ANZ pledges $1 billion for start-ups

 The ANZ Bank has this morning pledged to lend $1 billion to new businesses over the next year.

Small business operators have hailed the "big four" bank's move as a deserved mark of respect for small business start-ups, although questions linger about whether they will take the assistance being offered.
Dean Ramler, founder and CEO of furniture business Milan Direct, said banks should treat small businesses with respect "from day one".
"When we started Milan Direct six years ago, I literally walked down the street and got knocked back by the first three banks I approached – they all laughed at us and didn't take us seriously,”  he said.
“The fourth bank, which did take us seriously, today has the business of a $20 million company. So it would be nice to see banks treat start-ups and small businesses with respect and not be so risk averse, because those businesses can turn into huge successes.”
Mick Liubinskas, co-founder of start-up incubator Pollenizer, said he would be watching with interest where ANZ placed the funds.
"There are known risks if you're investing in a new cafe. But if you're investing in a cafe-cum-hardware store that also sells software subscriptions, that's where real risk is taken. Australia is well positioned to develop big disruptive technologies. If the money goes into those sorts of ventures, especially software technologies, that's where the benefits are for Australia, because of the export opportunities," Liubinskas said.
With credit growth decelerating across the economy, banks are keen to encourage a rebound in small business borrowing.
The total value of newly approved loans of less than $100,000 fell to $2.6 billion in the December quarter, down from $3 billion early last, latest Reserve Bank figures show.
But there appears to be more appetite for borrowing by larger companies. Newly-approved loans worth more than $2 million rose over 2012, the RBA figures show.
ANZ general manager of small business banking, Nick Reade, said the initiative demonstrated the bank's commitment to the start-up sector.
"It's an important part of the small business sector that we already support and we decided to show our commitment to this sector by increasing lending to this market," he said.
The bank also wanted to dispel the myth that banks don't lend to start-ups.
Reade said the bank hoped to increase the number of new customers banking with ANZ as a result of the $1 billion commitment to start-up lending. "We're hoping to grow our business and help new businesses on the way," he said.
Reade said the bank already approves seven out of 10 loan applications made by start-ups and that the bank's history in lending to start-ups means it is comfortable lending to new enterprises, which may not have long trading track records.     
There are, however, question marks about whether small businesses actually want the money. According to data released in late February by financial services research house East & Partners, small businesses are saving more than they are borrowing. The data showed for every $1 small businesses borrow, they are saving $2.78.
Nevertheless, the response from small business to ANZ’s announcement has been positive.
“It's great to see ANZ pledging such a large lending amount for new business. Milan Direct has funded all growth organically so we haven't so far sourced external funding, however this is something we would consider if the terms were favourable. We certainly see this as a positive move by ANZ,” Ramler said.
Blake Hutchison, founder of AgendaSelects, a subscription marketplace, is also hopeful the announcement will help small businesses grow.
"The small business and specifically start-up tech environment does need help. The funding opportunities are limited,” Hutchison said.
"Repayments and long-term interest rate impacts are concerns for small businesses growing slowly but steadily. Innovation in repayment plans or deferred repayments would obviously assist and make more small businesses consider bank loans rather than [access funds from] friends and family. It will be interesting to see how ANZ intends to structure lending for small business owners."
But emerging businesses need more than money – they also need business support, said Nick Cloete, the founder of point-of-sale software system Kounta.
"It's great to see the big banks taking notice of the growing start-up scene in Australia. We'd look into ANZ's loan options to possibly help fuel the growth of Kounta, but start-ups aren't just looking for cold, hard cash,” he said.
"They also want strategic investors who bring with them industry experience, partnerships, innovation and the sort of entrepreneurial spirit that we're yet to see a bank match. Kounta is currently in its first round of funding and has a big focus on getting strategic investors and institutions on board."
Small business advisers such as Adam Stanley, a partner with accounting firm Pitcher Partners, are also cautiously optimistic about the announcement.  
“It’s good marketing from ANZ, but the next step is being able to successfully get the loan. You still need the business plan and cash flow forecast, which are important to get the money. I think it’s a positive initiative from ANZ given the low credit growth environment in the current market,” he said.
Stanley says businesses with a well-articulated business plan and credible cashflow forecasts would be very deserving on funding. "Innovative small businesses are essential to maintain a strong economy and it is pleasing to see ANZ recognise this with dedicated funding. Businesses with a unique value proposition or well developed intellectual property should be provided the opportunity to bring their ideas to market."
Peter Strong, executive director of the small business lobby group the Council of Small Businesses of Australia, also welcomed the announcement.
“It’s great news because this is a lot of money in recognition of the importance of small businesses,” Strong said.
“The other interesting point is that a lot of money has been put into the motor vehicle industry, which we can see remains problematic. Investing money into the development of small businesses is a great way to give more certainty to our economic future."
Strong expects online retailers and IT-based businesses to be start-ups that would benefit most from the funds. "Traditional industries such as transport and manufacturing could apply this money to implement new technologies to evolve into new sectors," he said.
Strong said green energy and export/import business, especially in light of the Asian century, could use the money to build existing relationships and to launch into new markets.
Ramler said ANZ's announcement could prompt other banks to offer more favourable lending terms to small businesses.
“I believe most of the other banks will follow suit, because whenever a positive move is brought out by one bank all the other banks tend to copy that move, which is a win for small business,” he said.
ANZ said start-ups needed to have a business plan, a cash flow forecast, recent personal tax returns and no negative credit rating to apply for a loan.
(Source: SMH)