Prospa, an Australia-based small business lending platform, has delayed its float on the Australian Securities Exchange scheduled for today (Wednesday, June 6), amid increasing pressure from regulators on the nation’s banking and financial services industry.
According to Reuters reports, Prospa has delayed its Initial Public Offering by 48 hours amid criticism from the Australian Securities and Investments Commission regarding its small business loan terms, citing the “industry-wide review into financial services small business loan term,” the publication said.
Earlier reports in Australian outlet Financial Review said Tuesday (June 5) that Prospa has set a market capitalization of about $576 million.
Amid its float, Prospa is facing a challenging market as Australian regulators crack down on the banking sector.
Peter Strong, CEO of the Council of Small Business of Australia, criticized the company specifically for its high interest rates, which can average 41 percent.
That average annual interest rate is disclosed as a “factor rate,” the publication explained, with annual rates growing higher once additional fees are added.
“Forty-one percent is theft – it’s not an interest rate,” Strong said. “If the royal commission makes it harder for banks to lend money, that will force people into lender displaying usury behavior. It will force people to get loans at very high rates, and that makes the problem of access to finance worse.”
Australia’s Small Business and Family Enterprise Ombudsman Kate Carnell is collaborating with FinTechs to heighten transparency as part of broader efforts to address concerns over the financial services industry. Next month, Carnell will introduce an industry code that requires companies to disclose interest rates and make it easier for borrowers to compare.
“The challenge for Prospa is to continue to work with us on what we are doing to increase transparency,” said Carnell. “Prospa needs to go through with the industry code currently underway and that should be finished at the end of June. They need to be very transparent and very open, so businesses and consumers know what they are getting – and what it is going to cost. If they take a lesson from the banks and do that, I think they have a bright future.”