An economist has called on businesses to improve their "bankability", saying it's a "dog's breakfast" for many.
Independent economist Cameron Bagrie said many banks had moved further away from business lending as home lending has gone up in market share.
He said home lending accounted for more than 60 percent of total bank lending.
"The banking sector has been economically incentivised by the risk rates to lend a lot more into the housing market over the past three years particularly, but more like ten or 20 years," he told AM co-host Ryan Bridge.
"If you look at home lending, there's about 62 percent of total bank lending and as home lending has gone up in market share business lending has diminished in market share."
Bagrie has called on banks to "wake up to a little bit to a bit of economic reality".
"So the banking sector has really shied away from the business sector and they have cut out a lot of staff that have got critical lending skills," he told AM on Tuesday.
"Banks need to wake up to a little bit to a bit of economic reality that the business sector creates the jobs and the jobs are needed for people to pay their mortgages on the other side. So there is a shift in attitudes that I think needs to take place across the banking sector in regard to allocating capital towards SMEs, in particular.
"The hope is that as the housing market starts to adjust, the banks start to reallocate capital into the real productive part of New Zealand."
But it's not just banks Bagrie is calling out, he said small businesses need to improve their bankability, which for many is a "dog's breakfast".
"There's another part of the story that isn't talked about enough and it's the bankability of businesses … one of the problems we come in time and time again is just the bankability of a lot of small to medium-sized businesses," he told AM.
"They're not good. They're just not bankable prospects. So I guess we can point the finger at the banks, but business owners also need to take a little bit of responsibility in regard to lifting their bankability."
Bagrie said bankability is "how are you running your business. How you are forecasting cash flow. What are you doing in regard to risk management?"
"Typically, people will put in an application for a business-based loan and it's an absolute dog's breakfast in regard to what they present to the banks."
Watch the full interview with Cameron Bagrie above.