SMEs struggle under higher funding costs

Small to medium enterprises are likely to face the brunt of higher funding costs, a new report has found.

According to new research released yesterday by JPMorgan and Fujitsu, nearly half of all SMEs are paying loan rates above 8 per cent.

And these interest rates are expected to rise further, as funding costs continue to rise – spurring the big banks to hike their rates for small businesses beyond any moves in the official cash rate.

''As the cost of funding stays high for the banks themselves, they'll be looking to pass on that burden to the SME sector,'' he said. ''This means the rates for this sector will remain quite high,” JPMorgan’s Scott Manning said.

These higher rates will be a further setback for the sector, which remains fragile.

Many small and medium businesses have found it tough to secure financing over the past two years as profits have fallen away.

As such, small business confidence has been largely negative this year.

While repricing of mortgage portfolios outside the official cash rate has pricked political sensitivity, business loans fall outside the public spotlight.

SMEs struggle under higher funding costs

Staff Reporter

Last Updated: 08 July 2010 Published: 08 July 2010

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Written by Staff Reporter

Last Updated: 08 July 2010

Published: 08 July 2010