SME borrowing remains stuck in a rut

By Mozo ·

Record low interest rates of the last 12 months haven't been enough to free up the credit necessary to see steady growth for Australian small and medium enterprises (SMEs).

According to the latest data from the ABS, overall commercial credit is up slightly, but borrowings by SMEs continues at low levels - a continuation of the trend started in 2009 and persisting in spire of low interest rate levels.

According to the data, SMEs are unwilling or unable to borrow more, which is a concern given that they are such a vital part of Australia's GDP, a hot bed for innovation and employ more than half of our current work force. 

Many SMEs are continuing in a state of survival, with little expectation of growth recovery in 2014. Amongst SMEs the main drivers for credit were basic working capital and vehicle acquisition, with business expansion barely making the agenda.

A recent DFA SME survey revealed the top barriers preventing SME owners borrowing as well as their levels of satisfaction with the banks. Around 20% of SME owners were not able to get the funding assistance they required.

Also, poor service has reduced in importance for SME owners seeking credit thanks perhaps to improved customer service, or service being outweighed by more pressing issues.

When it came to naming credit providers for service and products, ANZ received the highest acclaim for customer service, while ING won out on product quality for SME owners.

As the end of 2013 quickly approached, SMEs are still yet to see a significant rebound in confidence or growth and remain stuck in the same borrowing lull that they've been in since 2009. It is unlikely that any further interest rates cut would be sufficient to kick lending along unless providers bring business credit down to even more affordable levels or banks are encouraged to lend more to such a vital sector of our economy.

SME owners looking to find the best value credit and business loans to give their business a kick-start in the new year can compare business loans and other business banking products here.