Small firms 'finding it difficult to predict interest rates'

Small companies are becoming wary of taking out bank loans because it is increasingly difficult to predict interest rates.

Executive director of the Council of Small Business of Australia Peter Strong told Smart Company that recent events have had implications on the confidence of small firms when it comes to weighing up their business banking options.

The vast majority of economists had forecast further interest rate cuts at the start of the month, which would have provided some much needed relief to less established enterprises across Australia.

However, the Reserve Bank of Australia failed to make another readjustment and now the country's four major banks have actually hiked their rates.

This level of uncertainty, Mr Strong suggested, has left some businesses questioning the feasibility of taking out credit.

"They'll wonder if it is worth getting a loan, because you're not sure what it's going to be anymore," he remarked.

Indeed, this tallies with a recent National Australia Bank study, which showed that 70 per cent of organisations are keen not to take on any additional debts in the current economic climate.