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Credit crunch bites small businesses

Australia’s small and medium businesses looking to expand or invest in new projects will now find it harder to request a loan following the exodus of non-bank lenders from the SME sector.
 
The contraction of wholesale credit markets, where lending institutions attain the bulk of their funds, has led to tougher lending standards and a higher refusal rate. Those businesses lucky enough to get approval have been hit with high interest rates.
 
Business commentator Robert Gottliebsen admits that although it will be tough for enterprises that previously relied on non-bank lenders, the move could be good for the long term.
 
“The fact that business lending offers much higher margins will divert money to the business sector. Banks are now undertaking much more vigorous credit checks than two years ago – an overdue development,” he says. “Nevertheless, despite the interest rate situation and the tighter credit checks, the availability of bank finance is going to help the selling prices of small to medium sized businesses.”

Adeline Teoh

Adeline Teoh

Adeline Teoh is a journalist with more than a decade of publishing experience in the fields of business, education, travel, health, and project management. She has specialised in business since 2003.

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