New small business minster tells banks to work harder to understand SMEs

New Federal Small Business Minister Nick Sherry says a lack of specialist small business knowledge among Australia’s leading banks is hampering the supply of credit to SMEs, but he has ruled out direct government intervention in the banking market with the creation of a Government-based small business bank.

Sherry told SmartCompany that he has held discussions with the Australian Bankers’ Association to reinforce the message that banks need to “do better” in terms of lending to SMEs.

“But banks should walk in the shoes of small business and develop a more specialised understanding of the requirements of small businesses,” Sherry says.

“There’s a lack of knowledge and information where banks are dealing with small businesses. They need to do better in terms of that.”

While Sherry says his discussions with the ABA are confidential, he says the lobby group “appreciates the sentiment” in the SME sector.

Unlike his predecessor Craig Emerson, who felt the credit squeeze has been overblown, Sherry has acknowledged that many SMEs were struggling to obtain finance due to the fact competition in the banking sector has fallen.

“The critical issue is non-bank lenders, specialist providers that have a greater understanding of business, have almost totally disappeared.”

“It’s a very slow recovery. While there is capital, it has been re-priced and the competition has been reduced, and that’s a problem.”

However, Sherry says small businesses must be realistic about the situation, and stressed the government couldn’t “wave a magic wand” to ease the credit squeeze and said competition would only increase over time.

He also again ruled out the establishment of a government-owned bank for small businesses, something that has been so successful in other countries such as Singapore and Canada.

Sherry says the creation of such a bank was not the role or policy of the Government.

Sherry has spent the last few weeks holding a series of over 60 meetings with small business industry groups and individual businesses.

While he says most have industry-specific issues, four broad areas of discussion have emerged:

• Tax, where top issues include the taxation of trusts and tax reform.
• Deregulation, where many sectors are pushing for national frameworks to replace state-based regulation, as is currently happening in the areas of occupational health and safety and business names.
• Finance.
• Industrial relations, where Sherry says small business lobby groups are keen to ensure they have the right information to steer members through the complex transition to Modern Awards.

Sherry also expressed disappointment with moves by parliamentarians in South Australia and Western Australia to introduce state-based franchising laws that would sit on top of the national Franchising Code.

He says state governments had agreed with the Federal Government to leave franchising laws alone until at least 2013 to provide the sector with certainty.

“I am disappointed,” Sherry says.

“Whatever people’s views on the latest round of reforms, franchising needs certainty for a period of time. Franchising is a national market.”

Sherry’s immediate priorities include extending the Government’s Small Business Assistance program (including the Small Business Support Line) and Business Enterprise Centres (of which there are more than 35 around the country) indefinitely.

He is also keen to get involved in the debate over the next round of tax reform, which is likely to kick off next year.