The Council of Small Business Organisations Australia (COSBOA) has come out strongly in support of Treasurer Josh Frydenberg’s announcement of proposed new laws aimed at reducing red tape on bank lending.
COSBOA Chief Executive, Peter Strong said “We can’t understate the importance of these changes for the economy and for small business. From the beginning of the pandemic we have been hearing from our members that small businesses are struggling to access finance despite the SME Guarantee Scheme.”
Commercial & Asset Finance Brokers Association of Australia (CAFBA), COSBOA and the Australian Small Business and Family Enterprise Ombudsman have been strong advocates of removing unnecessary red tape on credit laws.
David Gandolfo, Deputy Chair of COSBOA and President of CAFBA has strongly commended the Government on its decision to wind back red tape and regulation on bank lending.
As a result of the Banking Royal Commission action was taken against banks for failing to properly assess whether borrowers could meet repayment obligations. Changes to credit laws were consequently introduced. In effect, the changes to the credit laws aimed to protecting customers from themselves.
Mr Gandolfo said “The laws assumed that customers were almost incapable of making informed decisions about their own finances.”
There were serious unintended consequences for customers both in personal lending and business finance.
Mr Strong observed that “while the main goal was to curb risky mortgage lending, business lending was caught up in changes which took the form of the banks applying an extreme risk management approach to everyone.”
This has had a negative impact on the ability of small business owners to finance their commercial activities.
Mr Gandolfo said “This constraint on business lending is despite the acknowledgement of the Royal Commissioner that there had not been a market failure in the area of business lending.
“The banks have tried very hard to respond in a responsible manner but they have been constrained by rigid regulations from lending to large numbers of solid business and home borrowers”.
Mr Strong added “These aren’t normal times, and small business people aren’t all struggling because their business model is unviable or because they’re making bad business decisions – it’s because of a health crisis outside of their control, and they shouldn’t be punished for it.”
Mr Strong concluded “Well done to the Government on its intention to remove one of the biggest handbrakes on the economy.”