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Speaker 1: Is it a sign of the squeeze on the economy.

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Speaker 1: Bank lending for small businesses has slowed. Our growth rates

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Speaker 1: now just one point five percent. In fact, our biggest

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Speaker 1: bank A and Z has seen their book shrink Westpac

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Speaker 1: have flatlined since COVID. Now Philwicks is the Small Business

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Speaker 1: New Zealand founder and is back with us. Feel good

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Speaker 1: morning to you.

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Speaker 2: Good morning like he going very well.

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Speaker 1: Indeed some of the dart pricing it used to be

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Speaker 1: six percent growth now it's down to one point five.

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Speaker 2: What is that?

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Speaker 1: Is that demand or attitude or the rules around lending

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Speaker 1: or what ah?

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Speaker 2: I think that's attitude and a lack of understanding. I

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Speaker 2: think sometimes a bank sussess small business like it's the

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Speaker 2: eighteen hundreds. You know. They often will look at historical

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Speaker 2: financials when they should be looking at you know, what

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Speaker 2: we're the business is what quotes are on the table,

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Speaker 2: and it's a lazy risk assessment. They've got clients or

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Speaker 2: there are small businesses as strong Forward where no debt,

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Speaker 2: personal guarantees and are still being declined and that's because

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Speaker 2: of the formulas that they use are often historical or

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Speaker 2: some arbitrary formula in a spreadshet rather than understanding you know,

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Speaker 2: where the businesses and where it's going.

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Speaker 1: Does it vary widely from bank to bank depending on

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Speaker 1: who you're dealing with?

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Speaker 2: No, not really. I mean I think I think that.

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Speaker 2: I mean, there is definitely an opportunity for some bank

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Speaker 2: to step up. But I think, you know, the irony is,

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Speaker 2: I think small business is often less risky than big business.

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Speaker 2: You know, they will mortgage their house before they'll default

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Speaker 2: from a loan. A lot of these business owners. You

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Speaker 2: learning to somebody with skin in the game. I mean,

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Speaker 2: that's not risky. That's exactly who who you want to back.

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Speaker 1: Yeah, exactly I'm read. Is there a suggestion there's some

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Speaker 1: you need a little more capital as a bank to

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Speaker 1: back a small business on a loane than you do

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Speaker 1: to say to a house, put the money into a house.

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Speaker 1: It's easier.

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Speaker 2: Oh that's that's It's easier and easier and faster. And

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Speaker 2: I think, you know, I think the banks will loan

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Speaker 2: to big business. You know, it's a lot easier for

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Speaker 2: a bank to a nine hundred K mortgage and a

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Speaker 2: ninety k working cattle alone to a trade business. And

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Speaker 2: I suppose that's where the margin is so that's where

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Speaker 2: the focus goes. But it's it's policy driven discrimination. It's

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Speaker 2: costing the country productivity and growth. What they should be

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Speaker 2: looking at is that ninety K time ten thousand businesses.

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Speaker 2: You know, that's where the opportunity is. And if you know,

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Speaker 2: there's a real vacuum there. And I think if one bank,

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Speaker 2: one bank really steps up, could really own that segment.

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Speaker 2: It's a branding and trust opportunity just waiting, in my opinion,

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Speaker 2: just wanting to be claimed.

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Speaker 1: Would they know that? I mean, we'll get them on

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Speaker 1: eventually and I'll ask them, but would they know that

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Speaker 1: or would they defend it or would they then go

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Speaker 1: But listen, Mike, here's what we've learned from lending to

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Speaker 1: a thousand businesses. You know, sixty seven of them go

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Speaker 1: bust and we're on the line for it.

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Speaker 2: Look. A couple of years ago I was asked to

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Speaker 2: speak to all the Australian and New Zealand banks as

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Speaker 2: part of a risk assessment. Basically they wanted to know,

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Speaker 2: you know, what makes a good lending risk for small

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Speaker 2: business and it was a real eye opener. I mean,

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Speaker 2: to their credit they sort of said, look, we really

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Speaker 2: don't understand and this is across the board. We really

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Speaker 2: don't understand small businesses. We should. A lot of our

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Speaker 2: good people come in and end up being gift going

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Speaker 2: straight up into corporate and I think there's a lot

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Speaker 2: of truth in that, just from my own experience, is

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Speaker 2: just identifying that the way that they assess business is

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Speaker 2: really looking very much at how business has performed historically

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Speaker 2: rather than saying, hey, this business is doing really well now,

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Speaker 2: it's got a lot of business in fun of it.

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Speaker 2: It's a low risk because it's because most small business

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Speaker 2: owners when they go for a loan that they've usually

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Speaker 2: put up quite a bit of collateral. But it's the

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Speaker 2: way that they're assessed and that to me points to

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Speaker 2: a real lack of understanding what people getting to know

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Speaker 2: those individual businesses as well as they should good insight.

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Speaker 1: Peel Listen will get a bank on eventually and we'll

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Speaker 1: ask them about this because it's interesting and it surprises

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Speaker 1: me to a degree. Feel with small business New Zealand

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Speaker 1: founder make the small bank sector, I have to put

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Speaker 1: fifty percent more capital against business loans. I think that's

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Speaker 1: probably part of what the problem is.

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