Australia has something in the region of two million SMBs and Tyro executive director Jost Stollman said large banks typically insisted that owners of small businesses put up their family homes as collateral rather than rely on the business's positive cash flow.
His comments come in the wake of a report of an Australian Government inquiry into bank lending, which found that the big four banks — ANZ, Commonwealth, NAB and Westpac — regularly indulge in business practices that are harming small business customers.
"In the 21st century, it is a ridiculous restriction that Australia's big banks are insisting that any small business loan must typically be collateralised by property, rather than the cash flow of the business itself," Stollman said.
"We know that Australian SMBs want to borrow up to $60 billion a year more than they currently do to grow their businesses, hire new staff and innovate."
Research by Tyro had found that banking red tape was cheating more than 880,000 SMBs of four weeks’ productive work-time a year, about $7 billion a year.
The inquiry, conducted by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), found banks have repeatedly failed to make changes to address persistent problems, despite having repeated opportunities over the last 10 years.
Completed in just over three months, the inquiry examined a number of cases of banks allegedly mistreating small businesses. It concluded that loan contracts between banks and small businesses put the borrower at a significant disadvantage.
The inquiry found that since the global financial crisis, more than 17 inquiries and reviews had made more than 40 recommendations relating to SMBs.
The ASBFEO report makes 15 recommendations — four to the federal government and 11 to banks — to address the finding that the big four banks "consistently" engage in practices that can hurt small operators. Six-monthly scorecards will be issued on the progress banks are making in response to the recommendations.
Stollman said that as Australia's only technology company with a bank licence, Tyro recognised the restrictions of the lending model adopted by big banks, and that was why it offered unsecured cash flows to SMBs.