Achieving a balance between encouraging a market that provides reasonably priced credit to small businesses with fair and reasonable safeguards is a challenging task. The challenge is reflected in the ways in which both the general or judgment law and legislation have responded to small business lending. As we shall see in some cases the relevant law draws no distinction between small and large business while in other respects small businesses are treated as being in a similar position to consumers.
This paper complements, and draws on information from, ‘Everyday Consumer Credit – Overview of Australian Law Regulating Consumer Home Loans, Credit Cards and Car Loans’ (‘BP4’). In some areas, such as the generic consumer law in the ASIC Act and the Code of Banking Practice, small business credit is treated in either the same or substantially the same way as consumer credit. Given the overlap between small business and consumer credit in these areas, some of the information in BP4 is repeated in this paper with relevant modifications.
The scope of this paper is limited to small business credit in the form of loans, both secured and unsecured. It does not consider other banking facilities, financial products or financial services. It is intended to provide an overview of the relevant issues, and does not purport to be comprehensive.