Banks 'increasingly keen to lend money to start-up firms'

Banks across Australia are focusing a lot of their attention on lending to start-up companies.

In the past, there has been a temptation to avoid less established firms in favour of larger corporations that have already got a good track record of making money.

However, lenders are finally realising that new enterprises hold a lot of potential.

Research conducted by the Reserve Bank of Australia has highlighted a far more concerted effort among the nation's major banks to issue business loans to small companies since 2005, National Features reports.

Speaking to the news provider, ANZ's general manager of small business Nick Reade said start-ups are "ripe for investment", as lending amounts are generally smaller and there is more potential for large returns.

The company has backed a three-month Adelaide-based scheme called Innovyz, which is aimed at supporting small businesses. Similar initiatives will also be rolled out in Sydney and Melbourne.

"Five years ago the small business segment was under the radar. Now it's core," Mr Reade was quoted as saying.

"When you're trying to grow in the market, you can only grow by backing start-ups. The alternative is getting established businesses from other banks and that doesn't work."

Small enterprises have generally been down on their luck in recent years and confidence levels have been low because of the poor global economic climate.

A study conducted by Roy Morgan Research recently showed overall business sentiment fell by 8.3 points in September, with less than one in three respondents expecting their financial situation to improve in the next 12 months.

Knowing that banks are willing to offer support to smaller organisations should instil more confidence in business owners, but it seems that banks have become far more risk-averse since the global economic downturn.

Therefore, companies that are looking to borrow money need to provide full documentation and cash flow forecasts before they are given any credit.

"I think you'll find that no-doc business loans just don't exist anymore," Mr Reade continued.

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