The Commission received 1,211 public submissions identifying small business finance as part of their dealings with financial services. These submissions also included issues with larger lenders, smaller ADIs and intermediaries.
Issues raised in submissions were similar in nature to issues raised in relation to consumer lending and personal finance (including the issues examined in Round 1). This included concerns about the failure of banks (or other entities) to consider properly the borrower’s circumstances or longer-term viability of a loan, inflating valuations and income to secure approval of a business loan, and the over-reliance on personal properties as security for lending.
Submissions were varied and included stories from individuals who ran, or had been seeking to start up a small family-owned business involving modest financial dealings through to businesses with multi-million dollar loans and other financial dealings and investments. While these stories emphasised the variation in both the size and scale of those who considered their businesses to be SMEs, submissions consistently highlighted concerns regarding dealings with banks and the impact of these dealings on the viability of a business, as well as the subsequent emotional stress on personal and professional relationships.
Many submissions detailed the financial and emotional impact of pursuing redress, either through external dispute resolution channels or taking legal action. Submissions referred to SME owners abandoning their efforts to seek redress as they could not afford to commence legal proceedings or could no longer afford ongoing legal action, which often compounded existing financial hardship and highlighted an imbalance in resources between the business and the financial services entity.
Prior to Round 3 of public hearings, the Commission engaged with a wide range of interested stakeholders, including the Financial Ombudsman Service, Phil Khoury, who had undertaken the Independent Review of the Code of Banking Practice during 2016 and 2017, the Council of Small Business Organisations Australia; Financial Counselling Australia; the Legal Advice for Small Business Clinic, which is a joint initiative of the University of Canberra and ACT Legal Aid; Legal Aid New South Wales; Legal Aid Queensland; and the Consumer Action Law Centre.
In addition, the Commission spoke to a range of statutory and government bodies about policy and regulation in relation to small business lending, including the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC), the Australian Prudential Regulation Authority (APRA), the Australian Small Business and Family Enterprise Ombudsman, and Treasury. These consultations informed the lines of inquiry taken during the public hearings.