Government-Backed Loans: Computer Says No!

I’m getting feedback that many of our institutional lenders are deliberately limiting access to the promised government-backed loan scheme.

This is hurting small and medium sized business in Australia! And will be tragic for all - especially to a government who has already over-sold its promise to support Australians by over-stating the safety net for the employed and employees.

This is occurring through lenders either making it a long and drawn out process to get the loan, to the point that it is too hard or too late in coming, or offering rates far above the terms the federal government promised, or the borrower can afford.

Lenders who operate in this way must understand that they are NOT BEING PART OF THE SOLUTION … THEY are BEING the PROBLEM!!

If you drive unaffordable debt into the CVD Economy eventually you will be the hand that cuts the throat of your own business!

Let me also say that I do not think people in banking are bad or intentionally wrong. They are generally honest people who are caught up in a corrupt system. A system that has given decision-making to mindless, unintelligent, lacking in business understanding and skills, de-motivating and essentially predatory algorithms.

Lenders in this environment must begin to see business beyond an algorithm.

'Computer says no’ is a very sad state of affairs for many solid but small growth businesses who have their heart and soul into what they do, and have years of personal investment already at stake. 

This is why Australia is lagging so badly in business growth. We don’t have a robust entrepreneurial ecosystem to fund short and long-term, sustainable growth. Hence business is left to dinosaur banks and some very predatory lenders (if not loan sharks). I mean money borrowed at 1% or so (to 5% maybe) is then lent - with fees - at 25%. That is predatory lending and forces business into a borrowing pattern that eventually kills them like the death of a thousand cuts. 

Let’s face it, what business in a growth phase - or re-imagined phase through the CVD Economy - can earn the surplus to cover a 25% cost when most businesses are happy to earn 7% (maybe even 5%) from their invested capital? Or to just borrow some time to stay in business and keep people employed?

It just doesn't make sense. But maybe most lenders have really become lenders of last resort. If they are, they need to check their personal values at the door when they go to work and have the BS they have on their websites reflect their real service – managed algorithm decline (another form of Managed Adaptive Decline MAD – to adapt to ever-declining conditions albeit in a very well-managed manner).

I completely understand why business lending is charged at such a high rate. It’s simple - lend at a reasonable rate to low risk borrowers who don’t really need it … but charge all others a very high margin to cover the risk of those who might fail to repay.

Simply put, people running sound businesses that need some level of financial support have to pay ridiculous rates to cover a lending book -  a clear numbers game with easy decisions made by algorithms. If a lender had the capability and real relationship with people who know what they are doing, they would be able to judge the real opportunity and risk, and make conscious business decisions that made sense in the conditions we all face.

Now is a great time to support business growth who get the Covid Economy that we are in and will be in for some time. We need to back the people who will reinvent and create businesses that will generate sustainable value through such a sad and disorienting disruption as CVD19.

But death by algorithm is not the answer.