Small business losing out to holiday homes
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26/07/2010 5:20:00 AM
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Funding for weekend holiday homes has been much easier to obtain by borrowers than funding for small to medium businesses, following a tightening of lending to the SME sector.
Speaking with the ABC's Inside Business on Sunday, Joseph Healy, NAB group executive business banking, said mortgages had become more attractive for banks due largely to international banking rules, which favour the provision of credit to the household sector over SMEs.
While 10 years ago banks were lending a dollar to the SME sector for ever dollar in the mortage sector, now for every $1000 avaialble for mortgages, only $600 is lent to small business. Bank debt in the household sector has grown from $280bn to $1.1tn during that period.
Healy said the situation was a "big conern", and that "we mustn't lose sight of the fact that small business is the engine room of the economy."
The issue is starting to be recognised, Healy argued, due to a strong consistent message from the SME sector that the banking system was not serving their needs.
However, he warned the situation was only likely to get worse, as funding from international institutions became more scarce as demands for credit rose around the world.
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