- 44 per cent of Gen Y business owners applied for a business loan in the past 12 months.
- 39 per cent of Gen Y had their loan applications knocked back.
- 35 per cent of SMB owners remain concerned about cash flow
More than a third (39 per cent) of Gen Y business loan applications have been denied in the last twelve months according to MYOB’s latest Business Monitor report.
In a post-Royal Commission world, MYOB’s findings suggest the younger generation of business owners are having greater difficulty securing finance as banks tighten up lending criteria.
MYOB CEO Tim Reed believes the decline in home ownership amongst Gen Y is a contributing factor to their lack of success with loan applications. He predicts the trend will continue to increase as 36 per cent of those Gen Y business owners surveyed said they expect to apply for a loan in the coming months. Reed suggests financial institutions need to take heed of the results as this lack of finance could prove crippling for the SMB sector.
“This isn’t something you can pin on smashed avo. Australia’s youngest small business owners struggle to get access to finance because they’re less likely to own their own home. Many of us have believed tying business loans to home ownership has been a problem with the lending system that has existed for years, but for the first time we’re now seeing the generational impact,” he said.
“For too long there has been a lack of competition in the small business lending market, which has led to a lack of product innovation. Small business shouldn’t have to put up their own property as collateral to drive their business forward. We believe the birth of a new generation of small business financiers, as well as the bipartisan support for the Federal Government’s Australian Securitisation Fund, is in response to this market need.”
Reed also suggests that Gen Y is facing the brunt of the Royal Commission backlash far more than their Baby Boomer or Gen X counterparts.
“Recent data from the Reserve Bank of Australia demonstrates growth in bank loans of between $100,000 and $500,000 has been in negative for the last three quarters, which further compacts the frustrations of small business operators,” said Reed.
Despite access to finance being a sticking point for Gen Y business owners, MYOB’s Business Monitor Report suggests their economic outlook remains positive with close to one third (31 per cent) believing the economy is set to improve.
In further good news, a third of small business owners are expecting their profits to increase in the next twelve months. Gen Y was most likely to report more profits gained in the last 12 months (42 per cent) and are also more likely to expect a profit increase in the 12 months to come (44 per cent).
As expected, the main issues causing small business owners concern in the last year were utility costs (40 per cent) and cash flow (35 per cent, up 7 points from 28 per cent in October 2018).
Reed suggests small business owners ‘creeping concern’ around cash flow is a warning sign that needs heeding.
“If cash flow causes problems, the wheels can fall off very quickly in other areas, so making sure businesses can get paid on time should continue to be an absolute priority for all,” he said.