Along with agriculture, retail businesses are being more closely monitored by banks after a series of poor economic news hit the sectors, according to the Reserve Bank (RBA).
This was highlighted as part of the RBA’s submission to a federal parliamentary inquiry into small and medium business access to finance, which acknowledged that small businesses, particularly in agriculture and retail, faced financing constraints due to the global financial crisis.
“Lending to small businesses has increased slightly over 2009 and 2010, after growing steadily over the decade prior,” the submission.
“The slowdown reflects both reduced demand from businesses and a general tightening in banks’ lending standards.”
According to the RBA, small businesses rely mainly on loans from banks and other financial institutions for their debt funding, as it is difficult and costly for them to raise funds directly from debt capital markets.