05/11/2008 - 22:00

Small business banks on lending

05/11/2008 - 22:00


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SMALL business owners in Perth are seeking to remain positive, despite the uncertainty lingering in the global financial markets and access to finance, according to business advisers.

SMALL business owners in Perth are seeking to remain positive, despite the uncertainty lingering in the global financial markets and access to finance, according to business advisers.

At a recent small business forum in Brisbane, representatives from Small Business Centres across Australia, including Fremantle's chief executive Phil Kemp, expressed a degree of confidence to 500 attendees despite the perceived tightening of lending practices to SMEs.

Mr Kemp said small and medium sized companies remained fearful about banks putting the squeeze on access to credit, although the federal government gained assurance from banks at the summit about the availability of funds to small business.

"We're [SBC] getting a different message," he said. "Some are telling us they are struggling to get finance from banks but maybe they're just rolling banks into the same bad message; there's always a perception with SMEs that banks are the bad guys."

A survey conducted by Mr Kemp on the financial crisis found that low consumer and business confidence was affecting sales and that the fall in the Australian dollar was pushing up business costs, which were unable to be passed on.

Belmont Business Enterprise Centre manager Carol Hanlon said small business owners were struggling to deal with lingering doubts in the global economic market, as consumer confidence levels dropped and sales began to slow.

"A lot of stress at times like these comes from the fact that a lot of small business owners use their personal property for collateral on bank loans, and with property decreasing in value and with financing of cash all dried up, there's a lot of uncertainty out there," she said.

The latest edition of East & Partners' SME Banking Markets Report reveals that small and medium sized businesses are seeking to grow, but believe they are restrained in their access to credit.

East & Partners' financial markets analyst Peter Drennan said this had resulted in the number of SMEs planning to borrow money from banks to fall from 77 per cent to 65 per cent in just six months.

"Businesses are instead focusing on extra working capital in order to keep up the growth rates they have experienced during recent high growth years," Mr Drennan said.

BDO Kendalls director Rob Casamento, who specialises in the small business sector, said the accounting and advisory firm was advising clients to retain quality staff amid the "tough times" and "get back to basics".

He said for SMEs to be able to ride out the credit squeeze they should control excess stock levels, communicate and educate customers to the business's situation, control costs and adopt a risk management mindset.

"In times of financial uncertainty, prepare cash flow forecasts, focus on making sales to good paying customers, negotiate extended terms of trade with suppliers, maintain modest owner drawings and wages, and maintain open communication with your bank," he said.

Westpac's group executive retail and business banking Peter Hanlon, who attended the summit, said the bank was undertaking initiatives to support small businesses.

"Small business is the backbone of the Australian economy," he said.

Mr Hanlon said Westpac was providing programs such as business advisory workshops, regular economic briefings and fast-tracking plans to better equip branch managers to assist local businesses.

National Australia Bank's SME Cash Flow Study revealed that 82 per cent of WA small and medium sized business owners were frequently worried about the level of cash in their businesses.

NAB state general manager of business and premium banking Andrew Whitechurch urged SMEs to seek external support to help keep their finances in control and stress to a minimum.


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