The Banking Royal Commission: what does a chastened banking system mean for access to finance?
Pink piggy bank in blank white space with coins scattered around.

Commissioner Kenneth Hayne, stated in his interim report released last week that the key questions the Commission has to answer are; why such poor conduct has occurred and, how can it be stopped from happening again.

He clearly attributes blame for misconduct in the financial services industry to greed – with products and services multiplying as selling became the key focus of banks as they vied for their share of the market.

“Too often, the answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty,” he wrote.

The damming report sparked a much-quoted response from Anna Bligh, CEO of the Australian Banking Association calling it a “day of shame for Australian Banks. “The sector has lost the trust of the community,” she says, and has to do “whatever it takes” to regain that trust.


Unsurprisingly, we are beginning to see something of a ‘credit crunch’ among SMEs, with nervous banks slowing down their lending as the Royal Commission continues.

According to a Reserve Bank of Australia (RBA) report into small business finance, “the proportion of small businesses that perceive it to be relatively easy to access finance has declined recently,” and while lenders highlight that they are keen to lend to small business, unsecured finance involves more risk.

Small business perception of access to finance


For the SME community, risk is a huge consideration when looking to invest in growth opportunities.  Many businesses find it challenging to access finance without providing the family home or other personal assets as security.

Access to finance for start-ups is even more limited with Entrepreneurs usually resorting to personal credit cards to fund their day to day operations.

The report also finds that banks are reluctant to provide advice on obtaining finance, therefore hindering the decision making process of comparing products.  Feedback also shows that the application process and decision making time is lengthy – which is particularly problematic if a business opportunity is time sensitive.

Larger businesses continue to impose lengthy payment terms (sometimes well beyond 30 days) creating cash flow issues that can strangle small business growth.


The report went further, looking at possible initiatives that could improve access to cashflow finance for small businesses.  For example comprehensive credit reporting such as is seen in the UK and US to minimise risk to the lender.  Other areas include, more accurate financial reporting and meeting tax obligations on time, both of which would create better picture of credit worthiness.  The reliance on real estate as collateral could be reduced my making it easier for businesses to use other assets as security such as machinery and equipment.  And finally, private sector funding and more Government involvement.


We support the tabling of initiatives to improve access to finance highlighted in the ABS report and hope to see traction on some of these in the future. However,  as the Royal Commission rolls on and nervous banks curb lending, the reduced access to finance for SME’s could lead to a cash flow crisis as well as hamstring the growth of the small business sector.

In our opinion, small business is the backbone of our economy and should have financial support in their day to day business and growth opportunities.  Apricity specialises in finding a flexible finance solutions – we capitalise on what’s ‘coming in’ to the business rather than putting at risk personal collateral, property or equipment.  Our approach can allow businesses to weather the storms of the current situation in financial services – to sustain and grow without taking on more long-term debt.

Talk to Apricity today.