In 36 years in finance I have never truly seen the Australian banks , & certainly not the Credit Unions & Building Societies provide easy & effective capital for Small to Medium, size Enterprises (SME’s). In fact, it could be said they have created barriers to S.M.E.'s because of their fixation on ''bricks & mortar'' lending. The age old comment from the banker is “ do you own a home or property?” ‘’ No, oh sorry we can’t help you’’. I do recall the old Commonwealth Development Bank came the nearest to good cash flow lending because they were always seen as the ''lender of last resort'' . Their monitoring of financial performance on a monthly / quarterly basis had to be strong because they were dealing with business clients that were difficult to manage , financially. That’s not to say all SME’s are difficult to manage. You really just have to understand the business & who you are dealing with.
Banks in Australia are adverse to lending to S.M.E.'s because of their lack of understanding as to HOW to value a 'business' . There is a book written by Dave Ulrich ''The Leadership Capital Index'' which discusses & assesses the real value of human resource. I can also refer back to a book by Jane Gleeson-White, the ''Six Capitals'' in which the accounting profession are recognizing change has to occur in the way capital value is assessed.
It goes beyond the known concepts of financial and manufactured capital, to include four new categories of wealth: intellectual, human, social / relationship, and natural capital. It’s linking the way business operates to sustainable outcomes for the business operation & the environment. However that’s a different discussion point. The point I’m making here, is that bankers in Australia need to be able to properly assess the risk of SME’s in relation to the value of a business’ non - tangible assets. They can then lend appropriately using a different & revised risk assessment tool. It’s not the ‘’bricks & mortar’’ that repays a business loan ( acknowledging the rental income & plant & equipment etc). It’s also the energies of the business owners & the whole ‘’human resource’’ of the business in producing the cash & profit that repays the loan. They are of significant value. It requires bankers / lenders to think this way & accept appropriate risk.
At Compass lending we have access to short term finance for business that recognizes the value of those intangible assets like ‘’Human Resource’’ mentioned above. You are welcome to contact Michael to discuss this further – 65832211.