With an uncertain economic environment ahead, lower interest rates are needed to boost SME businesses after a decrease in business credit.

That is according to Bibby Financial Services Australia, who says business credit decreased by 0.3% over October 2012.

Director of Bibby Financial Services Australia Gary Green said lower interest rates would help boost confidence levels and borrowing by small businesses, with activity held back by uncertain economic conditions.

“While business credit has recovered during 2012, this recovery has been led by larger businesses, particularly listed companies, while borrowing by small businesses has been stagnant due to difficult trading conditions," he said.

“A further cut in official interest rates would help boost small-business confidence and help to prompt greater levels of business investment, which has been restrained by worries about economic growth.

“RBA data suggests the cost of borrowing probably remains too high for SMEs.

"There is a lack of confidence amongst SMEs about the economic outlook and their ability to repay debt, and furthermore directors are reluctant to put personal property on the line.

"SMEs also fear their customers or suppliers could become insolvent in this sluggish environment.

“Our recommendation to all SMEs is to increase their focus on cash flow and working capital, particularly with the Christmas holidays almost upon us.”

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