I HAVE run my own small travel and leisure company for the past 22 years. Most of my business comes from tourists, mainly from overseas, although I have had a fair amount of business from domestic tourists. Due to the 2008 global financial crisis my business took a massive reduction in numbers from both these groups.
The stubbornly strong Australian dollar has almost cut off international tourists although I have adjusted my business and cut costs to factor in a lower turnover. Since the GFC began, Australia has remained largely immune to the global downturn, but this is only because of the resource sector businesses like mine have continued to struggle with interest rate rises and borrowing costs.
Last week's consumer price index put the index into the Reserve Bank's target for inflation, between 2 and 3 per cent, so I am hoping the Reserve can finally cut interest rates. The problem now is that the big banks, one of which my loans are with, are going it on their own with rates. How should I go about finding a better deal? Should I expect a cut in rates?
You're not alone. I walk the city and see "for lease" signs dotting retail windows, "50 per cent off" ads all over the shopping malls, and small businesses struggling because they can't get access to credit. I see the ads on TV for banks' deposit rates, but little mention of their small business loans.
To be fair, the banks aren't at fault when it comes to lending to SMEs it's simply that residential mortgages are more profitable and less risky than a small business loan. Gone are the days when a travel agent, butcher or local bookshop owner could walk into their bank branch, have a meeting with the manager and arrange for a line of credit. Nowadays, the banks have centralised their lending decisions, so those valued relationships between bank manager and local business owner are increasingly difficult to find. And as tough as it is to obtain a loan, once you have one, you start the guessing game of what your rate will be.
When the CPI came out last week, even the nation's top economists were surprised at how low the number was. It was a true indication of how businesses in Australia are doing, and how consumer spending has come to a halt. And it all but sealed the deal for the RBA to cut rates at tomorrow's monetary policy meeting. But the question still remains what does it matter if your lender doesn't pass the savings on to you?
The hard truth is that you can't influence the major bank's decision to pass on a rate cut, but what you can do is look for a better deal.
There are great comparison sites out there that show you how your rate compares with other lenders.
You might be surprised to know that regional and non-bank lenders can often offer you a much better rate, with advice and a personal relationship to match.
There are 3.5 million small businesses out there, and every single one of them has the ability to let their feet do the talking, including you.
You can't change the RBA or your bank, but you can change the future of your own business.
And if the RBA drops rates and your bank follows suit? Take advantage of the situation. If you're not struggling to make your payments, take the savings from the rate cut and put it straight back into your loan, or put it into a high interest fund or savings account.
Either way, your best option in this tough economy is to pay down debt, save where you can and above all, don't give up. Good luck.
Mark Bouris is executive chairman of Yellow Brick Road, a wealth-management company and small business adviser that sells products and services for home loans, financial planning, insurance, superannuation, investments, accounting and tax. His advice here is intended as guidance only. Go to ybr.com.au.
If you have a question for Mark Bouris email it to Max Mason at max.mason@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Why are small businesses finding it harder to get small business loans from major banks?
The article explains banks have centralised lending and now favour residential mortgages because they are more profitable and less risky. That means local relationships with branch managers have weakened, making it harder for small business owners to access credit or negotiate favourable small business loan rates.
Will an RBA rate cut automatically lower my small business loan rate?
Not necessarily. The piece notes that even if the RBA cuts rates (after CPI fell into the 2–3% target), major banks don’t always pass savings straight on to business customers. If your lender doesn’t follow through, you’ll need to look for other ways to capture savings.
What can I do if my bank won't pass on a rate cut to my business loan?
The article advises shopping around: use reputable comparison sites to see how your rate stacks up, and consider switching lenders. Regional and non-bank lenders often offer better small business loan rates and more personalised service, so comparing options is a good first step.
How can I find a better deal on a business loan or lower my borrowing costs?
Start with online comparison tools to benchmark your current rate. Then speak to regional or non-bank lenders, which the article says can offer competitive rates and personal advice. With roughly 3.5 million small businesses in Australia, moving your business to a more supportive lender is presented as a realistic option.
Are non-bank and regional lenders a good alternative for small business financing?
Yes — according to the article, regional and non-bank lenders can often provide much better rates plus personalised advice and relationships. They’re highlighted as viable alternatives if major banks aren’t offering competitive small business loan rates or accessible service.
If my loan rate is reduced, what should I do with the extra savings?
The author recommends using any savings to reduce debt or build cushions: either pay the savings straight back into your loan or place them in a high-interest fund or savings account. The overarching advice is to pay down debt where possible, save where you can, and keep your business resilient.
How have the global financial crisis and a strong Australian dollar affected small travel and leisure businesses?
The article’s first-person account says the GFC caused a sharp drop in customers, and a stubbornly strong Australian dollar has reduced international tourist numbers. The result has been lower turnover and the need to cut costs to survive in a tougher market for travel and leisure operators.
Who provides this advice and where does it come from?
The guidance comes from Mark Bouris, executive chairman of Yellow Brick Road, a wealth-management and small business advisory firm. The article frames his comments as general guidance for small business owners navigating borrowing costs and rate changes.
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