Sushi Please, We Don’t Like Meat Pies
Banks don’t really want SME customers. Mind you, they say they do, but they don’t really. In short, banks view SMEs as high maintenance, low margin customers.
Yesterday the SMH reported that the ANZ has opened a wealth management sub-branch in Nagoya, Japan, targeting affluent clients. The bank’s chief executive for Japan, Robert Bell, said the opening of the sub-branch was part of a plan to expand the bank’s wealth management reach in key Japanese cities.
I’m not saying what the ANZ is doing is a bad thing. Phone and mining companies build infrastructure where there is high ROI. (Hence Telstra’s reluctance to roll-out a high bandwidth network in non profitable rural areas.) We know bank’s aren’t benevolent societies. But where’s this leave small business – the meat pie end of town?
I spoke with John Mladineo earlier today. John and his son run Yeomans, a small company engineering business in Sydney’s west. They employ 23 people and generate around $3 million PA in revenue. They are an archetypal SME.
John contends cash flow is their biggest problem. They have an annual wages bill of over $1 million. He says they pay high rent, but can’t afford to buy.
Like many SMEs Yeoman’s has issues around debtor days. Their average debtor is around 90 days but suppliers at the big end of town demand settlement after 30 days, otherwise as John claims: “we’re (Yeoman’s) cut-off.”
John contends that the cost of doing business is increasing in other ways, with many prospective client’s now requesting a 5% bank guarantee before project commencement.
John also intimated that the amount banks are willing to lend is relative to an SME’s asset pool. As a result, cash from the bank ceases to flow when an SME’s asset pool dries-up.
This, of course, leaves the small business ‘high and dry.’