Just like fashion, television shows and military engagement, Australia’s small businesses are now tracking their US counterparts in terms of their banking experiences.

A new CoreData-syndicated study of small businesses, seeking new or additional finance through a business banking relationship, reveals many are now having to jump through extraordinary hoops to access funds.

Just as banks have lost faith in each other in terms of their ability to meet their loan obligations – intra-bank lending rates at all time highs – Australian bank lending prudence suggests banks anticipate quite the slow down in the domestic economy (at least in terms of small businesses).

For banks, in a downturn (just as in an upmarket) it’s all about protecting the downside impact of defaults, and while nobody is talking too loudly about the ‘R’ word in Australia yet, the banks are not taking any risks… the irony of it!

The emerging tight lending policies in Australia reflect what is happening globally, particularly in the US.

There are an estimated 27 million small businesses in the US and new data reveals lending activity among them has dropped off considerably.

Partly this reflects the banking sector’s new cautious lending approach and partly the fact many small businesses are postponing expansion plans etc. until it is clearer what true impact the credit-crunch will have on the US economy.

Banking is all about confidence and it seems just as positive led growth feeds on itself the opposite is also the case – reduced liquidity and fewer companies accessing capital may not only hasten a recession but fuel its length and severity.