Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

Small businesses suffer as lending tightens

Staff Reporter 4 minute read

Small business owners are struggling under tighter credit conditions and higher interest rates, despite the improving economic outlook.

According to a report in today’s The Australian Financial Review banks are charging small businesses almost double the margin that large businesses pay over the official cash rate and well over double the margin charged to home borrowers.

Figures from the Australian Bureau of Statistics (ABS) show that the average cost of bank finance to small businesses in August was 7.2 per cent – 4.2 percentage points over the official cash rate.

With bank margins on mortgages rising back to pre-crisis levels, the federal government has warned the banks against moving their rates by more than the Reserve Bank of Australia’s (RBA) shifts to the official cash rate.


"I've made it very clear [that] the government expects the banks to behave in the way in which they should behave and the way in which they've traditionally behaved – that is, that they will pass on the official cash rate increase and no more," treasurer Wayne Swan said last week.

However, smaller business may receive no such luxury with the Commonwealth Bank of Australia’s (CBA) executive general manager of small business Symon Brewis-Weston saying business lending is kept entirely separate from mortgages.

“Unless you see some abatement in that wholesale funding marketing, whether it’s two or three months, you will see some place move beyond any move in the official cash rate,” Mr Brewis-Weston told the daily.

According to Mr Brewis-Weston, large businesses have lower lending rates because the companies can access money through equity markets by issuing commercial paper.

Small businesses suffer as lending tightens
TheAdviser logo

If you’re feeling overworked and overwhelmed in this fast-paced mortgage market, it’s time to make some changes, and the Business Accelerator Program can help! Early bird tickets are on sale now. Work smarter, not harder, this year.




more from the adviser
uptick graph Non-majors and non-banks continue to dominate: Broker Pulse

A greater proportion of brokers are sending their clients to non-...

construction equipment ta Demand for excavators up 191% YOY: CBA

The major bank’s data has revealed a jump in asset finance grow...

mortgage money house Hot Property: The biggest property headlines from the week 7-11 June

The weekly round-up of the biggest news stories from across Momen...