Small business once bitten twice shy of big banks post GFC

Prospects for small businesses appear to be looking up post-GFC in Australia, yet the attitudes held by business owners towards banks has not recovered.

Small Business FinanceThose classed as ‘micro businesses’ turning over $1-$5 million p.a. are moving away from trading banks in droves and turning to third party brokers in sourcing their equipment finance.

As time poor business managers are busily trying to win sales and ramp up output, they have little time for the complexities of applying for business finance. On the other hand, major banks and financiers are seeking increasing amounts of information in typical business finance applications. Gathering more information takes more time, and time is something nobody has an abundance of.

Banks aren’t investing any extra time either. Typically, many of their business bankers or ‘relationship managers’ only remain in given positions for short periods of time. So as the brighter ones are promoted to higher positions, their small business clients can be left high and dry.

The perceived shortage of funds supply available to small businesses is due to a number of changes in the banking landscape. Mark O’Donoghue of finance broker Finlease explains it like this, “A potential key contributor to this shortening of supply could be due to certain multinational banks leaving the Australian market as a result of the GFC, meaning that many larger corporations are now forced to source funds from Australian based banks. This increase in demand for local funds combined with a limited supply of funds saw increased competition and the ability for the major banks to ‘cherry-pick’ the companies they choose to deal with. Larger corporations may be seen as less risky and more profitable. As a result, funding accessible by many small to medium sized enterprises has dried up to a certain extent.”

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