Small Business and Family Enterprise Ombudsman, Kate Carnell, has raised concerns about the simplicity of small business loans and the issue of ‘non-monetary default clauses’ – that is, lenders being able to default loans based on changing external factors such as market prices even if the borrower has met regular repayments. Other risk factors include interest rate covers or revenue figures of the business. In response, CBA Business and Private Banking Group Executive, Adam Bennett, has said it will amend and simplify its small business loan terms, so they no longer include financial indicator covenants which are currently in almost all of its small business loans. ANZ General Manager of Small Business Banking, Kate Gibson, has also said ANZ will simplify contracts and remove financial indicator covenants for over 95% of its small business customers. Finally, NAB will remove the covenants on new and existing small business customers with total lending under $3 million, as well as rewrite small business contracts to simple language by the end of the year. While the big banks all are aiming to simplify their contracts and application methods, March 2017 RFi Group data shows that SMEs that were satisfied with their loan application experience, (0-6 out of 10) were most likely to find that the application process was simple (23%), they were approved for their amount (20%) and the process was quick (17%).
Source: RFi Group Mar-17 Australian SME Banking Council