Loans in Australia are used for more than to purchase homes ... Interest rate cuts could encourage a business to borrow and invest/expand.
That's true but the banks have shown a serious reluctance to pass on any cuts to business loans. Perhaps with the drying up of mortgage lending they might refocus on expanding their business portfolio. However, given the tough business conditions at the moment it's probably unlikely.
That's true but the banks have shown a serious reluctance to pass on any cuts to business loans. Perhaps with the drying up of mortgage lending they might refocus on expanding their business portfolio. However, given the tough business conditions at the moment it's probably unlikely.
Due to the high dollar - many businesses would be deemed very risky at this time.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
That's true but the banks have shown a serious reluctance to pass on any cuts to business loans. Perhaps with the drying up of mortgage lending they might refocus on expanding their business portfolio. However, given the tough business conditions at the moment it's probably unlikely.
Due to the high dollar - many businesses would be deemed very risky at this time.
There are a lot of good business's out there who have had insufficient support from banks since the days of Alan Bond and co. Partly due to the lack of appetite for risk by the banks, and partly due to the poor decisions in cases of supporting guarantees (bullshit decisions really) by the courts who ruled against banks in sympathy with guarantors who don't hold a beneficial interest.
When the courts tell the banks that their security is risky they simply stop lending against that type of security.
One bank did offer small unsecured loans to help small business owners, but they suffered large losses from a particular ethnic group who confused loans with gifts - so that has been scaled back.
It's virtually impossible for a startup business to get funding of say $25,000 to get them going. In fact only the government will offer funding for an approved startup to get people off centrelink support.
It's a community problem, not just a bank problem, and it needs a community solution.
Any expressed market opinion is my own and is not to be taken as financial advice
I looked into that a while ago and was offered amazing interest rates or..... wait for it...... 14%.....
Try the ANZ small business section. Unsecured lending for small business is necessarily at a higher rate than a fully secured loan to a PAYG employee. That's one of the unfortunate facts of life.
ANZ has a policy of lending unsecured up to $50,000 for a business that is well established and profitable and smaller amounts to start ups. You have to ask for their "small business lender" because half of their staff don't know that the section exists. They have made changes lately, but I don't know exactly what they changed.
They suffered substantial losses when they lent to Melbourne taxi drivers who said thank you very much and then disappeared. I'll let you draw you own conclusions there.
Other banks really only offer business cards, which are just credit cards, and they are often at a higher rate of interest than cards that any retail borrower can access.
Banks used to take guarantees from mum, dad, or uncle jack as security, but court rulings that found in favour of a tearful guarantor meant that they can no longer rely on that security when the worth of the security is tested. they can only take those guarantees when the guarantor has a vested interest in the business being started.
Australia needs a banking system that can deliver small lending to start up business's but we don't have it. Poor third world economies have micro lending, but this nation has nothing. That's where future jobs come from. Google started from humble beginnings in a garage, so it is possible to make good, although the reality is that most fail.
Banks have let us down in this area of lending, but it's not entirely their fault, the community has let itself down via unintended consequences of goodwill gestures by sympathetic courts. Governments also don't seem to have any policies in place to encourage banks into that area - tax breaks perhaps?
I don't have the answers hoofa, but it's something that will hurt the nation if it's ignored forever.
Any expressed market opinion is my own and is not to be taken as financial advice
I am all for "fear" when it comes to lending people money and if that fear is represented in the interest rate being double digits, I am all for it. There has been 2 decades on insufficient fear and risk associated with that fear as everyone has just been allows to "roll it over".
Have banks kept up with the internet age Peter? Many new businesses nowadays have no hard assets like shops etc. They may have a warehouse, but the shop front is often virtual. Have banks kept up with this concept?
Have banks kept up with the internet age Peter? Many new businesses nowadays have no hard assets like shops etc. They may have a warehouse, but the shop front is often virtual. Have banks kept up with this concept?
Most small retailers rent their premises, and they pay for expensive fitouts, so the small internet retailers have lower startup costs. Most of them could start their business with $10,000 to $25,000 for stock and operate from their house or garage. A shed in the backyard would be ideal, and from that shed they can retail to the world.
It's extremely hard for a small business to start up, and most of them fail - about 80% don't make it, so the odds are against them. Banks don't really want them because the amounts are small, it's not profitable, and when it all goes bad and they try to claim on a guarantee from a family member, the guarantor usually reacts badly, as though he/she didn't know that they would have to make good if it didn't work out. I even had a very experienced tax accountant with his own practice once tell me that he didn't know what he was signing and the bank didn't explain it properly - this was for a guarantee of just $2000 for a local community sports group that had lost community support.
A lot of people have a go, and if they fail they get a job and pay off the loan. It's no different to a car loan, or a loan for a wedding etc.
Banks should have a small loan facility similar to a personal loan, and accept guarantees from a close family member. If it all falls over, then the borrower just gets a job and pays it off, or the guarantor pays - either or.
I'm not suggesting that banks should lend easily, they have to be selective. The reality is that a percentage of todays small business entrepreneurs are tomorrows successful business owners who will employ our sons and daughters, so if we don't have a mechanism to launch them, jobs will be few and far between in the future. Not everyone can be employed by government.
There is a gap in the market that can easily be filled by our banks, with a little encouragement, and with some legislative change to ensure that guarantors fulfilled their obligations.
Dick Smith started his business with a small loan guaranteed by a close friend. That couldn't happen today.
Any expressed market opinion is my own and is not to be taken as financial advice
Most small retailers rent their premises, and they pay for expensive fitouts, so the small internet retailers have lower startup costs. Most of them could start their business with $10,000 to $25,000 for stock and operate from their house or garage. A shed in the backyard would be ideal, and from that shed they can retail to the world.
It's extremely hard for a small business to start up, and most of them fail - about 80% don't make it, so the odds are against them. Banks don't really want them because the amounts are small, it's not profitable, and when it all goes bad and they try to claim on a guarantee from a family member, the guarantor usually reacts badly, as though he/she didn't know that they would have to make good if it didn't work out. I even had a very experienced tax accountant with his own practice once tell me that he didn't know what he was signing and the bank didn't explain it properly - this was for a guarantee of just $2000 for a local community sports group that had lost community support.
A lot of people have a go, and if they fail they get a job and pay off the loan. It's no different to a car loan, or a loan for a wedding etc.
Banks should have a small loan facility similar to a personal loan, and accept guarantees from a close family member. If it all falls over, then the borrower just gets a job and pays it off, or the guarantor pays - either or.
I'm not suggesting that banks should lend easily, they have to be selective. The reality is that a percentage of todays small business entrepreneurs are tomorrows successful business owners who will employ our sons and daughters, so if we don't have a mechanism to launch them, jobs will be few and far between in the future. Not everyone can be employed by government.
There is a gap in the market that can easily be filled by our banks, with a little encouragement, and with some legislative change to ensure that guarantors fulfilled their obligations.
Dick Smith started his business with a small loan guaranteed by a close friend. That couldn't happen today.
It may also be that banks no longer have the ability to manage loans of that type.
Back in the 1970s, a branch bank manager was held responsible for the quality of loans out of that branch. Having non-performaing loans in your branch was a huge black mark. My family had a struggling agricultural business in the 1970s. The Bank manager drove 50 miles out of town to inspect his "investment" in the overdraft. In some extreme cases managers even required that grocery ordered that were to to be paid from the overdraft had to be approved by the bank manager before the store would get paid. I've heard stories of the bank manager changing an order for expensive jam to a cheaper flavour of jam!
In other words, in the old model the bank got itself involved in your business and, if necessary, "helped" with the management to try to get you out of trouble and protect their bonus.
These days a branch manager seems to have no influence or skin in the game with a loan.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
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