There are mixed attitudes among businesses to borrowing at the moment.
Australian Prudential Regulation Authority figures show business credit has grown by 3.3 per cent over the past year, the fastest annual growth since early 2009. A closer look at the figures reveals much of the growth is in the resource states of Western Australia and Queensland. Reserve Bank data on total bank lending shows that for the 12 months ending March 2012, lending declined by 6.1 percent for loans under $100,000 but grew by 4.28 percent overall. This suggests that lending to some smaller businesses, who typically borrow lower amounts, has still not turned a corner. The overall figures still show some promising signs on the business investment front, no doubt helped by lower interest rates. The other reason for the turn-around is banks are starting to lend again. Ever since the financial crisis, major banks have not been as keen to lend to business.
If you are thinking about borrowing money for your business, here are some points to consider.
The interest rate is important and you should shop around. Make sure you look at the all up cost of borrowing, including account fees and charges.
It is also important to get the right credit for your business. Commercial finance can be a fast, flexible way to get immediate use of equipment such as cars, plant or computers. To simply free up some short term cash, a business line of credit or overdraft are options.
You should also consider service. This includes the quality and experience of the financial organisations’ business bankers and other staff. Make sure the financial institution can give you access to your money in the way that suits your business, whether that be by internet and mobile banking or its branch opening hours. Will the financial institution be with you through thick and thin or will they desert you when the going gets tough?
Greg Taylor is Deputy CEO and Chief Financial Officer for the Hunter-based Greater Building Society. This blog also appeared in the Newcastle Post August 22.