The SME responsible lending exemption, introduced at the start of the pandemic last year, was due to expire on 2 April but will now be extended until the government secures passage of its credit reforms through the Senate.
The exemption was brought in to help small business get access to credit quickly and efficiently during the pandemic by clarifying that small businesses were not subject to responsible lending scrutiny by the banks.
Mr Frydenberg said the exemption will continue to be in place until the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 is passed.
“As part of the government’s commitment to these reforms, the small business exemption will be extended until the government secures passage of its credit reforms through the Senate,” Mr Frydenberg said.
“The extension will continue to provide the certainty and confidence necessary to allow small businesses to access credit in a timely and efficient manner.”
Under the credit reform bill, which has now passed the House of Representatives, the current practice of “lender beware” will be replaced with a “borrower responsibility” principle, with the government hoping that the reduction of extensive information and checks required by lenders will help speed up loan approvals and inject credit into the economy.
Responsible lending obligations will continue to apply for small-amount credit contracts and equivalent loans by banks as well as consumer leases.
While small-business lending was not meant to be captured under the Credit Act, the government contends that risk aversion of lenders has meant that some small businesses have struggled to access credit, particularly where it is difficult to separate their business from their household.
The Reserve Bank of Australia noted out this week that small businesses continue to be reluctant to access new loans as a result of stringent lending requirements enforced by banks and other credit providers.
“Indeed, small businesses have reported that the price has not been the biggest impediment to accessing finance over the past few years,” said RBA assistant governor Chris Kent.
“For instance, entrepreneurs in our small business panels have noted that access to finance for start-ups is a challenge. Banks often have substantial collateral requirements, and the process for getting finance is lengthy and onerous.”
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.