Government extends responsible lending exemption for SMEs

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The responsible lending exemption for SMEs, introduced at the start of the pandemic last year, was due to expire on April 2, but will now be extended until the government guarantees adoption of its credit reforms by the Senate.

The exemption was introduced to help small businesses access credit quickly and efficiently during the pandemic by clarifying that small businesses were not subject to responsible lending review by banks.

Mr Frydenberg said the exemption will remain in place until the adoption of the National Consumer Credit Protection Amendment (Support for Economic Recovery) Bill 2020.

“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 by the Senate,” Frydenberg said.

“The extension will continue to provide the certainty and confidence necessary to enable small businesses to access credit quickly and efficiently.”

As part of the Credit Reform Bill, which has now been passed by the House of Representatives, the current practice of “beware of lenders” will be replaced by a principle of “borrower liability”. government hoping that reducing the extensive information and checks required by lenders will help speed up loan approval and inject credit into the economy.

Responsible lending obligations will continue to apply for low-value credit contracts and equivalent loans from banks as well as for consumer leases.

While small business loans were not supposed to fall under the Credit Act, the government argues that lenders’ risk aversion has made it difficult for some small businesses to access credit, especially when it is difficult to separate their business from their household.

The Reserve Bank of Australia noted this week that small businesses continue to be reluctant to access new loans due to the strict loan requirements imposed by banks and other credit providers.

“Indeed, small businesses have reported that price has not been the biggest barrier to accessing finance in recent years,” said RBA Deputy Governor Chris Kent.

“For example, entrepreneurs on our small business panels noted that accessing finance for start-ups is a challenge. Banks often have substantial collateral requirements and the process of obtaining financing is long and expensive. “

Government extends responsible lending exemption for SMEs

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Last updated: March 19, 2021

Release date: March 19, 2021

Jotham lian

Jotham lian

Jotham Lian is the Editor-in-Chief of Accountants Daily, the leading source of late-breaking news, analysis and information for Australian accountants.

Prior to joining the team in 2017, Jotham wrote for a range of national mastheads, including the Sydney Morning Herald and Channel NewsAsia.

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