Investors remain wary
Business lending under pressure
a level that was already tight. In fact, over the past couple of years, lending to small businesses has hardly grown at all — unlike lending to large businesses, which has grown by about 5 per cent a year.
Banks are treating small businesses as household borrowers and imposing the stricter Australian Prudential Regulation Authority-led conditions on lending.
Furthermore, property is a common form of security for small business lending and the decline in housing prices has probably reduced the amount of money that can now be borrowed.
In the end, one-fifth of small businesses have struggled to find finance from the banks because of the perception of higher risk and this has led to small businesses relying on costly personal credit such as credit cards to fund their operations.
“Angel investment” per capita has been relatively low in comparison with other developed economies, including being substantially lower than New Zealand.
Funding for start-ups from angel investors in Australia has also slumped by two-thirds in the past year. This comes despite venture capital for large later-stage start-ups being at record levels and the introduction of new tax incentives for early stage investors.
Mr Lowe seems right to identify business lending, especially to small businesses, as an area needing a turnaround. It’s a real concern that we are not seeing an increase in angel investors or seed investment for small businesses.
We need a thriving small business sector, and having access to capital at all stages of development is essential.
Locally, there are some investors addressing the growing funding gap at the pre-seed and seed stages, but we still need more. It’s also important for small businesses to get on the front foot and ask potential investors for support. In Geelong, we’re finding that there is support available to those who are committed to securing it.
Small businesses are essential to our community and we encourage local lenders and investors to open up seed level finance to build our small business sector. The transformation of our city relies on a thriving business community and a new generation of innovators who are looking to change the way we work and connect our city to a global audience. That’s well worth supporting.
Ben Flynn is chief executive of Geelong Chamber of Commerce. geelongchamber.com.au