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SME lending could tighten after Royal Commission

Wednesday, 06 February 2019
By Wayne Robinson

SME lending: banks may tighten criteria

Changes in lending practices  to small and medium sized businesses were not in the recommedations of Kenneth Hayne’s report of the Banking Royal Commission, but lending could still tighten.

PIAA CEO Andrew Macaulay has already set up a meeting with the opposition minister for small business, with the aim of ensuring that any incoming Labor government does not take action that pushes the banks to an even more risk averse position than they currently take.

Macaulay said, “Both government and opposition have said they will implement the Hayne recommendations in full, but Labor has said ‘and then some’. We do not want small and medium sized print businesses to face an even tighter credit crunch than they already have, which is why I want to ensure the shadow minister understands the consequences of any further actions.

“Banks need to be brought to task, there is no doubt about that, but in terms of their functionality and accountability, and not feeling they have to turn off the loan tap.”

Hayne  did not receommend an extension of consumer credit laws into small business he did recommend that the “too complicated and too confined” definition of small business be expanded. At present it is for loans of less than $2m, Hayne recommends $5m for comanies with less than 100 staff.

Hayne said he feared any expansion of the National Consumer Credit Protection Act would make credit even harder to attain for small business than it already is.

Print businesses in particular struggle to get credit. Media Super boss Graeme Russell famously used the lectern at the PIAA Print2Parliament event late last year to tell assembled politicians that banks had ‘virtually abandoned’ print, and called on them to tell banks to open their minds. In the upcoming issue of Print21 Foxcil Group owner Roger Kirwan tells Patrick Howard that if he was starting up today rather than six years ago the banks would not loan him the money.

The Royal Commission also did not recommend any change in the law in relation to guarantees for loans, and will not ask for banks to have an obligation to renew loans.

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