Businesses 'are keen to trim their debt'

It is becoming increasingly clear that companies across Australia are desperate to reduce their levels of debt.

Although a recent ANZ study showed that small enterprises have benefited from bigger profits in recent months, there is still an overriding sense that firms are reluctant to take credit.

Analysis by the Reserve Bank of Australia indicated that despite a slight rise in the uptake of business loans in the first six months of the year, borrowing levels have retreated once again, the Australian reports.

The central bank stated that only 20 per cent of corporate funding came from external sources in the past year. This figure stood at 40 per cent in the years leading up to the global financial crisis – a significant difference.

It also revealed that debts are down to half the book value of equity among listed organisations, which is something that has not been seen since the early 1980s.

Of course, businesses will be far more likely to borrow from banks once the global economy starts to improve – particularly in places like Europe, where there is an ongoing financial crisis.

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