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Major bank calls for long-term SME reform

by Malavika Santhebennur12 minute read
Major bank calls for long-term SME reform

New research by NAB has shown that the SME sector will require long-term reform to recover and grow once the COVID-19 crisis is over.

The research report prepared by advisory business AlphaBeta for NAB has called for long-term reform in eight key areas to support Australian small and medium businesses recover from the economic impacts of the coronavirus pandemic.

NAB CEO Ross McEwan said that as the economy begins a cautious and gradual recovery from the COVID-19 pandemic, SMEs would play a critical role in this recovery.

“Long before the impact of COVID-19, SMEs were already facing tough business conditions in Australia,” Mr McEwan said.


“For some time, the sector has faced challenges, which are likely to continue post-COVID-19, including hiring new staff, limits to supply chain opportunities and regulatory red tape.”

Mr McEwan added that SMEs currently contribute to half of Australia’s economic output but comprise a larger part of society as two out of every three working Australians are employed by those businesses.

“While these businesses have received much-needed support during the COVID-19 pandemic, they will also need long-term reform if they are to thrive and power Australia’s economic recovery and beyond,” he said.

The Supporting Economic Recovery: What we can do for small businesses research report has found that business owners are spending up to 18 hours on compliance before hiring their first employee, which is five times more than a large business with more than 200 employees.

It also found that red tape costs small businesses $9.3 billion per year, with seven out of 10 reporting government red tape as a burden on their business.

The research report has identified the following eight key areas of reform required for SMEs:

  • Making it easier to hire new workers: cutting red tape and providing support could make it easier for small businesses to hire staff;
  • Cutting regulation: More focus on reducing regulation will allow SMEs more time to work on their business rather than in the business;
  • Ensuring small businesses get paid faster: speeding up cash flow to small businesses can support small business growth;
  • Harnessing the power of digital tools: SMEs need to be equipped with the incentives and support to adopt digital tools;
  • Opening procurement opportunities: small businesses can find it difficult to access government and corporate procurement opportunities;
  • Further access to capital: small businesses need greater access to a more diverse range of finance options;
  • Lifting small-business management capability: SMEs should be provided with support to boost their management skills; and
  • Improving state business conditions: There is an opportunity through the national cabinet to streamline differences across states to reduce business red tape and unnecessary cost.

“This report is not just about actions for government – it is incumbent upon all of us to work together,” Mr McEwan said.

“Our aim with today’s report is to make a significant contribution to the discussion on driving long-term reform in areas we know will have a lasting impact.”

The federal government announced various stimulus packages to support SMEs impacted by closures and restrictions imposed to curtail the spread of coronavirus.

This includes the Coronavirus SME Guarantee Scheme, which was designed to help SMEs access working capital to help them survive the pandemic. Under the scheme, eligible businesses with annual turnover below $50 million can access up to $250,000 in unsecured funding for terms of up to three years.

Shortly after the announcement of the guarantee scheme, NAB launched a new funding facility for businesses affected by the coronavirus pandemic called the NAB Business Support Loan. The loan facility aimed to provide struggling businesses with up to $250,000 funding.

As of 19 June, the total number of NAB business loan repayment deferrals was at 39,528, while the value of total loan balance that had been deferred stood at $20.67 billion.

A total of 98,189 home loans had been deferred, with a value of $39.14 billion.

“It won’t be just one big initiative that will level the playing field for SMEs. It will take a series of changes across industries and governments to best support Australia’s economic recovery.”

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has welcomed the release of the report, stating it provides a comprehensive analysis of key SME pain points and provides ideas for reform to support SMEs impacted by the COVID-19 crisis.

Ombudsman Kate Carnell said the report has revealed the extent to which small businesses’ efforts to grow their business are hindered by unnecessary burdens.

“This report confirms the enormous pressures small businesses are under and the need for reforms to help these SMEs – many of which were viable and strong just a few months ago – get back on their feet and thrive again,” Ms Carnell says.

“Many of the reforms recommended in this report are simple and will make it easier to do business – which of course has broader economic benefits.

“My office has made a number of recommendations in regards to ways government could be cutting red tape. This report backs many of our recommendations, particularly in relation to tax compliance, where the cost for small businesses ($90 per $1,000 turnover) is 225 times higher than the cost for big business ($0.40).”

Ms Carnell spoke before the Senate select committee on financial and regulatory technology earlier this week and urged government to adopt regulatory technology, or regtech, to “reduce the burden on small businesses to interpret and implement complex regulations”.

Earlier this year, Ms Carnell called for new federal legislation to protect SMEs against unfair payment practices.

That was one of several recommendations made in the ombudsman’s final report for the review into supply chain financing.

[Related: ASBFEO calls for 30-day payment terms for SMEs]

Malavika Santhebennur

Malavika Santhebennur


Malavika Santhebennur is a content specialist at Momentum Media, focusing on mortgages and finance writing.

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