Opposition calls for Senate inquiry into small business credit squeeze

Opposition leader Tony Abbott and Small Business Spokesman Bruce Billson have both called for an official inquiry into restrictions on business financing.

Billson, who was on the campaign trail with Abbott in Melbourne yesterday, says he has received complaints from small businesses about accessing finance on reasonable terms, and that due to the limits on lending facilities businesses have not had the opportunity to grow.

“As interest rates lowered the cuts given to home owners are not being given to small business loan holders, and as interet rates have been going up we’ve been seeing higher rate rises given to small businesses…it’s quite challenging.”

He said the inquiry will attempt to discover what businesses have been experiencing in regards to finance restrictions, why business lending has so many restrictions and what needs to be done to ensure lending is increased.

“We’ve been hoping to get cross-party support for the inquiry when Parliament resumes next year. We’ve told people to collect their thoughts and convey their practical experience on the ground. The inquiry still needs to go to a vote, but we’ve been encouraged by the positive support we’ve had so far.”

Dun & Bradstreet’s director of corporate affairs, Damian Karmelich, says an inquiry is a good move into discovering how businesses are being restricted.

“I think anything that can be done to better explore how small businesses can get access to finance can be a good thing. We’re in an environment where not just small businesses but everyone is being re-rated for risk. Many of these issues are not unique to small businesses but are acute to small businesses.”

“I think for small businesses, often part of what needs to be much clearer for them is their requirements. What do they need to do to access credit at a good rate? Small businesses don’t have a good deal of knowledge about this process, and we’d like to see the basis of those decisions of giving out credit.”

The Victorian Chamber of Commerce and Industry welcomed the announcement, saying the economics reference committee should investigate a number of topics during 2010 including the cost of financing, changes to lending policies and the practices affecting small businesses.

Chief executive Wayne Kayler-Thomson said in a statement the investigation is timely, coming after a VECCI survey showing 30% of small businesses in Victoria said lack of capital was the key barrier to investment. 

 “Anecdotal evidence suggests that access to finance for small business is getting harder not easier, despite an improving economy. An inquiry will help shed some light on this.”

Abbott suggested the nation’s banks are failing to pass on reasonable lending rates, instead opting to shore up their bottom lines.

“I know that the banks have got to be secure. I know that the banks have got to be careful of risky lending. But there are enormous numbers of small businesses in Australia right now who are effectively being denied capital because the banks are refusing to lend on reasonable terms to good businesses that have been their customers for a long time,” he said.

“What I am doing today… is announcing that the Coalition will be pushing for a Senate inquiry into the restrictions that are now being placed on small business financing.”

Abbott said it was “very important” to go ahead with the inquiry, suggesting it was “thanks to the Rudd Government, the tax payers of Australia now stand behind the banks”. 

While he also said while the Government had a responsibility to ensure banks were well financed during the global financial crisis, there is a “heavy social responsibility” to ensure small businesses can operate without unnecessary restrictions.”

The Australian Bankers’ Association said it would participate in any inquiry attempting to discover how small business lending was being restricted.

The association said the level of lending to businesses with loans less than $2 million was down to $200.6 billion – lower than the $203.4 billion peak in September 2008.

“It is important that banks continue to make prudent decisions on lending. Obviously it does not make business sense to lend to a customer who cannot repay the loan. We need to remember the vital role played by sound lending in restoring economic growth and we must work together to get through these difficult times,” ABA chief executive David Bell said in a statement.