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Cash flow

Small business minister: banks need to ‘do better’ for start-ups

By Oliver Milman
Friday, 15 October 2010

Australian banks need to “do better” to understand the struggles of cash-starved start-ups, the new federal small business minister has told www.StartupSmart.com.au.

 

Senator Nick Sherry admitted that start-ups are finding it difficult to secure funding, but stressed that the government couldn’t “wave a magic wand” to ease credit problems.

 

However, the minister’s comments that there was a “lack of knowledge” of small firms’ needs among banks is a striking change in tone from his predecessor Craig Emerson.

 

“The financial services market is very different from three years ago,” Sherry says. “We won’t go back to the market we had three years ago, the market has changed dramatically.”

 

“The number of providers of finance has contracted dramatically. The big four banks are actually lending more money to small business, that’s recovered.”

 

“The critical issue is non-bank lenders, specialist providers that have a greater understanding of business, have almost totally disappeared.”

 

“It’s a very slow recovery. While there is capital, it has been re-priced and the competition has been reduced, and that’s a problem.”

 

“We’ve got to be realistic over what government can do. But banks should walk in the shoes of small business and develop a more specialised understanding of the requirements of small businesses.

 

“There’s a lack of knowledge and information where banks are dealing with small businesses. They need to do better in terms of that.”

 

Sherry pointed to government moves to help small firms, such as creating a national register for business names and national rules on the security provided for business funding.

 

However, he again ruled out the establishment of a small business bank, despite the launch of similar schemes in the UK and Canada.

 

“There are limitations on what government can do,” he says. “Government provided bank guarantees to prevent the collapse of those institutions (and) we’ve maintained a strong economy.”

 

“The impact of the GFC has been significantly less than other countries for small business. [But] the government won’t provide finance directly to small business through creating a small business bank, which is often raised. It’s not going to go there.”

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