Australian Small Businesses Struggle for Finance as Global Models Suggest Alternative Solutions

Small businesses in Australia have struggled to access finance, and recent market volatility has highlighted the issue. Judo Bank, a specialist small business bank, recently reported three bad loans, causing its shares to plummet by 40%.

The Reserve Bank of Australia found that strict lending criteria, collateral requirements, and high borrowing costs are the biggest obstacles for small businesses trying to obtain finance.

Unlike many other advanced economies, Australia's system relies heavily on commercial banks and specialist lenders. This means they carry most of the risk, leading them to prioritize collateral, particularly residential property.

In contrast, countries such as the UK, Germany, France, and the US have established institutions that share part of the risk with the government. These institutions provide guarantees and lower-cost funding, making it easier for small businesses to access credit.