The Financial System Inquiry agrees with submissions arguing that small and medium businesses find it harder to get access to loans, compared with home buyers and large corporate borrowers. But it also concedes that there is no easy fix.The interim report of the FSI found that "compared to their larger counterparts, the price and terms of SME loans can be more restrictive".It found that many lenders now require more security (usually residential property) for business loans.It said that "information asymmetries" were the most significant structural factor contributing to the higher cost and lower availability of credit for SMEs. Typically, lenders have limited knowledge about a new borrower's financial position, the financial performance of the business and the financial behavior of the business owner."The SME sector is extremely diverse, so lenders may have limited knowledge of the conditions in and prospects of particular industries. Lenders are less likely to lend to new business for this reason," the report said.This asymmetry resulted in lenders' application processes that could be "overly cumbersome".The Inquiry floated a number of ideas to alleviate the situation. It asked for responses on whether development of an SME finance database would reduce information asymmetries between lenders and borrowers.It also raised the prospect of SME loan securitisation and changes to tax rules to encourage more venture capital finance for SMEs.It rejected two proposals that came up in submissions: government subsidies for SME loans and mandating superannuation investment in SMEs finance.It also questioned a couple of common arguments: that the restrictions on SME funding were the result of a lack of competition; and that regulation was to blame.It said: "During the GFC the spreads between lending rates and the cash rate increased for all loans. However, spreads for SME lending increased by more than spreads for mortgages and corporate loans. Terms of lending to SMEs also tightened."This has generated concerns about the strength of competition in the SME lending sector. The increase in spreads reflects, at least in part, a re-evaluation of risk and an increase in the rice of risk."It is not clear if any of the increase in spreads was due to reduced competition."The Inquiry cited several submissions claiming that APRA's capital requirements had reduced the availability of lending to SMEs, or increased its price. It said: "The Inquiry has received little evidence that capital requirements have affected either the supply or lending to SMEs or its relative pricing."