It started amicably enough. Everyone sat down at Friday’s roundtable organised by the CPAs, determined to come up with some measures around tax and finance to assist SMEs. But then I asked Minister Craig Emerson if he thought the problems of assessing and paying for finance were as bad as through the GFC and if so, what was he going to do about it.
Silly me. I thought it was a no brainer. Of course it is as bad. But Emerson argued quite aggressively that there was a “perception” gap. Here is what he said:
“There’s a distinction to be made, one is actual access to finance, the other is reported access to finance. And if you ask any small business organisation, they will report that there’s been little access to finance for small businesses.”
“But if you look at the statistics about lending for small business, there is a very large amount of lending going to small business. So it’s a question really, I think, of whether we are talking about the actual situation or perceptions of the situation.”
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“If we are frankly talking about the perceptions of the situation, I don’t think we can solve the problem.”
And that pretty much set the tone, which was “we can do nothing – or at least not much.”
In fact, the head of the Australian Bankers Association, Steven Munchenberg summed it up when he said that accessing finance was now about the allocation of a scarce resource.
It really irked me. The consequences of this “new reality” where little can be done is a huge opportunity lost.
We know that most businesses borrow to invest in growth. But the new landscape we are told looks very different. Now only a very small group of companies will be able to access finance. Companies had better get used to being told: “Sorry, you don’t fit”. As Munchenberg also noted, small businesses are high risk.
Yet we heard from the head of the Canadian equivalent of the CPAs, Anthony Ariganello, a completely opposite situation.
“In Canada we have been fortunate in that the banks have not really cut back on their lending. They demanded more collateral, more guarantees, that’s true, but we do have… the Business Development Bank of Canada which was created over 65 years ago, and it is owned by the Government of Canada, however it’s got its own independent board of directors.”
He says: “That institution is charged with lending to the SME sector, and if you go back two years, that cap was about $10 billion, and they assisted a variety of small- and medium-sized businesses that were either exporting, or even within Canada, but they lent to 28,000 businesses.”
The point he also makes is that those who have borrowed from this bank have actually been very successful.
“When you asked me to look at the number of institutions or businesses that failed, that number is only 5%, and statistically banks that have borrowed from the BDC versus – sorry, not banks, organisations, companies that have borrowed from the BDC versus say normal banks, have actually a two-to-one success failure ratio. So very, very successful.”
We also heard from the CPAs how government guarantees have helped businesses access finance in other countries.
So other countries are finding solutions to this ongoing problem caused by market failure – and we are not. In fact, we are focused on arguing about whether there is even a problem or not!
That is going to get us nowhere… fast.