Is your bank the biggest threat to your business?

Nicholas Graham from Interlease says Australia’s small to medium sized businesses are finding it increasingly difficult to access bank finance and it seems likely to remain the case for the foreseeable future.

Even though the banks continue to advertise, we are having strong doubts that they are committed to financing businesses in the fabrication sector.  Recent media coverage on this challenges faced by businesses seeking finance only seems to reaffirm this.

There is growing concern in this segment of the economy is not being extended the necessary credit and therefore being placed under increasing pressure.

From our point of view, there is no doubt that credit conditions are continuing to change and tighten, with the banks becoming more selective and restrictive.

The banks maintain that they have continued to support local businesses, however, what we are seeing is that they are simply cherry picking the best ones to finance.  Unfortunately, as a result of the dramatic reduction in financiers in the Australian market that are able to do this freely.

It has more to do with the attitude by banks that good businesses are failing to secure financing, and less to do with the broad sector being a credit risk.  Anything even slightly out of the usual is becoming more difficult to finance, with the banks taking the easiest option and really only offering the products they prefer.

This is unlikely to improve in the short term due to the uncertainty on the world markets and the preference for preserving cash reserves.

Our tips for maintaining risk with your bank:

• Reduce your gearing with your bank. We will always advise our clients not to finance plant and equipment with their bank – if you finance these by other means, it leaves the bank as a backup for other financing requirements.
• Consider other providers of working capital to supplement your bank facilities, not having the bank as the primary financier.
• Try not to tie up all your properties with your main banker.

If you spread your finance across several providers, your bank will continue to be an integral part of your business, but that total dependency is taken away.  Not every relationship manager understands everything that every client does, so a large part of the decision making process comes down to the numbers, and the credit options and polices at the time.”

End of financial year is a great time to reassess your machinery financing and to look at tax minimising strategies. For more information call 1300 592 061 or email marketing@headland.com.au