A specialist small business bank, Judo Bank, recently flagged three business loans had turned bad and the market reaction was swift. The shares lost 40% of their market value in a day as investors worried about the health of lending to the small business sector.

Small businesses have often reported challenges in getting access to finance, and in recent years have increasingly turned to non-bank lenders or specialist providers such as Judo. It’s not unusual for a small business owner to have to pledge a major asset, such as the family home, as collateral against a business loan.

In a report on small business, the Reserve Bank of Australia found the biggest obstacles to obtaining finance were

strict lending criteria

collateral requirements and

Yet in many other advanced economies, lending to support small business is not left up to the private sector. Governments are also involved. So, what do these alternative options look like, and what can Australia learn from overseas?

Small businesses are big employers

Small businesses employ around 42% of the private-sector workforce or 5.4 million people, and account for around 97% of all Australian businesses.

So when small businesses have trouble accessing finance, they invest less, hire fewer people and are less able to grow. That matters not only for entrepreneurs but for productivity across the economy.

Over the........

© The Conversation