Sky-high house prices in Sydney and Melbourne will starve budding entrepreneurs of financing because banks continue to insist that property security be pledged to back loans, according to the chief executive of Westpac’s business bank, David Lindberg.
With business credit growth showing signs of life, housing remains the most common form of security required by banks to access business loans. Mr Lindberg said with “housing affordability a problem in the country, if you are young person and you want to start a business, and you are not lucky enough to have wealthy parents, you are going to have an awfully difficult time getting financing in a large dollar number for a new business that, at present, has no cash flows.”
“If you haven’t been able to buy a house, you won’t be able to start a business,” Mr Lindberg warned last week’s The Australian Financial Review Banking & Wealth Summit.
National Australia Bank’s head of business banking Anthony Healy agreed that banks must do better to create new products that don’t rely on property security, but rather seek to protect the bank’s position from company cash flows.