Australia Lags Behind in Supporting Small Businesses with Finance

Small businesses in Australia often struggle to get access to finance due to strict lending criteria and collateral requirements. The situation has worsened over the years, with many small business owners having to pledge their family homes as security for loans.

A recent report by the Reserve Bank of Australia found that the biggest obstacles to obtaining finance were strict lending criteria, collateral requirements, and borrowing costs.

However, in other advanced economies, governments are involved in supporting small businesses through public institutions. For example, in the UK, the British Business Bank provides government-backed guarantees and lower-cost funding for lenders, which has enabled 51% of borrowers to access credit they wouldn't have otherwise received.

In Australia, most of the risk remains with commercial banks and specialist lenders, making it difficult for small business owners without property to pledge. The country's system is dominated by the big four banks, which naturally place greater emphasis on collateral, particularly residential property.