Small business banking inquiry reveals shady conduct from big banks
Thursday 01 December 2016
Article by Kelly Emmerton
Small business ombudsman Kate Carnell has probed into “arbitrary, confusing and unfair conduct” in the small business lending practices of big banks during a banking inquiry this week.
The banking inquiry was announced following calls for the federal government to hold a royal banking commission, and was designed to investigate how big banks treat Aussie small businesses.
On the first day of the inquiry, Carnell questioned ANZ’s $1 million limit on small business loans, noting that prospective business owners would often find $1 million is not nearly enough to buy a brick and mortar business, according to WAToday.
"It's an arbitrary figure and I would suggest it's not a figure that meets lending practices of small businesses currently,” she said.
"What made you – the bank – decide that $1 million was the right figure for small business?”
Graham Hodges, deputy chief executive at ANZ, responded by saying the loan limit was suitable for many businesses.
"The 1 million level picks up the vast majority of our small businesses," he said.
Questioning representatives from all four big banks, Carnell also probed into confusing and unfair behaviour that meant customers were receiving contradictory advice from different sections of a bank. This kind of thing could result in customers being offered a loan, or a loan extension, one day and then having the offer rescinded the next.
While Hodge denied that the conduct was taking place at ANZ, CBA chief risk officer David Cohen, acknowledged that it had occurred in some cases and was a “regrettable” experience, reported The Australian. He agreed that the banks had an obligation of transparency toward customers.
The problem, it seems, was largely a lack of guidance on an appropriate notice period for termination of an agreement, and CBA, ANZ and NAB all supported the idea of a “holding period” to help give customers a chance to secure alternative funding.
Tips for small business borrowers
- Look outside the big banks. The major players are not the only banks providing funding to Aussie small businesses, and you can often find a better deal by considering non-bank lenders. So make sure you compare all the small business loan offers on the market.
- Plan your business strategy. Many of these non-bank lenders tailor interest rates to suit your borrowing power and business - the more secure your business, the lower your interest rate. So to snag the best possible deal, make sure your cash-flow data and business plan are up to scratch.
- Consider a secured loan. Own your home or car? You can often snag a lower interest rate by putting an asset, like property or a vehicle, up as security against your loan.
- Check your credit score. A good credit score is key to having your loan application approved and could even help you get a better interest rate. If your score is not as good as it could be, try to pay off any other outstanding debt to whip it into shape.