“Today, the small business sector is the primary source of income for more than 6.5 million Australians – almost 60% of the Australian workforce. But the real potential of small business is yet to be realised.
More and more Australians (of all ages) are shunning traditional forms of employment to have a go at running their own business – and the fuel retail industry is no exception.
Within this context, the future success of Australia’s small business sector will be directly related to the ability of the finance sector to accommodate the evolving financing requirements of small businesses”.
The above comments are an excerpt from the opening remarks made by COSBOA Chair (and ACAPMA CEO) Mark McKenzie at the Reserve Bank of Australia’s Roundtable Meeting on Small Business financing that was held in Sydney earlier this week.
The meeting was held in Sydney and was co-chaired by RBA Governor Philip Lowe, COSBOA Chairman (and ACAPMA CEO) Mark McKenzie and ABA Chairman (and ANZ CEO) Shayne Elliott.
In his opening remarks, Mark McKenzie stated that despite some significant improvements in product simplification in recent years, many small business owners continue to encounter substantial difficulties in securing affordable lending products to support the growth of their businesses and/or navigate short-term cashflow issues – often forcing them to seek out non-traditional forms of financing and/or put their growth plans on hold.
“Access to affordable business lending products is an essential requirement of the small business ecosystem and Australia’s collective inability to address the current difficulties represents a significant opportunity cost for our country in terms of untapped employment growth in the small business sector”, Mark McKenzie said.
The round table was considered a key event for the business finance sector and was the result of months of collaboration between the Reserve Bank of Australia, the Australian Bankers Association (ABA) and the Council of Small Business Organisations of Australia (COSBOA).
Other attendees at the meeting included James Shipton the Chairman of ASIC, Anna Bligh CEO of the ABA, David Gandolfo Deputy Chair of COSBOA (and Chairman of CAFBA), Peter Strong CEO of COSBOA as well as senior representatives from the ASBFEO, the Australian Treasury, senior banking representatives and senior officers from APRA.
Participants in the roundtable heard about the experiences of the business owners of six (6) Australian businesses who outlined recent and significant difficulties in securing capital needed for both start-up and growth.
“The issues highlighted by these business owners pointed to problems with accessing the right finance products, limited knowledge of finance products, and substantial difficulty in navigating the associated red tape”, said COSBOA CEO Peter Strong.
The meeting discussed issues around the processes and communication mechanisms for small business on business lending, as well as the need for the finance sector to develop a deeper understanding small business needs and behaviours.
“The small business sector is as diverse as the 6.5 million Australians who work in it – it is not just ‘a bunch of shops’ – and modern lending products must be developed to take account of this diversity”, said Peter Strong.
“One issue that gained a deal of interest was the opportunity to collect and use better data on small business operations to support banking decisions on loan applications”, Peter Strong added.
Other key messages included a stated desire of small owners to run their business without being told what to do by regulators, government or banks; and a call for access to a range of products that are better tailored to the specific needs of small business owners – most of whom are more than capable of looking after their own interests without being overprotected by onerous lending regulation.
The issue of access to affordable lending is a familiar one for the fuel retail industry where high gearing ratios, volatile cash flows and a requirement for regular investment in infrastructure create a challenging financing environment for fuel retailers.
ACAPMA hopes that by partnering with organisations like COSBOA and the ABA, banks can develop a better understanding of the nature of the financing challenges of small business and develop products that provide improved access to lending products – both secured and unsecured.
A further summary of the RBA’s Small Business Financing Roundtable can be found at: (insert link to COSBOA Press Release).
In the meantime, ACAPMA – both independently and in cooperation with COSBOA – will continue to work with the Australian Banking Industry and Australia’s financial regulators to push for greater access to affordable lending products for small to medium fuel businesses.