After the recent turmoils in financial markets, it appears small businesses are feeling unloved by the big banks. So when it comes to securing a loan for that next equipment purchase, it is more important than ever to play the field.
The latest research indicates that the banks' attitude towards small business is in complete contrast with that of the federal government. Our politicians see small to medium sized enterprises as the backbone of the Australian economy and have lavished us with gifts like the Investment Allowances of 2009 to keep the relationship alive.
Recent surveys also indicate that an increasing number of smaller businesses prefer to have a Relationship Manager to handle all their dealings with their bank. Yet many Relationship Managers only remain in a given position for less than 12 months, after which that person may be transferred or promoted. This is hardly long enough for that banker to truly understand a particular company's trading conditions. If we compare this with our love lives, that's not a relationship, that's a short term fling.
We spoke to Mark O'Donoghue, principal of Finlease, who knows something about keeping finance relationships alive. "We believe it pays to have several sources of finance available to you, rather than rely on the one bank. After all, it's better to have a number of good partners rather than one bad marriage."
When it comes to building relationships with their clients, it seems the banks have not been altogether faithful. During the rate decreases of 2009, many smaller businesses reported rate increases on their loans.
Enlisting the services of a good finance broker can really pay off, as your broker can source finance from a number of lenders to secure optimum rates and terms. After all, chances are you don't have only one source for the raw materials you depend on every day. If your preferred supplier suddenly has a shortage of a given raw material, or increases its prices, you would simply try your other suppliers, right? It's worth looking at finance the same way.
Your broker will sift through the various finance options available to you and will generally recommend using different financiers for different assets. It could mean having one financier for your commercial premises, another for your motor vehicles and another for your major pieces of plant and equipment. This can help in securing funds at lower cost and can also free up your options for the future because you won't be too heavily geared with any one financer. This article has been provided by finance broker Finlease, a specialist in the area of business finance.