Banks slug small business with high interest rates

Interest rate margins on small business loans have increased greatly over the last two years. In 2007 loans to small and medium sized businesses from the big four banks featured rates that were lower than the average home loan rate. Now loans to small businesses are priced at least 1.2% above home loan rates.

"A 1.2 per cent gap is appalling," Independent Retailers Association chief executive Peter Strong said.

For small and medium-sized enterprises the cost of borrowing has risen to be the No 2 issue. The biggest problem is being able to get any finance at all.

The difference between the RBA benchmark rate and business lending rates has trebled in two years to almost 4 per cent. Lending to small business fell last financial to its lowest level since 1994.

If you are having difficulty obtaining finance for your business, speak to the mortgage brokers at Intellichoice about alternative business finance solutions.