Australia is experiencing negative growth in loans to businesses, with a new report revealing Australia lags behind the G8 average by 2% and the BRIC nations’ average by a whopping 68%.

The study, by international accounting and consultancy network UHY, examines central bank data on outstanding loans to businesses in 22 countries across UHY’s network.

This includes the G8 – the United States, Canada, the United Kingdom, France, Germany, Italy, Japan and Russia – and BRIC (Brazil, Russia, India and China).

The study found that despite Australia fairing well in the global financial crisis and having strong financial institutions, the value of loans in Australia fell by 6% in the last three years.

According to the study, outstanding loans to Australian businesses shrunk from US$690 billion in December 2008 to US$651 billion in 2011.

Meanwhile, all BRIC nations experienced double-digit growth. According to UHY Haines Norton chairman David Tomasi, the results for Australia reflect the banks’ tough lending criteria.

“While our economy is performing well, relative to other industrialised countries, Australian banks have scaled back lending to small businesses,” Tomasi says.

“[This is] causing some sectors of the economy such as the manufacturing sector – which is highly capital-intensive – to be hard hit over the last few years.”

Tomasi says lending to small businesses is a key barometer of economic prosperity, so tough lending criteria could have dire consequences.

“Starved of credit, it’s difficult for them to expand and create jobs,” Tomasi says.

“Small businesses are hugely reliant on bank financing… If a small business cannot expand to fulfill an order, that order can be lost to better financed overseas competitors.”

Tomasi says governments should reverse this negative trend in business funding by offering other forms of funding outside of the banking system, such as tax breaks for private investors.

The study mirrors the findings of a DBM Consultants survey, which shows the borrowing intentions of SMEs have dropped significantly because of the gap between official interest rates and those charged by the major lenders.

The survey also found a fall in banking satisfaction among businesses, with the ratings levels of the big four banks tapering off in February, marking a reversal of last year’s steady rise.

“Wider lending margins were closely associated with a fall in the number of businesses saying they were looking to take out additional lending products and an increase in the number of businesses seeking to replace existing lending,” DBM managing director Dhruba Gupta said.

“So while the banks’ lending margins have improved, they appear to have come at a cost of fewer businesses looking for new loans, and more existing customers looking to replace their current lending.”