Government measures announced in the 2016 Federal Budget to support the small business sector are likely to fail, a leading Fin Tech figure has warned.
The banks’ unwillingness to provide cash-flow lending to SME’s will doom the government’s asset write-off provisions to failure, and waste the rare opportunity of historically low interest rates, according to ebroker.com.au CEO Simon Isaacs.
“The expansion of instant asset write-off announced in the budget should be a huge growth engine for small business and the economy. Instead it will probably ‘die in a ditch’ thanks to the big banks,” said Mr Isaacs.
In order for businesses to take advantage of this policy, they need cash to purchase assets. According to Mr Isaacs most small businesses have very limited reserves, and banks these days virtually refuse to lend on an unsecured basis.
“Sadly we live in a country where our banks are simply not interested in funding small business without residential security. They’ve become glorified building societies.
“The government’s policy will fail because most SME’s simply don’t have the spare cash needed for widespread take up, and the banks won’t lend to them.”
To prove his claim, Mr Isaacs points to the results of the initial policy in the 2015 budget. According to reports in March, only $547 million of claims were processed in a policy that forecast $5.5 billion over 4 years.
“The first iteration of this idea 2015 was a dud, and it will fail again this year. The missing link is funding.”
Mr Isaacs argues that because the banks won’t change, the government should do more to support the emerging non-bank business lenders that ebroker represents.
“If the government was serious about innovation, you’d expect to hear a lot more about alternative funding, non-bank lending, Fin Tech and the like.
“Relying on the banks to come to the party, will condemn this to yet another wasted opportunity for growth.”