All banked up and nowhere to go for SMEs

The Government’s plans to build an economy based on encouraging successful small to medium-sized enterprises (SMEs) won’t happen. The lending policies of the nation’s banks will prevent it, according to the emerging champion of SMEs, former corporate high flyer Jim Scott.

Scott was responding to story from Australia this month in which international accounting firm KPMG suggested banks across the Tasman were looking to increase their lending to SMEs.

The KPMG spokesman said the banks would like to increase their lending into the SME sector because lending to corporates had slowed significantly. “It [SMEs] is pretty strong, healthy sector and the banks will see that as an opportunity,” said Peter Nash, KPMG head of financial services in Sydney.

Scott, however, labelled the comments as the “usual warm and fuzzy statements that we in the SME sector see more of these days”. He said the problem for SME owners and managers is that banks and politicians fail to understand the potential of the sector “let alone begin to talk our language and address our real requirements. In New Zealand banks simply stereotype us. We are offered banking contracts and conditions that are years out of date.”

Scott agreed with KPMG’s assessment that SMEs are the business of the future but says banks “will need to get their heads out of the clouds and address the real competitive efficiencies that SMEs are able to deliver”. He also believed that the days of conglomerates being “market darlings” that deliver economies of scale and stable company structures have gone.

“SMEs’ requirements and their scale of operations are very different and it will take lot more understanding to turn this into business contracts of substance. Without relevant banking contracts being offered we are not going to realise their [SMEs’] potential in the near future,” warns Scott.

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