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New how-to guides for landing small business loans 

Many small businesses have borne the brunt of the credit crunch, but two new initiatives aim to help them and their financial advisers navigate the minefield that obtaining small business loans is becoming.

Mark Phillips | October 2019

In an introductory video on the homepage of a new website aimed at small business owners, Australian Banking Association (ABA) CEO Anna Bligh declares: “I can absolutely assure every small business person out there that Australian banks have an appetite to lend into this sector. They see this sector as a growth sector and want to be partners with people who are in it.”

This is encouraging news for the more than two million small businesses in Australia, which collectively employ about 4.7 million people, and their advisers.

According to the Financing your new small business website, launched by the ABA in conjunction with CPA Australia, and the Council of Small Business Organisations Australia (COSBOA), there are currently about one million loans provided to Australian small businesses, equating to more than A$280 billion.

Coinciding with the launch of the website, ABA released a report, SME Lending in Australia, which states that 94 per cent of loan applications submitted by small businesses to ABA member banks have been approved in the past 18 months.

However, as the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell notes, small business loan applications have fallen by 33 per cent since 2014. There may be no single reason for this, but, undeniably, accessing finance is an increasingly daunting and confusing process, particularly as lenders tighten their requirements in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

ASBFEO, in partnership with Scottish Pacific Business Finance, has released its own Business Funding Guide, primarily geared towards accountants, bookkeepers, brokers and other financial advisers, to help its small business clients find the right funding and increase the likelihood of their applications being approved.

Notably, in her forward to the guide, Carnell says that since the royal commission, “about a third of small business owners have had their applications for bank loans rejected”.

Whatever the case, both resources offer valuable advice and practical tools for advisers and their clients, from constructing an effective business plan, different finance types, how loans are assessed, using an adviser (ABA’s website features a mini video presentation by Knight Partners founder Peter Knight FCPA on “The role of an accountant”), what to include in a loan application, tips for getting business accounts in order, common mistakes, debt options, how to deal with a lender and, in ASBFEO’s case, even a fund decision flowchart and funding matrix for several scenarios.

The ultimate objective of the ABA and ASBFEO resources is to help small-to-medium businesses (SMBs) identify the right funding solutions and, as Carnell emphasises: “Small businesses need to prove their credit worthiness by working with their trusted advisers to get their business finance-ready and to produce a comprehensive business case for investment.

“For small business to continue to be the engine room of the economy, access to affordable and appropriate finance is vitally important.”

Ombudsman calls for feedback

Indeed, Carnell is now seeking feedback on its Business Funding Guide, adding that its companion guide – FitsME: Essential Guide to Business Funding – gives small business operators the most important information they need to know about preparing to apply for finance.

“The overwhelming feedback from the small business community is that a lack of access to funding is their biggest barrier to growth,” she says.

“At the moment, this is a living document that can be amended and improved based on the feedback we get [the deadline for feedback via inquiries@asbfeo.gov.au is 18 October 2019], with a final version of the guide available later this year. It’s crucial small business understands that the Big Four banks are not the only game in town.”

By incorporating broader feedback, it is expected that the guide will be able to further engage businesses and their advisers about bank and non-bank funding, and provide the tools with which to find the most appropriate option. Historically, 83 per cent of small businesses have relied on major banks.

However, Carnell also says that while the ASBFEO guide already covers a broad range of funding alternatives, for those small business operators considering obtaining finance through a mainstream financial institution, the new ABA website is a helpful resource.