The group representing small businesses in Australia, COSBOA, asked banks to be clearer when they say “no” to small businesses asking for loans.
“COSBOA supports the clarification of what happens when lending to a small business, however, does wish detailed reasoning compared to general reasoning be given to a small business when a loan is declined. This reasoning should be limited to where a loan may be declined due to not fitting within a Bank’s policy rather than a rejection based on a credit assessment,” said Luke Achterstraat CEO, COSBOA.
“Whilst we understand that factors in a Bank’s process change over time and make it impractical to provide this information in relation to future applications, however, reasoning is imperative in ensuring the small business can direct their energies and resources to Bank’s that may fit their needs
“We believe that sufficient safeguards can be put in place to ensure that providing more detailed reasoning for loan declines does not trigger any ‘tipping off’ prohibitions under the Anti-Money Laundering and Counter-Terrorism Financing Act.”
Getting a business loan is crucial for business owners, whether they’re just starting, growing, or dealing with short-term money challenges. You can get these loans from banks, credit unions, or online lenders, each with different interest rates, repayment terms, and rules about who qualifies. Many small business owners face a common problem when trying to get a loan – traditional lenders like banks are often not very eager to lend money.
Research from OnDeck shows that small businesses often find it hard to get funds from big banks. About two out of every five small businesses that were surveyed tried to get money from different places. Among them, 24% had their application turned down by a bank. This number goes up to 38% for businesses that have been around for less than five years.
COSBOA, which represents small businesses, supports certain parts of the Small Business Lending Code, like the broader definition of small businesses, better protections for people guaranteeing the loan, and easier ways to complain. But, they want to make sure that when a bank says “no” to a loan, they explain it clearly. Small business owners depend on the Australian Banking Code of Practice to make sure they’re treated fairly and ethically by their banks, especially since they often use in-person banking services for things like putting in cash, getting business loans, and other types of support.
Earlier, COSBOA represents the interests of Australia’s small businesses. As mentioned in our submission to the 2021 Independent Review of Banking Code Practice, the wealth and well-being of the Australian community is enhanced when small business friendly policy and regulatory settings are advanced by all Australian governments. Small business owners rely on the Australian Banking Code of Practice to ensure they are treated fairly and ethically by their banks. These small businesses frequently use in-person banking services to facilitate cash deposits, business financing and other support mechanisms.
Established in 1979, The Council of Small Business Organisations Australia (COSBOA) is a member based not-for-profit organisation exclusively representing the interests of small businesses.
Full Submission here.