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SMEs using home loans to finance business, research finds

A large proportion of SMEs are doubly invested in today’s interest rate decision with many using their home loan to finance their businesses.

MYOB Business Monitor research found that 28 percent of business owners rely on this method to fund their business activities, and, as a result, the Reserve Bank’s official interest rate decision today will find many small to medium businesses tuning in.

MYOB CEO Tim Reed believes many of those using their home loans experienced a set back when lenders didn’t pass on the full cash rate cut last month.

“This was a double whammy for a large proportion of Australians,” said Reed.

According to Reed, the rate move affects many small business owners in both the repayment of a home loan and ability to keep their business running. The research found many ways in which the home loans are accessed, with using a line of credit on the property loan being the most popular method. Other methods included increasing the value of the loan and redrawing against the amount already paid.

“It would make a real emotional and financial difference to the public if the Reserve Bank dropped the cash rate again now and lenders followed suit with both home loan and business loan interest rates,” said Reed.

With expectations of a revenue drop and as business conditions remain slow-moving, today’s decision could have a huge impact on these particular SMEs.

The research also found 22 percent of business owners place a lot of importance on the cash rate, 63 percent place some importance, and only 11 percent do not consider it important.