Why A Fall In Interest Rates Won’t Help SMEs
According to some new research from JPMorgan and Fujitsu, banks are more now more willing to finance SMEs.
Gee, isn’t that big of them!
Martin North, Executive Director industry group, Fujitsu Australia & New Zealand, claims risk ratings are now “more realistic” (than they were during the GFC) and banks “won’t increase interest rates at different levels for businesses than home owners.”
Why were they higher in the first place?
According to North, the biggest difference between pre-GFC condition and now, is risk. And the counterbalance to risk is a demand for more detailed information.
This accords with what Andrew Clark from Moody’s told me a few weeks ago about the equipment financing sector.
James/ “So the banks have tightened things up?”
Andrew/ Absolutely. “They’re more careful about who’ll they’ll lend to, and what type of assets they want on their books.”
Which in the context of what North is saying, this means SMEs now have interest rate parity with home owners, but it’s harder now to get a loan!
North even has the temerity to bag small business saying: “The demand for credit amongst the small business sector is insipid. The theory goes that we’re over the GFC and everybody is trying to get more funding, but the small business sector is nowhere near as optimistic.”
Talk about ingratiating yourself with prospective lenders.
Banks now want more security than ever on a loan. If you’re mortgaged to the hilt and your cash flow’s dried up, the banks aren’t going to lift a finger to help you, even if you have a stellar portfolio of floating assets such as outstanding invoices.
Which is rather hypocritical of them, because they’ll buy the ARs of large companies at the drop of a hat.
Not surprised are you?