Report finds 'sound reasons' for SME finance costs
The latest inquiry into small business finance has quietly repeated the findings of previous investigations: there is no compelling evidence banks have unfairly turned off the tap on small business lending.The Parliamentary Joint Committee on Corporations and Financial Services was set up in response to complaints from the small and medium enterprise sector in the wake of the global financial crisis. The sector's lobby groups complained banks were rationing credit, wrongly increasing interest margins and unfairly making it harder for small businesses to refinance.The committee essentially rejected these claims, saying there were "sound reasons" for SMEs to pay more for finance after the GFC. Since the GFC, it said: "SMEs appear to have fared better than large business. Lending to large business has dropped dramatically since 2007. In contrast, lending to SMEs experienced a more modest decline, and may be showing clearer signs of recovery."The committee's report, released at the end of last week, joins others over the past two decades in rejecting the SME lobby's key complaints.Like its predecessors, it mainly recommends improvements in the information offered to and about small business borrowers. It recommends that:-- The Federal Government develop standard definitions of 'micro', 'small' and 'medium' business.-- The Reserve Bank of Australia track Basel III's impact on the cost of small business finance and home lending.-- The Australian Bankers' Association's voluntary Code of Banking Practice and the Mutual Banking Code of Practice include a standardised notice period for notifying business borrowers of possible adverse changes to loan terms and conditions.-- The Government undertake further work on strengthening the mutual sector as a "fifth pillar" of the banking system.