Small businesses want the Australian Securities and Investment Commission and the Australian Competition and Consumer Commission to investigate the practice of big businesses offering loans to small businesses.
The Council of Small Business Australia has called for an investigation by the regulators into global giants pushing out payment times to small businesses and then offering the same small businesses loans to keep them afloat.
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Why small businesses are in trouble
Small business ombudsman Kate Carnell says some big multinationals are driving small enterprises out of business through late payments.
Massive brands including Kellogg's, Mars and Fonterra all have payment terms of up to 120 days and offer loans to cover this period in a development highlighted by Australian Small Business and Family Enterprise Commissioner Kate Carnell.
Peter Strong, chief executive of COSBOA, has contacted the ASIC and the ACCC to request an investigation.
![Peter Strong, chief executive of the Council of Small Business Australia, is calling for an investigation into the loans ...](/web/20170408102904im_/http://www.smh.com.au/content/dam/images/g/j/o/d/o/x/image.related.articleLeadwide.620x349.gvfpyw.png/1491543568237.jpg)
"Lending has lots of rules and regulations around it and I think there is coercion involved in this lending process," he says. "This is not a true business to business dealing, it is where a loan is being forced upon [the small business] by someone who owes them money."
Strong says the complexity of the system disadvantages small business.
"There are a different set of rules when it comes to a business lending to a business," he says. "It's an incredibly complicated world that favours big business. It's so complicated that no small business has a chance. If the law allows this to happen then the laws should change."
![graphic](http://web.archive.org./web/20170408102904im_/http://www.smh.com.au/cqstatic/12z7v7/0504smallBusinessLoan729px.png)
ASIC
A spokesperson for ASIC says the regulator "shares concerns" with the Australian Small Business and Family Enterprise Ombudsman about lenders meeting the requirements under the new Unfair Contract Terms laws in relation to lending to small businesses."We have called on lenders to immediately take steps to ensure their loan agreements meet the new requirements, and are working with lenders to identify and rectify unfair terms in their loans," the spokesperson says.
ACCC
The ACCC is also going to look at loan arrangements as part of its broader unfair contracts investigation.
Michael Schaper, deputy chair of the ACCC, says the watchdog already has an investigation underway into payment terms and unfair commercial practices that have the effect of delaying payment times for suppliers.
"The potential for large businesses to unilaterally alter their payment terms and unfairly delay payment times for their suppliers is a significant concern to the ACCC, and may also raise issues of misleading or potentially unconscionable conduct," he says. "Ensuring small businesses receive protection under new unfair contract terms law is a priority for the ACCC in 2017."
If the law allows this to happen then the laws should change.
Peter Strong, Council of Small Business Australia.
Schaper says the loan arrangements being pushed on small businesses could be caught by Australian Consumer Law protections against unconscionable conduct.
"It could be seen potentially as unconscionable," he says. But Schaper says this is a hard test to prove. "Most people have a clear sense if something feels wrong but there is a difference between that and being able to prove it before a judge in the court room. It has to be unconscionable beyond reasonable and hard bargaining practice."
Schaper says the ACCC will consider concerns about loans to small business in the context of its broader investigations.
"It can be hard to look at loan issues separately you have to look at the bigger picture," he says. "That's certainly what we are doing in terms of all the unfair contract issues we have before us."
He says the ACCC will be taking cases to court to establish principles.
"You can expect to see some action from us in the very near future."
Business Council of Australia
COSBOA is also undertaking discussions with the Business Council of Australia about a voluntary code of payment between large businesses and small businesses to attempt to address the issue of lengthy payment times.
However Strong feels legislative reform is a better bet.
"My concern is voluntary codes very rarely work," Strong says. "We will look at the wording when it comes out."
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