Judo Bank CEO says SMEs are facing “seriously frustrating” wait times of up to 60 days to refinance loans

Small businesses are experiencing delays of up to two months when trying to refinance their business loans by switching to different lenders, SME-focused neobank Judo Bank has found.

Judo Bank, which has been monitoring the waiting times business borrowers have faced for 15 months, found the extended delays discourages businesses from changing lenders.

Joseph Healy, co-chief executive of Judo Bank, told The Australian Financial Review that the average time it takes banks to settle a loan and release the security is 52 days.

“This is seriously frustrating because they can’t get on with business and has all the characteristics of anti-competitive behaviour,” Healy said.

“It reminds me of the famous song by The Eagles. ‘You can check out any time you want but you can never leave’.”

In the best of times, small businesses struggle to secure finance and can wait weeks to receive a loan application outcome, only to find out they are ineligible.

The pandemic exacerbated these challenges as irregular trading patterns over the last fifteen months have made it difficult for businesses and lenders alike to make decisions about whether they should be borrowing or lending.

Neil Slonim, independent SME finance advocate, tells SmartCompany the blow out in bank credit approval times has been an issue since the pandemic began in March last year.

“Credit approval times have been elongated for a considerable amount of time, going back to the commencement of COVID-19,” Slonim says.

“Bank approval times continue to frustrate small business owners and it’s not just a matter of waiting for the bank to provide approval, there are many occasions when it takes a long time for the bank to decline to approve a loan.”

According to Slonim, longer credit approval wait times hurt businesses most when they receive a negative outcome.

“If you wait two months for approval and the answer is no then that can cause serious damage because you’re two months further down the track without access to the funds and you’re stuck,” he says.

While Slonim admits no bank wants to lose customers, he doubts that the delays in refinancing waiting periods are a deliberate attempt by banks to prevent customers from leaving.

“Judo is able to move much more quickly, there’s no doubt about that. Judo is taking advantage of its speed that often the banks are unable to provide.”

Credit approval times have been disrupted because it’s challenging for banks to base their decisions on pre-COVID-19 performance when a business has undergone 12 to 15 months of substantially lower turnover.

“And, as we’ve seen currently, at any point we could go back into lockdown and revenue, which looks as though it may have been recovering, is immediately under threat again.”