Phil Wicks: Small Business NZ Founder on the banks lending less to small businesses

It's being suggested small businesses are finding it tougher to get loans than big businesses, despite being a safer option. 

The latest data shows the compound annual growth rate of bank lending has slowed from 6% to 1.5% since 2013. 

Small Business NZ Founder Phil Wicks told Mike Hosking most banks are making business hard. 

He says lending to someone with skin in the game should be more attractive to banks. 

Wicks told Hosking many banks assess loan risks like it was centuries ago. 

He says there are small businesses with strong work ethics, no debt, and personal guarantees, still being declined 

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Episode Transcript

Speaker 1 (00:00):
Is it a sign of the squeeze on the economy.
Bank lending for small businesses has slowed. Our growth rates
now just one point five percent. In fact, our biggest
bank A and Z has seen their book shrink Westpac
have flatlined since COVID. Now Philwicks is the Small Business
New Zealand founder and is back with us. Feel good
morning to you.

Speaker 2 (00:16):
Good morning like he going very well.

Speaker 1 (00:18):
Indeed some of the dart pricing it used to be
six percent growth now it's down to one point five.

Speaker 2 (00:22):
What is that?

Speaker 1 (00:22):
Is that demand or attitude or the rules around lending
or what ah?

Speaker 2 (00:26):
I think that's attitude and a lack of understanding. I
think sometimes a bank sussess small business like it's the
eighteen hundreds. You know. They often will look at historical
financials when they should be looking at you know, what
we're the business is what quotes are on the table,
and it's a lazy risk assessment. They've got clients or
there are small businesses as strong Forward where no debt,

(00:49):
personal guarantees and are still being declined and that's because
of the formulas that they use are often historical or
some arbitrary formula in a spreadshet rather than understanding you know,
where the businesses and where it's going.

Speaker 1 (01:02):
Does it vary widely from bank to bank depending on
who you're dealing with?

Speaker 2 (01:07):
No, not really. I mean I think I think that.
I mean, there is definitely an opportunity for some bank
to step up. But I think, you know, the irony is,
I think small business is often less risky than big business.
You know, they will mortgage their house before they'll default
from a loan. A lot of these business owners. You
learning to somebody with skin in the game. I mean,
that's not risky. That's exactly who who you want to back.

Speaker 1 (01:29):
Yeah, exactly I'm read. Is there a suggestion there's some
you need a little more capital as a bank to
back a small business on a loane than you do
to say to a house, put the money into a house.
It's easier.

Speaker 2 (01:40):
Oh that's that's It's easier and easier and faster. And
I think, you know, I think the banks will loan
to big business. You know, it's a lot easier for
a bank to a nine hundred K mortgage and a
ninety k working cattle alone to a trade business. And
I suppose that's where the margin is so that's where
the focus goes. But it's it's policy driven discrimination. It's

(02:01):
costing the country productivity and growth. What they should be
looking at is that ninety K time ten thousand businesses.
You know, that's where the opportunity is. And if you know,
there's a real vacuum there. And I think if one bank,
one bank really steps up, could really own that segment.
It's a branding and trust opportunity just waiting, in my opinion,

(02:22):
just wanting to be claimed.

Speaker 1 (02:23):
Would they know that? I mean, we'll get them on
eventually and I'll ask them, but would they know that
or would they defend it or would they then go
But listen, Mike, here's what we've learned from lending to
a thousand businesses. You know, sixty seven of them go
bust and we're on the line for it.

Speaker 2 (02:37):
Look. A couple of years ago I was asked to
speak to all the Australian and New Zealand banks as
part of a risk assessment. Basically they wanted to know,
you know, what makes a good lending risk for small
business and it was a real eye opener. I mean,
to their credit they sort of said, look, we really
don't understand and this is across the board. We really
don't understand small businesses. We should. A lot of our

(02:58):
good people come in and end up being gift going
straight up into corporate and I think there's a lot
of truth in that, just from my own experience, is
just identifying that the way that they assess business is
really looking very much at how business has performed historically
rather than saying, hey, this business is doing really well now,

(03:20):
it's got a lot of business in fun of it.
It's a low risk because it's because most small business
owners when they go for a loan that they've usually
put up quite a bit of collateral. But it's the
way that they're assessed and that to me points to
a real lack of understanding what people getting to know
those individual businesses as well as they should good insight.

Speaker 1 (03:38):
Peel Listen will get a bank on eventually and we'll
ask them about this because it's interesting and it surprises
me to a degree. Feel with small business New Zealand
founder make the small bank sector, I have to put
fifty percent more capital against business loans. I think that's
probably part of what the problem is.

Speaker 2 (03:51):
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