Treasurer Josh Frydenberg will instruct the corporate watchdog to tell banks to waive responsible lending standards for individuals who operate a small business, in a bid to ease the credit squeeze on the sector.

Following meetings over the past week with the chief executives of the big four banks, Mr Frydenberg said that although small businesses were exempt from responsible lending standards, many had been inadvertently caught in the tightening of those standards in the wake of the Hayne Royal Commission.