Various sectors of the economy are definitely on a roll, yet what hasn't recovered is accessibility to credit. Banks are taking a cautious approach with risk management taking precedence over servicing the needs of their small business clients.
As a result, business finance is much harder to access than before the crash. In addition, a high rate of staff turnover with the major banks means that the relationship managers have little chance to fully understand a particular company's current trading conditions and future prospects. So while the economy is heating up, banks are keeping the funds on ice.
According to Mark O'Donoghue, principal of specialist business finance broker Finlease, "Research we've seen suggests that while larger businesses are happier than ever with the performance of their bank, smaller businesses are less than impressed." Yet with a correctly prepared application and the assistance of a specialist finance broker, sound businesses are still able to access the finance. So with credit being frozen, how will financiers warm to your application?
Firstly it's a good idea to spread you loans across several financiers so you're not heavily committed with any one institution. They'll be looking for proof of your company's stability, credit history. What is your ability to repay the loan based on historical data, and how will this be improved by the acquisition of the equipment you are financing? What are your assets and liabilities? What is your working capital position and does the purchase make sound business sense?
As you can see, financiers are looking for more information than ever so you need to ensure you present your business in its best light. Today more than ever, 'information equals ammunition' when it comes to securing the right finance arrangement.
It's also interesting to consider that during the GFC, the Australian Government provided a guarantee on retail deposits placed with banks and for funds borrowed by banks. This assisted the banks in sourcing the funds they needed. Yet while the government helped banks acquire the funds, many small business owners feel that assistance has not flowed through from the banks to their businesses. After all, small business is the engine that will drive the economic recovery.
Other research has shown that it is the small business market that has borne the brunt of the more recent cost and rate rises with little relief so far. As a result, credit is still expensive and harder to come by for small business than before the crisis. This is all the more reason to make sure you present yourself in the best possible light to a prospective financier, in order to move to the front of the queue and secure the best arrangement.
This information has been provided by specialist business finance broker Finlease, more information can be found at www.finlease.com.au .
