Many small business operators feel they are becoming increasingly neglected by the major banks amid the recent upheavals in financial markets. Tighter lending practices have meant that business finance is becoming harder to access, while industry analysts believe that the banks are placing less focus on building customer relationships.
The Principal of finance broker Finlease, Mark O'Donoghue commented "There appears to be more importance placed on maintaining profits and managing funding costs which is outweighing the need for building relationships and customer service especially with small business customers." The absence of long term relationships is due in part to constant staff changes within business banking departments of the banks. As a result, small business operators aren't able to build up a track record and therefore reinforce credibility with their bank for future funding needs.
As long term relationships with banks are becoming a thing of the past, at the same time credit costs are increasing. So while home loan rates have come down approximately 3 percent since their highs late last year, business finance rates are heading up.
The government was quick to point this out early in the year in a report by the Council of Small Business. While the government had provided banks with the safety net of a deposit guarantee, in return the banks weren't passing on the interest rate cuts in full which would help stimulate business and protect jobs. A recent study revealed that 400,000 jobs are in jeopardy because banks are hoarding interest-rate cuts instead of passing them on to small-business customers.
What are small business owners doing about it? Research shows that, for many small businesses, inertia is outweighing the benefits of jumping ship as they see the cost of moving to another financier as not worth the effort. However as a business grows, future potential can be hampered as banks which typically seek bricks and mortar as security. This can limit the potential of growing businesses, as lack of finance for that next shipment, equipment upgrade or raw materials can bring everything to a grinding halt. So it pays to keep your options option and spread your loans across difference providers.
As Bill Parry, Managing Director of forklift importer 'Hubtex Australia' said, 'in a capital intensive business like ours, you need diversity when it comes to sourcing funds. You can't put all your eggs in the one basket. Our finance broker acts as the conduit with the financial institutions, allowing us to access lots of lenders. This has helped give us the flexibility we need to keep growing our business."
In this challenging businesses climate, small businesses may be well advised to seek out the services of a specialist finance broker to take up where the banks have left off. This article has been provided by Finlease, a specialist finance broker servicing the needs of small business, further tips can be found at www.finlease.com.au .