Mark Bouris's column was first published by the Sunday Telegraph and is published here with permission.
When capital is being invested and expenses incurred, you have to be serious about your business.
This is why I set up Mentored, to address the gap between business owners’ aspirations and their abilities. And it’s revealing how much success is possible when they can access the right expertise.
But as Mentored evolved I saw that SMEs operate in an environment not of their making. They are in a world controlled by governments, regulators, banks and big business.
Frankly, Australian small businesses needed a champion and during September I became the Chairman of the SME Association of Australia.
We start from strength because around two million Australian businesses employ up to 70 per cent of the work force. And the government is committed to reducing the corporate tax rate to
25 per cent and it wants to fix the wholesale business lending markets so there’s greater competition in SME lending.
But there are worrying signs. The OECD’s latest report, ‘Financing SMEs and Entrepreneurs 2018’, shows Australia trailing the world in key measures. Just 31 per cent of all outstanding Australian business loans are to SMEs, while New Zealand (40 per cent), Spain (50 per cent) and Japan (65 per cent) have a greater proportion of their business lending to SMEs.
Australia has high interest rates for SME bank loans: Australia’s average bank lending rates for SMEs were just over 5 per cent along with Canada and Greece — well above the US, Israel, Italy and the UK where the average rates to business were around 3 per cent.
In many cases, Australian business owners who cannot access loans use credit cards at very high interest rates.
Perhaps the starkest difference is our venture capital activity.
The OECD says venture capital invested as a percentage of GDP is more than 0.3 per cent in Israel and the US while Australia is below 0.02 per cent, near the very bottom of the tables.
These scenarios are beyond the control of business owners: you need tax policy to encourage venture capital to invest in SMEs, and it’s ultimately the regulatory settings and bank lending policies that keep SME interest rates high and finance support for small business, low.
This is why I’ve taken the role at the SME Association. We can upskill and educate business owners and we are halfway through an advertising campaign to ‘buysmall.business’, with a positive response from consumers who know that supporting their local small business is good business for all of us.
But now it’s the turn of governments, regulators and banks to see the potential of SMEs as Australia transitions into an economy driven by smart people and innovative businesses.
Business owners are playing their part.
Now it’s time for the people who create the business rules to get serious.
If you want to play first grade, train like a first-grader.