What do the Banking Royal Commission findings mean for Australian Small Business and Agribusiness?

The final findings and recommendations by Commissioner Hayne were released to the public on Monday 4th February. We have sifted through the 76 recommendations and drawn out those which will impact SMEs and those in the agricultural industry specifically.

SMEs

The definition of small business

This will be simplified so that an additional 10,000 to 20,000 additional SMEs in Australia will be governed by the Banking Code. This will offer better protection for these businesses when dealing with their banks.

Credit assessment process

There were warnings going into the commission hearings that a review of small business lending would make it increasingly difficult to access finance from the big banks. The report does not recommend tighter regulation but it does not seem to improve access to finance for smaller operators either. The general consensus is that the information you need to provide as part of the loan application process will not change too much either.

Peter Langham, CEO of business finance provider Scottish Pacific, said that small business owners must be prepared to look for other alternative financiers to the banks. He comments that business owners are already looking to do things differently in light of the Royal Commission.

Lanham also warned that the combination of Australia’s cooling property market and more stringent lending conditions introduced due to the Royal Commission will definitely impact SME owners who need to use their home as security for their business loan.

Bank and non-bank lenders have some useful tools and tips on alternate finance but if you’re looking for something totally independent, check out the government website.

In the next couple of months Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman, and theBankDoctor.org will be releasing a guide to help SMEs assess whether borrowing from a fintech is the right option for them.

Agribusiness

Here are four key agriculture related points from the Royal Commission:

Farm debt mediation

This should be governed by a national scheme which will mean consistent treatment of farmers who face financial difficulties through drought and other natural disasters.

Internal valuations

Valuations of land will be undertaken independently and, in the case of agricultural land they will need to recognise the likelihood of external events that may affect value and the time required to sell.

Charging default interest

Banks will no longer be able to charge default interest on loans secured by agricultural land in an area declared to be affected by drought or other natural disaster.

Distressed agricultural loans

These will be managed by specialised, experienced agricultural bankers.

These recommendations seem to practical and will have longer-term benefits for those in the agribusiness sector.

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