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Access to finance solution for small business

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The Real Estate Institute of Australia (REIA) say entrepreneurial spirit is being stifled because of difficulties in access to finance for small business.

REIA President, Peter Bushby says, “According to the Australian Bureau of Statistics’ (ABS) publication examining barriers to innovation faced by Australian business in 2010-11, of businesses employing up to 4 people, 20.5% were lacking access to additional funds. Of businesses employing 5 to 19 persons, 22.8% reported a lack of access to additional funds as a barrier to innovation.”

“Bank credit helps these businesses to facilitate their ongoing development without placing excessive strain on cash reserves or working capital. However, as they are often perceived to carry a higher degree of financial risk, small businesses can face higher costs when accessing credit from financial institutions.”

“Residential property is used as security for lending to small businesses, which makes it particularly difficult for entrepreneurial Generation Y as only two out of five younger Australians own their own home.”

“When it comes to real estate businesses (96% of which are small), lenders should be taking into account such assets as rent rolls, which provide strong cash flow stability. They tend to put all small businesses into one basket and that simply does not work.”

“REIA wants to see an Australian Small Business Credit Resolution Service (AUSBCRES), which would mediate between financial institutions and small business when credit applications are refused and ensure that all applications by small businesses are adequately and properly assessed.”

AUSBCRES would be created as a division of the Small Business Commissioner / Small Business Ombudsman.

Mr Bushby says, “At his recent Press Club address, Prime Minister Rudd said, ‘We must improve the operating environment for small business in this country. This involves access to capital’. AUSBCRES would go a long way to assist.”

For the Small Business Credit Resolutions Service discussion paper, go to http://reia.com.au/userfiles/MEDIARELEASE_1375227962.pdf.

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