News Pulse for June 11, 2018

A daily download of SME, startup, fintech and tax news from around Australia.

Everyone shares blame in Prospa disaster

The only thing we know for sure about the float of small business lender Prospa is that it’s not going ahead.

The reasons for that now indefinite delay to the IPO are murky, with various sources putting the IPO’s demise down to bad luck, bad timing and conservative advice.

Prospa founders admit float lost ‘vital momentum’

The co-founders of small business lender Prospa maintain the company can return to the public markets for a future float, after a last-minute regulatory query this week created “confusion” that sapped the listing of vital “momentum.”

Prospa was meant to be one of most-watched floats of 2018, but these plans were thrown into disarray this week as scrutiny from regulators apparently caught the company, and its investment bankers, off-guard.

‘Can’t legislate against stupidity’, franchise inquiry told

The government cannot stop small business owners from making stupid decisions, a leading franchising lawyer has told an inquiry into the scandal-plagued $144 billion industry.

HWL Ebsworth special counsel Derek Sutherland said on the opening day of the parliamentary inquiry into the Franchising Code of Conduct that while there had been some “terrible” things happen to franchisees, there was no problem with the current regulatory system.

‘They stitch you up in the fine print’

Pat Loughnan says he became addicted to Prospa’s easy money.

The owner of Stirling Asphalt, who is based in the Perth suburb of Innaloo, says he used Prospa loans to help him through the sort of cashflow crunch that would be familiar to small businesspeople all over Australia.

The dark art of capital raising

For the best part of a decade, they’ve been the masters of this little universe. The middle men that have matched the billions of dollars of capital that have flowed into the stock market with the corporations in need of it, Australia’s investment bankers have maintained a position of power.

But this week the music stopped. On Tuesday, the former country heads of Citigroup in Australia, and Deutsche Bank, were among six of the nation’s most senior bankers from ANZ Banking Group, Deutsche Bank and Citigroup who were served with criminal cartel charges in relation to the aftermath of a botched $2.5 billion capital raising for ANZ in 2015.

Botched Prospa float leaves lender in limbo

The botched $576 million float of small business lender Prospa has dealt a blow to venture capital-backed companies with ambitions to list on the Australian Securities Exchange, as mystery surrounds its decision to delay the float minutes before trading was due to commence.

On Friday co-founders Greg Moshal and Beau Bertoli said the controversial lender, which charges small business owners average annual interest rates of more than 40 per cent for short-term, unsecured loans, may not float at all.

Prospa founders lament momentum loss amid float delay

The founders of small business lender Prospa have blamed the decision to indefinitely delay on “a loss of momentum” around the deal following the dramatic decision to pause the $576 million initial public offering just 15 minutes before it was due to list on Wednesday.

The company said on Friday that after consulting with the investment bankers running the float, Macquarie and UBS, it had decided not to proceed with the IPO.

Tech titans’ walled garden a trap

Facebook and Google have created an online ecosystem in which both users and advertisers find themselves trapped inside a “walled garden” with few alternative prospects, the ACCCAustralian Competition and Consumer Commission The ACCC is Australia's competition regulator and national consumer law champion. inquiry into digital platforms has heard.

The near impossibility of breaking free from the tech giants was underscored by parents, university graduates, small business owners and privacy advocates who shared their concerns about the platforms’ dominance at two public forums held by the competition watchdog in Melbourne recently.

‘If you can’t trust your kids’ – bank chief warns on small biz loans

Raising banks’ threshold for small business lending from $3 million to $5 million would risk forcing up interest rates and restricting the supply of credit, Bendigo and Adelaide Bank chief executive Mike Hirst warns.

With business banking practices under the microscope, Mr Hirst said that if banks classify loans worth up to $5 million as small business lending – as the corporate regulator has backed – it could exacerbate the long-held complaint of small businesses: that it is too hard to get credit.

Tax office cracks down on partner income splits

The Australian Taxation Office is set to crack down on the misuse of a key income-splitting method commonly used by traditional partnerships in law, accounting and other professional service firms after shutting down another splitting technique used by partners in this year’s budget.

Tax officials released a list of concerns they have over the way some firms are using service trusts, a technique used by partnerships to split the profit from the main operation into parts and to protect assets, after withdrawing the old rules for allocating profits last December .

Ombudsman calls for greater clarity on fintech loan terms

The Small Business Ombudsman has urged fintechs, including soon-to-list SME lender Prospa, to make their loan terms explicitly clear to customers.

Speaking to Mortgage Business, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, stated her concern that fintechs, including Prospa, are making their interest rates “really hard to understand”.

ASIC issues resolved: Prospa

Online lender Prospa is still hopeful of getting its stalled IPO off the ground at some point, with the company telling the market that any potential regulatory issues with regards to its prospectus have been resolved.

The company has put its $146 million IPO on hold indefinitely after citing the Australian Securities and Investments Commission’s (ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au) broader review into small business lending as the reason for its last-minute decision on Wednesday to halt the listing.

Tax office cracks down on partner income splits

The Australian Taxation Office is set to crack down on the misuse of a key income-splitting method commonly used by traditional partnerships in law, accounting and other professional service firms after shutting down another splitting technique used by partners in this year’s budget.

Tax officials released a list of concerns they have over the way some firms are using service trusts, a technique used by partnerships to split the profit from the main operation into parts and to protect assets, after withdrawing the old rules for allocating profits last December .

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