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Lack of millennial home ownership results in rejected business loans



Finance | News

By Loren Webb

Nearly half (44%) of Gen Y (also referred to as millennials) small businesses have applied for finance in the last year and more than a third (39%) of those applications were declined. This is according to the latest findings from the MYOB Business Monitor. 

The report, which explores the state of play of 1,000 Australian small businesses, found Gen Y businesses were more likely to apply for finance, compared to 23% of Gen X small business owners and 15% of the Baby Boomer generation.

This trend looks set to continue in the next 12 months, with 36% of Gen Y-run small businesses expected to apply for finance, versus 16% of Gen Xers and 8% of Baby Boomers.

With data demonstrating a decline in home ownership among younger generations of Australians*, MYOB CEO, Tim Reed considers the rate of success of finance applications for Gen Y small business a warning shot to the way financial access is provided to the small business community as a whole.

“Australia’s youngest small business owners struggle to get access to finance because they’re less likely to own their own home. Many of us have believed tying business loans to home ownership has been a problem with the lending system that has existed for years, but for the first time we’re now seeing the generational impact,” he said.

“For too long there has been a lack of competition in the small business lending market, which has led to a lack of product innovation.  Small business shouldn’t have to put up their own property as collateral to drive their business forward. We believe the birth of a new generation of small business financiers, as well as the bipartisan support for the Federal Government’s Australian Securitisation Fund, is in response to this market need.”

In addition to financial access barriers, the findings may also suggest Gen Y small businesses are bearing the brunt of consequences from the Hayne Royal Commission.

“Recent data from the Reserve Bank of Australia** demonstrates growth in bank loans of between $100,000 and $500,000 has been in negative for the last three quarters, which further compacts the frustrations of small business operators,” said Mr Reed.

In its tenth year, the MYOB Business Monitor dissects key factors affecting small business. Topics include financial stability and business pressure points.

Economic outlook

While access to finance is a sticking point for Gen Y small business, they maintain a positive outlook. Thirty-one per cent of Gen Y respondents said the economy will improve in the next 12 months, while just 28% of small business nationwide expect this. In fact, 45% of all respondents expect the economy to decline.

Revenue is another area where Gen Y are feeling buoyant, with 37% reporting revenue went up in the last 12 months (versus 25% at national average) and 38% stating revenue will be up in the year to come (versus 28%). Nationwide, the 12 months ahead look less rosy than six months ago, with expectations for an increased revenue forecast reducing five points from 33% in October 2018 to 28%.

When asked why revenue had increased in the last 12 months, most replied there had been an increase in customer demand (28%), followed by the current economic climate and development of better relationships with customers (jointly 14%). For those who had stated revenue had decreased during the last 12 months, one third (33%) said the reason was the current economic climate, while 21% put it down to decreased customer demand.

On profitability, on balance, the last 12 months have been positive for small business, with respondents more likely to say profit has increased (30%) than decreased (26%). The next 12 months are looking more positive still, with 34% saying they expect more profit in the year to come. Gen Y were most likely to report more profits gained in the last 12 months (42%) and are also more likely to expect a profit increase in the 12 months to come (44%).

“It’s interesting to see that the economy has worked in favour for some in the last 12 months, but most feel it’s been the reason for a decline if that’s what they’ve experienced,” said Mr Reed.

Business pressures and priorities 

The top issues most likely to cause Australian small businesses a lot to extreme concern this year are fuel prices (40%, down 6 points from 46% in October 2018), utility costs (40%) and cashflow (35%, up 7 points from 28% in October 2018).

In terms of priorities for the year ahead, small business are most likely to invest in diversifying the variety of products or services offered (25%), customer retention strategies (24%) and jointly, the sale of products or services online and prices and margins on products sold (23%).

Gen Y are most likely to diversify their product or service range in the coming year at 33%, versus the national average of 25%. They’re also likely to be more aggressive with their customer acquisition strategy this year. Thirty-one per cent of Gen Y-run small business will increase investment in this area, versus the 21% national average.

“The research tells us there’s a lot for small business to feel optimistic about in the coming year, but it’s worrying to see cashflow such a creeping concern for the community. If cashflow causes problems, the wheels can fall off very quickly in other areas, so making sure businesses can get paid on time should continue to be an absolute priority for all,” said Mr Reed.


State overview: have you tried to access finance in the last 12 months?

New South Wales Victoria Queensland South Australia Western Australia
Sample 306 280 215 73 93
Yes, and was successful 20% 18% 18% 24% 19%
Yes, but was not successful 10% 8% 6% 3% 16%
Have not tried to access finance for the business 68% 71% 74% 70% 65%
Don’t know 2% 3% 1% 3%
Net Yes 30% 26% 24% 27% 35%

About the MYOB Business Monitor

Now in its tenth year, the MYOB Business Monitor is a national survey of 1,000+ Australian small and medium business owners and managers, from sole traders to mid-sized companies, representing the major industry sectors. The Business Monitor researches business performance and attitudes in areas such as profitability, cash flow, pipeline, technology usage and the government. This most recent survey ran in April 2019.

*Source: Grattan 2017

** Source: Reserve Bank of Australia, April 2019