The majority of SMEs believe their banks are not loyal to them and that access to funding hasn’t gotten any easier over the past year, a new survey from accounting firm WHK reveals.
The survey of 531 SMEs from across the country, compiled by East & Partners, found that 94% of SMEs don’t believe their banks have been loyal to them – up from 82% in August 2010.
WHK chief Carl Walsh says the issue is that businesses think their banks should trust them given they have been loyal customers for several years, often decades.
“The credit aspects are the most glaring here, and SMEs believe that despite having been customers for a number of years, their banks have been disloyal.”
“The question is – why? And that lies in getting access to credit. They’re being pinned with rate rises, which they feel is opportunistic coming out of the GFC.”
Walsh says that given many entrepreneurs use their home as the security for many of their banking facilities, SME owners think banks should be more willing to take risks now the economic climate is improving.
“They look to the mortgage sector where they see a lot of press, and a lot of government commentary around mortgage rates, but nowhere near the amount of time being spent on improving conditions for SMEs and their owners.”
The survey also shows that more than 40% of SMEs have experienced rate increases during the past three financial quarters.
The results of the survey come just days after NAB business banking head Joseph Healy told SmartCompany that banks and other financial institutions need to do more to support SMEs coming out of the financial crisis.
Walsh says he welcomes those comments, and suggests they may prompt other finance institutions to ease up on lending criteria.
“Healy and I know each other, and I believe he’s one of the few that actually recognises the needs of SMEs. He spent a lot of time in Britain where the SME sector is very important, and treated as very important by both banks and government.”
However, there is some reprieve on the horizon. The WHK survey found that more than half of SMEs surveyed did not experience a rate rise in the last six months, suggesting some stabilisation is occurring in the business loan market.
That stabilisation will be welcomed given that the number of SMEs planning to increase the size of their lending facilities grew to 44.1% of the third consecutive quarter.
Walsh says the banks need to start making things easier for SMEs – and they can start by ensuring it remains easy to switch to another bank.
“It’s extremely hard to leave your bank, and not just because of the fees. If you’re working six or seven days then it’s extremely difficult. I know it’s a statistic that we use often, but it is true that Australians are more likely to divorce than leave their bank.”
“And SMEs are no different. They have their personal affairs tied up, and business affairs, in their bank. And it becomes extremely difficult to exit when you want to.”
Going forward, Walsh says SMEs will benefit from the current interest rate environment, as the RBA seems content to sit on the sidelines for now.
“I believe we’re going to see successive surveys prove this. Rates and access to credit will improve.”
However, there are more problems ahead – 80% of SMEs believe the natural disasters that occurred over the past few months will negatively impact the economy, and therefore their business.
“We were a little surprised by that, because the overall talk has been that we may see some decline but we’ll also see a resurgence as the year goes ahead.”
“But this is obviously a national survey, so it’s been weighted by the Queensland and Victorian people hit. But I think the SME sector is resilient, and we’re going to see a better response in three months’ time.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
