Small business lending scrutinised

16/07/2010

The Senate Economics Reference Committee’s inquiry into small business access to finance found that the supply of finance to small business had tightened over the past couple of years and become more expensive, but it concluded that a return to more prudent credit conditions was appropriate. It was more concerned with what it saw as restriction on competition, particularly exit fees on loans and the high cost of moving accounts.

It recommended that banks abolish exit fees on variable-rate loans. It recommended that the Australian Bankers Association work with small business organisations to develop a code of practice for lending to small business. The government’s green paper includes a proposal to extend to small business the protection currently available to consumers.

Such a change would mean small business would have ASIC acting as a watchdog over exit fees. It would also give small businesses better access to mechanisms for negotiating with lenders when they are in financial difficulty. And it would impose responsible lending obligations on small business lenders.

Source: Banking Day