With 1 in 3 Aussie businesses experiencing significant pressure from the recent round of bank interest rate hikes (see the latest MYOB Business Monitor ) – I started to wonder why all the commentary about interest rates centres on the homeowner. I get that “Mum and Dad homeowner” are an important segment and a huge proportion of society, but why don’t hear commentators discussing the impact on “Mum and Dad business owners”?
The fact is that the vast majority of businesses in Australia are run by “Mum and Dad business owners” who are typically sole traders or employ 1 or 2 staff. The ripple effect on these businesses from higher interest rates is worthy of our attention and support. While interest rate hikes may deliver a short term bonus for the banking industry’s billion dollar profits – what they also do is make it harder for smaller business (and some larger ones) to repay loans – we get consumers spending less money, which means less jobs, less investment and, in my view, a growing likelihood that the Australian economy starts to go backwards.
With a third of all businesses feeling the pain of interest rate pressures – it’s not surprising that “cashflow” is top of mind for most businesses. In fact – it’s actually key when you’re feeling the pinch from interest rates (see my earlier post on “cashflow as your fuel gauge”)
Here in lies the irony – while it’s easy to get “hot under the collar” about the banks’ interest rate hikes – when times get tough and you see cashflow as a real challenge – getting closer to your bank and sharing your issues with them proactively is often the best way to find a way through the challenges. It’s absolutely in your bank’s best interests to support you and help you find a way to manage your cashflow and met your debt servicing requirements. Banks are ultimately worried about managing risk – so proactively indentifying the debt servicing risks in your business and jointly coming up with solutions is a great strategy. Of course, you may find that having a chat with your Accountant first means you can ensure you’re fully armed with all the information your banker may need before looking at options to help you (both) out.
So what to do if you’re under pressure and your bank isn’t “playing ball”, well check out the Financial Ombudsman Service – they have some great fact sheets that outline a number of options available to you if you’re falling out with the bank manager.
So what are your thoughts on the recent round of interest rate hikes by the banks – is that putting your business under more pressure? Do you think there’s enough support and advocacy out there for “Mum and Dad businesses” when taking on the banks?