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New markets for cash-hungry SMEs

NEARLY three quarters of Australia’s small to medium-sized enterprises have an “antagonistic” relationship with their bank, according to a new survey. But the cash-hungry SME market has become the banking sector’s latest sweet spot and is taking advantage of its change in status, the JP Morgan/East & Partners Australian Corporate, Commercial & SME Banking Survey, has revealed. And companies of all sizes stand to benefit as increased competition in the banking sector puts pressure on pricing in the $470 billion business lending market. About 73 per cent of SMEs – defined as companies with annual revenues of between $5 million and $20 million – described their relationship with their bank as antagonistic, according to the survey, which covered Australia’s top 500 companies as well as the commercial and SME sectors. In contrast, only 12.7 per cent of commercial enterprises, or companies with annual revenues between $20 million and $340 million, believed they had an anta-gonistic relationship with their banks. Among Australia’s top 500 corporates, the figure was even more modest, at 9.3 per cent. JP Morgan senior banking analyst Brian Johnson said banks had traditionally neglected to manage their relationships with SMEs. “Small businesses feel lost and lonely out there,” he said. “If an SME gets pitched to by a competitive bank, they are much more likely to change.” Mr Johnson said banks were now trying to build their relationships with small business customers as lending among Australia’s top 500 companies continued to fall. “SMEs are flavour of the month with the big banks and they’re actively leveraging that for their own benefit,” he said. The survey showed that 83.5 per cent of SME respondents intended to borrow funds in the next 12 months, while 80.8 per cent of commercial respondents had borrowing intentions during the period. Only 9 per cent of Australia’s top 500 companies were planning to take out a loan over the coming year. East & Partners principal analyst Paul Dowling said borrowers of all sizes were set to benefit from better pricing as a result of increased competition in the business lending market. “Competition is absolutely driving the market at the moment,” he said. “The dominance of the big four banks is under threat from regional and international players, but they’re really starting to fight back with aggressive pricing policies.” National Australia Bank, Commonwealth Bank, ANZ and Westpac had lost an 8 per cent share of the $470 billion business lending market to regional and international entrants since 2000, Mr Dowling said.

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