 Interest charges rising for small business
Small businesses are being slugged an extra $1.1 billion a year in interest by the banks.
In the past, small and medium business was able to borrow from the Big Four with a lower rate than home owners.
But how times have changed, now two years later these enterprises are paying around 1.2 per cent extra, according to data compiled for The Daily Telegraph by Canstar Cannex .
At present, there is $91 billion of variable rate borrowing, when the rate is applied it equals an extra $1.1 billion in interest payments.
Cited as the second biggest issue for small business - the number one issue is not being able to get finance at all - these higher interest charges are threatening the recovery of small business from the global financial crisis.
"A 1.2 per cent gap is appalling," Independent Retailers Association chief executive Peter Strong said. Fujitsu Consulting's Martin North said "there was no doubt that there is a dampening effect (on the economy) in terms of the ability of small business to grow and thrive". The gap in lending rates between the official cash rate set by the Reserve Bank, and the lending rates from the Big Four banks has risen to 3.9 per cent since November 2007.
Mr North suggests the Rudd government might want to look at moving some of the stimulus spending to this area of business.
Small to medium sized businesses are impacted by the lending practices of the big banks leading economists fear the recovery within the employment sector will be directly affected by investment in small business.
Recent data has indicated that job advertisements were on the rise, however this trend could be affected by the ability of Australian business to recover fully from the economic crisis that has gripped the world in the past 18 months.
Housing values have also remained strong, as well as the number of homeowners over paying their mortgages and building up savings.
If economic data continues along its current positive path, the Reserve Bank is highly likely to increase official interest rates when they meet for their November meeting on Melbourne Cup day.
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