Liberty responds to credit tightening for small business

Major non-bank lender Liberty is heeding calls from the market for greater access to finance by small business, by launching a solution that backs business rather than rely on the family home or any real estate as mortgage security.

The solution comes after the release of RBA data which shows total new credit approvals to business for $2 million and under has reduced by 13.6% from June 2018 to June 2019 . This compares to an increase in total lending to business for $2 million and over, which has instead increased by 12.9% over the same period.

And, the latest SME Growth Index shows that one in five SMEs are experiencing cash flow difficulties due to the rejection of a business loan. The data shows that the percentage of SMEs reporting cash flow issues has doubled since March 2018, with 19.6% saying it is worse or significantly worse.

Further, ABA research shows there would be more small businesses if access to funding improved. In fact 60% of those interested in starting a business cite “access to money” as the main deterrent.

James Boyle, chief executive officer, Liberty, said these statistics yet again confirm that small businesses continued to struggle to access the funding they needed to invest and grow.

“The limited number of suitable loan products, combined with the complexity of the loan process for small business makes it tough to access capital. We responded with a solution that suits an established yet developing business, where lending is based on cash flow, not mortgage security,” he said.

While the RBA reports tightening credit flow, more small businesses are turning to non-banks for funding, according to the Index. A key reason given for this is to avoid property security, particularly in an environment of moderate house price correction and lower levels of home ownership.

Mr Boyle said that while Liberty was developing products designed for small business, the operating environment needed to be more supportive. “More needs to be done to support entrepreneurs by cutting red tape in Australia,” he said.

“We support the government’s recently announced deregulation taskforce in its endeavour to reduce regulatory costs and complexity. We welcome initiatives that give small business the confidence to invest, create jobs and thereby boost the economy.”

The lending solution is called Liberty Lift and offers loan sizes of $25,000 up to $1 million and loan terms of 1–5 years. Lending for Lift is based on business cash flow, not a mortgage security. Instead, security will be based on a charge of the business, guarantees and may also involve PPSR registrations.