Addressing SME finance challenges
The Australian Business Securitisation Fund would solve the problem of banks only lending to small business owners when they pledge their homes as collateral. The challenge of SMEs getting finance has been highlighted by research which found that banks reject around 75% of loan applications from SMEs and around half of these businesses are dissatisfied or very dissatisfied with their bank. In developing the proposal, the Morrison government is showing it understands that the problems SMEs face in getting finance need to be addressed.
Benefits to small to medium businesses
Under the Morrison government’s plan, the fund would buy packages of unsecured and secured SME loans issued by non-bank lenders and smaller banks. The increase in funding outside the big banks would make it possible for alternative lenders to increase their lending to small businesses.
The $2 billion lending boost offers many potential benefits to SMEs. Small and medium businesses will have more choice along with easier and faster access to unsecured business finance. The funding will lead to a decrease in reliance on business funding from big banks, promoting growth in Australia’s dynamic fintech sector. In addition, increased competition resulting from more industry funding will lead to lower interest rates on small business loans.
Banking Royal Commission leads to small business lending squeeze
Recently, the tightening of bank lending since the Banking Royal Commission proceedings and Interim Report has led to an increase in business loan applications to Moula. As a result, loans approved by Moula have increased by 51% in September 2018 compared to June 2018. Moula’s growth has also been a result of its approach which includes a streamlined lending process, exceptional customer service, transparency and no hidden fees.
Moula helps fill the lending gap in the market
As a strong supporter of SMEs, Moula welcomes the plan that would enable non-bank lenders to increase their lending to a vital sector of the Australian economy.
Moula CEO Aris Allegos sees fintech lenders playing a large role in boosting finance to small to medium enterprises. ‘We welcome the news of the Australian Business Securitisation Fund and the role it could play in boosting SME funding,’ he says.
‘Healthy access to capital is vital for SMEs, and we’re proud to have created a platform which helps us back good businesses without making them jump through hoops. The new fund is great news for Australia’s two million SMEs, and we look forward to learning more about it.’
SMEs as the engine of the Australian economy
In Australia, SMEs employ 7 million people, 67% of all employment. In addition, they contribute $615 billion to the Australian economy, 57% of GDP (Affordable Capital for SME Growth Report, 2018. Australian Small Business and Family Enterprise Ombudsman). Looking at the big picture, the increased finance for SMEs resulting from the new fund will promote increased employment and a stronger economy.