CBA extends small biz olive branch with quicker decisions for “eligible existing” clients

Commonwealth Bank is attempting to address small-business lending concerns following the royal commission final report, unveiling a swathe of policy changes on Monday.

Under the changes, “eligible existing” small-business clients applying for unsecured loans of up to $250,000 can expect same-day decisions from the bank.

SmartCompany has confirmed “eligible” refers to small-business customers with less than $1 million in existing debt with the bank.

However, other unspecified eligibility factors may apply depending on what information the bank has about a particular client.

Only customers who are clients with CBA by the March implementation date will be eligible for the service.

A financial assistance team is also being set up for small-business clients which will be responsible for reviewing payments if clients fall into financial difficulty.

Further, the bank says it will remove more business banking fees from its service, having canned 10 other charges over the last 12 months.

CBA trying to restore respect and trust

While not directly addressing Hayne’s report, CBA, one of Australia’s biggest SME lenders, said it’s “determined” to restore respect and trust among customers and may make further changes.

“Small businesses are the engine room of the Australian economy — when they thrive, we all thrive,” chief executive Matt Comyn said in a statement.

The new policies come amid broader concern in the SME community that an already tight lending market will become more difficult in the wake of the banking royal commission.

However, while speeding up the approval process for existing customers, the policies don’t commit the bank to being more transparent about loan evaluations.

“Pretty minor” changes

Australian small business and family enterprise ombudsman Kate Carnell said the changes were nice but were far from getting to the heart of issues in the SME lending space.

“It’s good sentiment, but in reality, the actual changes are pretty minor,” she tells SmartCompany.

“These aren’t the major changes they need to put in place. What they need to do is they need to address the Banking Code of Practice, they need to change the definition of small business as recommended,” she tells SmartCompany.

Carnell says the inclusion of “eligible” customers in Commonwealth Bank’s announcement, without explanation, demonstrates the need for more transparency.

“I don’t know what ‘eligible’ is. The reality is we need more transparency, the banks need to make it clear what small businesses need to do to get the loans they need and it needs to be reasonable.”

Hayne recommended changing the definition of small business in the 2019 banking code in his report, simplifying it to a business which employs less than 100 full-time equivalent staff and where a loan is less than $5 million.

While potentially changing the framework regulating SME loan evaluation was covered by the royal commission, Hayne recommended no changes be made to the status quo.

Instead, he recommended deputising ASIC with the ability to pursue banks for breaches of the 2019 Banking Code of Practice, which stands to increase compliance risk for the banks.

A defensive move?

Other policy changes announced by Commonwealth Bank on Monday include the establishment of 24/7 business banking contact centres and removing default interest charges from business term loans for drought-affected farmers.

Commonwealth Bank says it lent over $30 billion to businesses last year, making it a major player in the SME lending space.

Although with the government poised to spend $2 billion on a securitisation fund designed to challenge established lenders, the policy changes could also be viewed as a defensive move.

The fund will provide funding to smaller banks and non-bank lenders with an eye on promoting competition in the industry.

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