In Australia, the traditional form of financing a new small business, using personal housing as collateral, is becoming more and more difficult for young people with a new idea.
This is why Labor wants to make it easier for potential new small business owners to access to finance and promote competition in small business lending.
We already know how important information is when making investment decisions. Comprehensive Credit Reporting is about sharing positive client information to allow financial lenders to make better decisions.
Allowing more lenders to access positive information about clients, such as good repayment histories on credit cards and regular contributions to savings accounts, will promote competition for small business financing in the banking sector.
This is good for consumers, good for small business and good for banks. David Murray noted “personal credit history is a major factor in credit providers’ decisions to lend to consumers, but also to new business ventures and smaller firms”.
Historically, Australian banks have shared negative credit information. Yet we lag the world when it comes to sharing positive information. This inhibits competition and reduces the potential number of successful loan applications. Other OECD countries like Japan and New Zealand have pushed ahead with positive credit reporting.
Importantly, while supporting consumers and potential new small businesses, positive credit reporting also has a benign economic impact.
An ACIL Tasman study found a one-off improvement in capital productivity of 0.1 per cent, worth up to $5.3 billion over a decade. International studies also show a decline in the default rate of loan applications.
David Murray recommended a formal review into Comprehensive Credit Reporting and Labor will undertake that review. If the review finds the industry code isn’t up to scratch, we will introduce mandatory reporting to share positive credit information amongst lenders.
The message is clear. If you want to start a business, you can and a Shorten Labor Government will help you. If you already own a small business, a Shorten Labor Government will support you.
For more information. http://www.alp.org.au/financeforsmallbusiness