HECS dad says it’s time for small businesses to get the same help

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The father of the Higher Education Contribution Scheme said a similar system should be put in place to help small and medium-sized businesses come out of the pandemic, arguing that it will do much better than the federal government’s existing loan guarantee program. .

Bruce Chapman, who designed the HECS system that supported the growth of the higher education sector in the 1990s, said the loan program should be replaced with a conditional income program similar to HECS.

Australian National University economics professor Bruce Chapman said an income-based lending system should be considered for small businesses.

In March of last year, Treasurer Josh Frydenberg announced a program under which the federal government would guarantee up to $ 20 billion, which is expected to support $ 40 billion in loans to small and medium-sized businesses.

In August of this year, Frydenberg expanded eligibility for what is now known as the SME Recovery Loan Program. He confirmed that 74,000 loans worth $ 6.2 billion had been taken out since the initial program was introduced to deal with the COVID-19 pandemic.

Prof Chapman said that an income-based lending system, whereby a business repays part of its income, would prove to be much more attractive than the government system.

He said that with low repayments when the borrower’s financial situation is bad, income contingent lending would be important given the uncertainty in the economy.

“There is no doubt that an income-tested loan would be highly favored by small businesses; after all, the policy minimizes borrowing risk for businesses, ”he said.

“If it is well designed, there is no chance that a business will have repayment difficulties on such a loan, and this type of financing cannot increase the risk of default.”

An industry survey for Hnry Australia, an accounting service for independent traders, found that nearly half of businesses had applied for a new loan or credit in the past 12 months. About a quarter of them had difficulty doing so.


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