The Financial System Inquiry interim report has identified key issues in the lending processes for SMEs.
The report found that in some instances, lenders’ application processes can be overly cumbersome for SMEs.
“Business owners may not be directed to bank officers who are qualified to provide proper advice on business loan applications, or may be directed to personal loan products because some bank officers lack familiarity with business lending,” it said.
“In some cases, banks do not communicate to business owners why a loan application has been declined.”
The report found information asymmetries are the most significant structural factor contributing to the higher cost and lower availability of credit for SMEs and can be a barrier to SME lending.
The issue has led the SME Association of Australia (SMEA) to begin developing a peer-to-peer (P2P) lending platform.
SMEA chairman Craig West pointed to Westpac’s recent investment in P2P lender SocietyOne and said the SMEA is looking to develop a similar lender model for business owners.
“I have engaged a consultant to look at it for the SMEA to find out how it could work,” he said.
“We have got the network and we are designing a software system to match businesses up.”
Mr Craig expects the service to be available to the SME community in the next six months.