Which Bank Looks After SMEs?

 In Daily Column

Where is your business fueling up?
Where is your business fueling up?

According to Commonwealth Bank group executive of business and private Banking Ian Narev “There is a misconception that banks have stopped lending to small to medium sized enterprises (SMEs),” Mr Narev said.

“We have lent and continue to lend to small business customers.”

He said the bank had made no material changes to its lending policies.

Mr Narev said there was only a 50 basis point differential between a residentially secured business rate and the standard variable mortgage rate.

Which means that the bank is still lending to SMEs but just charging them more.

Mr Narev then continues: “It is due to the difference in a risk profile of a home loan and a residentially secured business loan taken out for business purposes.”

But there’s a caveat. Mr Narev said the comparison was applicable for some business loans under $2 million.

In summary, the 50 point differential is based on risk. A residentially secured business loan is considered to be higher risk than a home loan except if the business loan is over $2million dollars.

Does that mean the rate changes if you borrow for your business against a property worth $2million?

Risk profile? We all understand that some business sectors are more risky than others. So, here’s an idea. The banks could post risk profiles on an industry sector basis and then charge accordingly.

Builders: High Risk – Charge an extra 70 points. GPs: Low Risk – charge…and so on and so forth. Talk about transparency. A bon fide user pays system with bugger all choice.

What am I saying? The banks already tacitly do it through Loans Officers.

Where to next? The major banks are leveraging off the GFC to justify their conservatism and increase their stranglehold on the consumer and business sectors.  There a few low-risk alternatives for SMEs. One is to improve cash flow and fund growth by using their own accounts receivables.

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