Business bears the brunt from the banks

SMALL and medium-sized businesses have not escaped this month’s interest rate rise, with all of the major banks acting on the Reserve Bank’s increase of 25 basis points.

Commonwealth Bank went over and above the RBA’s change, lifting its business loan variable rate by 45 basis points, closely followed by NAB and ANZ, which raised business rates by 43 and 39 basis points respectively.

According to RateCity research, the average standard variable rate for business-term lending is now 8.36 per cent, up an average of 23 basis points and 1.49 per cent higher than the average for standard variable home loans.

“By and large the banks have matched what they have done to home loan rates,” RateCity chief executive Damian Smith told WA Business News.

“But there’s pretty clear evidence over the past few years that small businesses have borne more of the brunt of interest rate rises than home owners,” Mr Smith said.

Chamber of Commerce and Industry WA chief executive James Pearson argued the gap between personal and business lending across the big four banks was much greater, which was a serious problem for small businesses.

“The fact is that the lending of money to business has a very direct relationship to the generation of wealth and the creation of jobs,” Mr Pearson told WA Business News.

“And the problem is that it’s getting harder for small businesses in particular to satisfy the lending criteria that banks are requiring; it’s becoming even harder for them to access funds because the banks’ appetite for risk has changed.”

Mr Smith said the tightening of lending criteria coupled with an aggressive increase in interest rates had been a double blow for small businesses.

“But an important message for all small businesses is that these are stated rates and while they are a good place to start, they are not the end,” he said.

Mr Smith said small businesses needed to be aware that, as the loan amounts increased, there was a lot more negotiation in business lending than personal lending.

“So if a small business is borrowing $1 million or higher, it is definitely up for negotiation what the rate and fees will be, so small businesses need to have a strong relationship manager in their chosen institution, if they don’t already,” he said.

Buoyed by Australian Bureau of Statistics data that showed a 2.7 per cent increase in business lending for the September quarter, Mr Smith was hopeful lending criteria would become more relaxed.