Small business lending should be dropped from APRA’s interest-only loans restrictions to give businesses access to the credit they need, says the Finance Brokers Association of Australia
The association warns that APRA’s capping of the amount of new loans that can be interest-only at 30% could end up hurting small businesses.
The warning comes after the latest AFG Mortgage Index
data to December 2017 shows that the number of interest-only mortgages has continued to trend downwards. Interest-only loans across Australia accounted for 33% of the mortgages lodged in the last quarter of FY17 and 19% in the second quarter of FY18.
Their volume went down from a high of 59% in the last quarter of FY15 to 47% in the same period of FY16.
“It is important to remember when we discuss this subject that the vast majority of small businesses will borrow against their family home at some stage in their business life, and they need to be able to access the right style of debt for their business, which could well be IO,” said FBAA executive director Peter White.
He cautioned that IO lending restrictions may result in small business borrowers unable to access the right type of loan, which could restrict their ability to expand or to continue operating.
“It’s tough enough for small business borrowers now in the lending arena without putting additional restrictions on them.”
White, who is an advisory board member at the Small Business Association of Australia (SBAA), told Australian Broker
that the issue has been an important area of concern for SBAA, as to how the lending cap will affect small businesses.
“Our country is incredibly reliant on the successes of small business and we need regulations that help them succeed, not restrictions that help them fail,” he said.
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