2 actions that Government can take to accelerate business growth

Yesterday, Australia saw the establishment of a government advisory panel on Fintech and the launch of a reform manifesto by Fintech Australia which we support.

We strongly believe that Government needs to become bolder in addressing market failure in providing our small-mid sized businesses with access to growth capital.

Here are two steps that could be taken this year:

  1. Build awareness of alternative financing options for SMEs to address market failure
    eg a mandatory referral obligation for banks declining credit applications
  2. Set up a Business Bank to: 
    • consolidate existing government funding mechanisms for SMEs in one place; and
    • provide modest co-investment support and endorsement for Alternative Finance providers

Working capital is the main impediment to growth, not equity.

Service businesses need working capital to grow and the current Basel III banking system cannot help in a meaningful way.

This is particularly true in the case of our critically important mid-sized companies:

Grant Thornton, December 2015:

According to the firm, mid-size business injects a combined annual turnover of $1.1 trillion into the Australia economy; contributing a further $241 billion through wages and salaries, employing more than 3.7 million Australians in the process.


There are interesting overseas examples, particularly in the UK.


The UK's major lenders will soon be required to share the financial information that they keep on small business to give these companies the best chance of securing loans.

The Government plans to force the banks to share their SME credit information with other lenders and to offer to share the details of SMEs rejected for a loan with online platforms that can match them to alternative finance providers.

The British Business Bank has also been tasked with "increasing and diversifying" the supply of finance available to SMEs. The Bank will facilitate up to £10bn of finance by 2019, according to new forecasts.




At present the largest four banks in the UK account for over 80% of UK SMEs’ main banking relationships. Many SMEs only approach the largest banks when seeking finance. Although a large number of these applications are rejected - in the case of first time SME borrowers the rejection rate is around 50% - a proportion of these are viable and are rejected simply because they don’t meet the risk profiles of the largest banks. There are often challenger banks and alternative finance providers with different business models that may be willing to lend to these SMEs.

Although the largest banks will sometimes refer these SMEs on (e.g. to brokers), in many cases challenger banks and other providers of finance are unable to offer finance as they are not aware of their existence and the SMEs are not aware of the existence of these alternative sources of finance. This is a market failure, of imperfect information, resulting in SMEs that are viable loan propositions not receiving the finance they need.