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Small businesses have little time for their banks

Supplier: Finlease (Australia)
22 June, 2010

Prospects for small businesses in many sectors of the economy appear to be looking up.

Yet one area that remains in the doldrums is the attitudes held by small business operators towards their trading banks. Those classed as 'micro businesses' turning over $1-$5 million p.a. are moving away from trading banks in droves and turning to third party brokers in sourcing their equipment finance.

As time poor business managers are busily trying to win sales and ramp up output, they have little time for the complexities of applying for business finance. On the other hand, major banks and financiers are seeking increasing amounts of information in typical business finance applications. Gathering more information takes more time, and time is something nobody has an abundance of.

Banks aren't investing any extra time either. Typically, many of their business bankers or 'relationship managers' only remain in given positions for short periods of time. So as the brighter ones are promoted to higher positions, their small business clients can be left high and dry.

Right now certain banks appear to be attempting to woo back small business customers through mass media publicity campaigns. Yet it’s at the one-on-one communications they should be focussing on as successful business relationships are all about trust, and you can only build trust over time. The longer the relationship, the stronger the trust.

How bad has it become? Recent research shows an alarming 239% fall in confidence over a 3 year survey period. This figure is not likely to see any improvement as many business owners feel the banks are unwilling to lend to small business in any meaningful way.

The perceived shortage of funds supply available to small businesses is due to a number of changes in the banking landscape.

Mark O'Donoghue of finance broker Finlease explains it like this, "A potential key contributor to this shortening of supply could be due to certain multinational banks leaving the Australian market as a result of the GFC, meaning that many larger corporations are now forced to source funds from Australian based banks. This increase in demand for local funds combined with a limited supply of funds saw increased competition and the ability for the major banks to 'cherry-pick' the companies they choose to deal with. Larger corporations may be seen as less risky and more profitable. As a result, funding accessible by many small to medium sized enterprises has dried up to a certain extent."

So it is little wonder that such businesses are enlisting the services of specialist business finance brokers. This is not dissimilar to strategies employed in other areas of management where there’s a trend to outsource certain niche functions to achieve greater efficiency. To find a good broker spend a little time looking at how a finance broker can improve efficiencies, logging onto is a good place to start.