Royal Commission impact will be “far and wide”

  • Brokers fear risk to industry

    Two brokers predict possible outcomes the commission’s recommendation will have on the industry

  • Brokers fear risk to industry

    Two brokers predict possible outcomes the commission’s recommendation will have on the industry

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    by Rebecca Pike

    With the Royal Commission final report now handed over to the Treasurer, the industry is waiting to see what recommendations will come out of it and what the impact will be.

    A small business lender has voiced concerns that the report will be particularly hard on Australia’s small businesses, as banks pull back their lending and make it harder to get credit. SMEs which usually use property for security will find that tighter lending and the cooling housing market have a real impact.

    Peter Langham, CEO of Scottish Pacific, said the impact “will be far and wide”.

    In a post, Langham said it would still be possible for small businesses to get finance, but “not at the rates or conditions that they are comfortable with”.

    He also said the main change in the SME lending space is the hurdles the banks have to go through, which means businesses will need to seek out alternatives to the banks.

    Scottish Pacific’s most recent SME Growth Index findings showed 96% of SMEs could name a key reason to borrow from an alternative lender, with fast credit approval and reduced compliance the main drawcards.

    Langham said brokers were one of the best ways for small businesses to get proper funding.

    He added, “These advisers, with a day to day understanding of their clients’ businesses, can help SME clients find their best funding option by making them aware of how the different products work and what the risks and benefits are, especially when it comes to some of the newer market entrants.

    “Australia’s cooling property market, along with more stringent lending conditions, will definitely have an effect on SME owners who need to use their home as security for their business loan and the credit squeeze will be on for any business unwilling to look beyond property security.

    “Those who want bricks and mortar security will have less equity available to secure facilities.

    “With many viable alternatives out there, I find it hard to understand why any business owner would risk their home to secure a business finance line of credit.”

    “Scottish Pacific are well-placed in a post-Royal Commission lending environment to offer Australian SMEs a secure alternative to fund their business growth,” he concluded.

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    Original Article