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Access to finance not going to go away

16 Aug 13

The Real Estate Institute of Australia (REIA) says difficulty accessing finance by small businesses has been questioned continuously, yet there is still little recourse or genuine feedback for those affected.

REIA President Peter Bushby says,” This is not an issue that is going to go away.”

“According to the Australian Bureau of Statistics’ (ABS) publication examining barriers to innovation faced by Australian business in 2010-11, of businesses employing up to 4 people, 20.5% were lacking access to additional funds. Of businesses employing 5 to 19 persons, 22.8% reported a lack of access to additional funds as a barrier to innovation.”

“Bank credit helps these businesses to facilitate their ongoing development without placing excessive strain on cash reserves or working capital. However, as they are often perceived to carry a higher degree of financial risk, small businesses can face higher costs when accessing credit from financial institutions.”

“Residential property is used as security for lending to small businesses, which makes it particularly difficult for entrepreneurial Generation Y as only two out of five younger Australians own their own home.”

“When it comes to real estate businesses (96% of which are small), lenders should be taking into account all assets at market value, such as rent rolls which provide strong cash flow stability.”

“At the same time, house buyers with unchanged financial circumstances post GFC are faced with much higher equity requirements.”

“REIA wants to see both major parties commit to the extension of the Financial Ombudsman Service to include regular meetings with stakeholder groups and the Australian Bankers’ Association (ABA) to review banking practices.”

“We also call for an Australian Small Business Credit Resolution Service, which would mediate between financial institutions and small business when credit applications are refused and ensure that all applications by small businesses are adequately and properly assessed.”

AUSBCRES would be created as a division of the Small Business Commissioner / Small Business Ombudsman. For the Small Business Credit Resolutions Service discussion paper click here.