APRA Proposes Making It Easier for Banks to Lend to Business

Australia's banking regulator wants to cut the capital banks need to hold against business, development, and infrastructure loans. If the proposal is finalised, the changes take effect in April 2027.

APRA published a consultation paper on 29 June, proposing lower risk weights across three categories of lending. Risk weights determine how much capital a bank must set aside for each dollar it lends. Lower weights mean the same pool of capital supports more lending, and the cost of making those loans comes down.

Three changes worth knowing about

Unrated corporate borrowers. Many Australian businesses don't carry a credit rating from a ratings agency. That's not because they're risky. It's because getting rated is expensive and most businesses have never needed to. Under the current rules, banks hold more capital against these loans simply because there's no rating attached. APRA is proposing a lower risk weight for high-quality unrated borrowers, making it cheaper for banks to lend to established businesses that haven't been through a formal ratings process.

Residential development lending. APRA proposes adjusting the criteria so more residential property development loans qualify for a lower risk weight. According to the consultation paper, this includes reducing the pre-sales thresholds developers need to meet before their loan attracts more favourable capital treatment. For build-to-rent projects, the paper proposes replacing pre-sales requirements with pre-lease requirements, recognising a different business model.

Infrastructure lending. Eligible domestic infrastructure operators would be treated like public sector entities for capital purposes, attracting a meaningfully lower risk weight.

What this actually means

APRA Chair John Lonsdale said the changes would make the framework "more granular and risk-sensitive" without compromising financial stability. The result: banks would have "greater capacity to deploy released capital in a manner that supports broader economic outcomes."

When a category of lending gets cheaper for banks to fund, they compete harder for that business. The direction of travel here is clear: the regulator wants capital flowing more efficiently into business lending, housing development, and infrastructure, and is adjusting the rules to make that happen.

The consultation is open until 7 September. If finalised in the second half of this year, the new rules would take effect from 1 April 2027.

What to do

If your business has been told it's "too hard" for a bank loan because you don't carry a credit rating, that friction may ease from next April. Non-bank lenders already price this differently. They assess your business on its actual performance, not on whether a ratings agency has heard of you. If you've been knocked back, it's worth getting a second opinion now, because the lending landscape is shifting in your direction.

If you're a developer or builder, the proposed changes to development lending criteria are worth tracking. Talk to your finance adviser about how loosened pre-sales thresholds could change the feasibility maths on projects you've shelved.

If your business supplies, services, or depends on large-scale construction, infrastructure, or utilities, the pipeline of bankable projects is set to widen. That's worth factoring into your own investment and hiring plans for the year ahead.

This article is general information only and is not financial advice.