Why Community Banks Are Better Than Community Batts

I just read that the US Senate recently voted to include a proposed $30 billion lending program in a package of aid for small businesses.

Apparently the program was designed (and will also be administered by) the US Treasury Department, but will be fronted by community banks. Moreover, the package would also include $12 billion in various tax breaks.

I know Australia is a lot smaller than the US, but given the sort of money that has been thrown around by the Federal Government on Home Insulation and now Renewable Energy Certificate dollars for solar power, $30 billion ain’t out of the question.

The idea would, I believe, be just a tad more useful than Mr Abbott’s call for a small business ombudsman.

I mean honestly, the Yanks propose a scheme that makes more funding available to SMEs and is fronted by a small business banker, (plus of course it’s treasury backed), and what does our Tony come up with? Basically someone to whinge to after you’ve  been slapped around by a lender.

But Tony’s idea is nowhere near as painful as the reality of Labor’s efforts. Supporting vertical markets that also happen to be aligned with one’s own stance on renewable energy and global warming is not altruistic, it’s cynical. To fast-track these schemes without administrative diligence demonstrates to me the Labor Party’s political immaturity.

Let’s wait and see what both parties promise SMEs pre-election. Tax concessions to SMEs whilst always appreciated, are much use if a business is struggling with cashflow – there’s bugger all to tax.

Banks don’t want to play in the segment, because it’s high maintenance and low return. They’ll stick with home loans. Talking about which, it’s soon going to be even harder to borrow against your home, the traditional fallback for small business.

An SME can however use floating assets as collateral. The precedent for this type of borrowing has been set in both Europe and the US and it’s gaining traction here. Call us or call your broker to see if you qualify.