Originally published in The Canberra Times.

By Bruce Billson.

While there can be many joys of small business ownership, small businesses also deal with many potential perils.

Access to finance is one of the double-edged levers for small business success. Finance is the "oxygen of enterprise" - too much and people can go silly; too little and growth, vitality and survivability are impaired. Without finance, scaling up or building a business from scratch is near impossible. But the risk of accessing finance without adequate protections is one of the most nefarious threats to small business, driven by the bad behaviour of dodgy or predatory lenders or "fringe financiers" .

For small business, there is a really valuable feature of the financial services regulatory and safeguards framework - the Australian Financial Complaints Authority (AFCA).

AFCA provides free, fair, and independent dispute resolution for financial complaints, including for small businesses where they have grievances with participating financial service providers.

This is reassurance for small business borrowers who know that if an issue arises and a resolution can't be worked through with the lender, the borrower can turn to AFCA.

But not all lenders to small business are part of the AFCA dispute resolution scheme. For AFCA to be able to help, the financial firm needs to be an AFCA member and agree to the jurisdiction of its scheme.

AFCA recently reported that complaints from small businesses hit a record 4648 last financial year, up 4 per cent on the previous year.

Non-AFCA small business lending grievances can come to ASBFEO. We will seek to facilitate a resolution, just as we do for broader business-to-business disputes. But unlike AFCA, ASBFEO is not empowered to make a binding determination.

For small businesses, there are many reasons why access to funding is needed. About 40 per cent of the business-to-business disputes ASBFEO assists with involve payment disputes - small businesses just wanting to be paid for the goods and services they have provided. A growing number of small businesses who turn to ASBFEO for payment dispute assistance are worried that the recalcitrant business customer is insolvent.

Tax debts are also in the mix as the ATO moves to a more muscular "lodge and pay" posture, regularising its approach to enforcing timely reporting and payment obligations.

Market conditions, cashflow pressures and debt enforcement are all combining to see many small businesses looking at ways to bolster cashflow, with some turning to new (and at times short-term) borrowings to pay the bills.

Worryingly, a desperate business is not always the most credit-worthy borrower, and risk-averse established lenders (usually AFCA members) may not be open to this kind of business. But fringe financiers and lowdoc loan sharks (often non-AFCA members) sense the desperation and step forward.

We have assisted with cases where a small business owner has borrowed $6000 from a non-AFCA fringe financier for a period of a few months, and weeks after the loan period expired was being chased for nearly $60,000.

The breathtaking interest, masked by being quoted at a daily rate, washed out to be 240 per cent per year. Daily late payment fees, starting at $100/day, can soon escalate to as much as $1000/day.

We have seen non-AFCA lenders sneakily subbed into loan documentation when the small business borrower thought they were dealing with a credible AFCA lender. Unexplained moves to lodge caveats over private property and assets are not uncommon.

These fringe financiers aren't AFCA members - so small business borrowers are more exposed and have fewer avenues for support and redress.

The highly valued and respected Small Business Debt Helpline (SBDH) do what they can. SBDH offers free, confidential advice from qualified financial counsellors. They can help you navigate options, negotiate with creditors, and regain control.

They're seeing more and more small businesses reaching out to them for support citing exorbitant product costs, aggressive sales tactics, inappropriate lending and no accessible dispute resolution as key issues.

One thing small businesses can do to instantly protect themselves from potential borrowing mishaps, is to take time to verify if a lender is an AFCA member before taking out any finance by checking AFCA's website through the Financial Firm Search. Look out for the lenders that are coming for you hard, pressuring you to sign quickly with aggressive sales tactics. Pause and take time to ask questions, thoroughly review product disclosures, compare other options and seek advice from your accountant or trusted adviser.

Be wary of unrealistic promises. Even the tiniest sniff of guaranteed approval or no credit checks or too good to be true should ring alarm bells. Look beyond the headline interest rates, check fees, penalties and repayment flexibility. If you don't understand it, don't sign it.

Keep your documents in order with clear records of agreements and communications.

Small businesses need heightened awareness of how punishing some fringe financier loans can be - and with the lender not being an AFCA member, the avenues to pursue a dispute or seek redress are greatly diminished. My guidance is - use extreme caution with non- AFCA lenders.

Government could make it part of the AFCA mandate and member rules that, if a financial services provider is an AFCA member, so are their subsidiaries.

Lawmakers developing unfair-trading-practices prohibitions should make sure these are extended to financial products and services so that ASIC has these powers to pursue the more egregious lending practices in this space.

The ATO should get the powers, just like other leading international tax agencies, to forgive tax debts that arise from economic coercion. Industry associations and finance sector leaders wanting to honour reputable lenders should seek to lift standards, set minimum conduct guardrails and ensure proper vulnerability frameworks are in place, or risk facing additional regulations given the compelling concerns about the harm some fringe financiers are causing.

Running a small business is hard enough without adding unnecessary risk. Before you borrow, pause, check, ask questions, seek advice. And if you're in trouble, reach out for help. AFCA and the SBDH can help. ASBFEO can also assist. Your business and you deserve nothing less.