Big four SME lender tells small business: Don’t panic

A big-four SME banker has advised small- and medium-sized enterprises not to panic following the turmoil on global financial markets over the last four days.

ANZ general manager of small business Nick Reade says it’s too early to say where the market is headed, and just as the bank increased its lending through the GFC it will stand by its customers should the economy go south again.

“From a small business perspective, they need to be conscious of what’s going on,” Reade told SmartCompany this morning.

“But volatility will always be there.”

Reade points to pockets of strength within the SME community, with the bank’s most recent small business sales trends report showing that small business sales rose in June for the second month in a row, to be 6.6% higher year-on-year.

The report, based on the value of credit and EFTPOS transactions processed through ANZ systems and transactions on its own cards, showed that clothing sales contracted by 0.5% in June, but automotive, restaurants, trades, business services, and travel and entertainment businesses all recorded solid growth.

Reade advises SMEs to pay attention to their cashflow, debtors, accounts receivable, and talk to their lenders if necessary.

And Joseph Healy, National Australia Bank group executive, business banking says the bank recognises the current economic environment is “providing a number of challenges for businesses, and we will continue to work closely with our business customers.”

“There is no doubt that global uncertainty continues to undermine confidence,” Healy said.

“NAB’s latest SME Survey found that business confidence weakened sharply for the June quarter, consistent with the deterioration in confidence reported by larger businesses.”

“However there is a remarkable resilience amongst SMEs and whilst many of them are currently being fairly conservative in how they run their businesses, they do remain focussed on the longer term.”

Meanwhile John Hinchy, chief economist with DBM Consultants, says Australian business is caught between the engine that is China and softened consumer sentiment, and if the contagion spreads, SMEs won’t be immune.

Hinchy says DBM has noticed concern among SMEs about the economy and their revenue expectations. According to East & Partners, there was a 3.1% total drop in demand for business banking products over the last six months.

He adds that banks can move quickly if they believe they need to tighten up their lending criteria.

On Friday, ME Bank reported that term deposit inquiries had surged as people sought a haven while the market sunk for the second consecutive day.

Analysts have pointed out that because Australian banks have reduced their reliance on offshore funding since the GFC, they are now better placed to deal with any crisis.

And as the sharemarket continues to operate in a volatile manner, there are suggestions many investors will sit out the market in favour of guaranteed returns from banks and financial institutions.

This will boost deposit rates, further reducing the need for the banks for go offshore for funds.