How confident are you that your current business funding is on competitive terms with a bank that remains committed to your industry and supportive of future expansionary plans? With the current climate of heightened economic uncertainty and low interest rates, now presents a pertinent time to review your business finance facility to ensure long term business success.
In the wake of Covid-19, Government stimulus in the form of Job Keeper, grants and emergency loans have kept many businesses afloat and at times, boosted profits. However, twelve months on, a climate of exacerbated economic uncertainty means accessing bank funding in a timely manner is proving more difficult than ever arguably when Australian businesses need support the most.
At Mazars, we see business owners needing additional working capital either to meet day to day operations or to expand for growth opportunities. Often, they are not getting traction on these requests because the level or nature of their lending needs just isn’t managed by the area of the bank they are in.
Anecdotal evidence suggests Banks are requiring enhanced due diligence for new loan applications, driven by increased regulatory requirements off the back of the Royal Commission and the removal of credit authorities from Relationship Managers. This is particularly prevalent in the sub $3mil commercial lending space which sees large portfolios of business lending customers managed by teams of Relationship Managers.
Bankers confess that Banks are moving away from an active loan portfolio management model which is resulting in key information held on file being well out of date such as valuations and financial statements. The consequence of this is that limit increase requests trigger a barrage of information requests to the customer, resulting in extended delays of up to three months for simple limit variations.
At a glance, the major banks promote positive customer satisfaction ratings over a ten-year average, however from our experience when you isolate business banking customer sentiment, the story is far less rosy. Further investigations indicate that cost to income ratios have risen substantially over the last 18 months across the Big 4 banks and, anecdotally talking with Bankers, the growth area has been in Risk and Compliance. The longer-term trend evidences the banking industry has a focus to drive down their cost to income ratio, seemingly through an increase in banker portfolio sizes and centralisation of support teams.
We are seeing this manifest in a reduction in relationship managed connections with increased digitalisation to drive operational cost cutting. Furthermore, there is a significant increase in compliance that has come out of the Royal Commission resulting in more information collation that is a burden on the customer which and also elongating turn-around times. It’s no surprise that IBISWORLD research showed an average increase of 9.4% in mortgage broking industry revenue across the entire banking industry for 2021.
What does this mean for you as a potential borrower?
Being prepared prior to speaking with your bank is now critical to ensure funding support with a timely turnaround. Having your facilities structured correctly will support your future growth needs which in turn will be key to avoiding any unnecessary fees in the future.
Anticipating the Bank’s requirements and submitting a compelling narrative of your business operation and future plans will lead to superior outcomes for both you and the Bank. We encourage one-on-one banking relations between our clients and their bank, as having a bank which understands your business will lead to support when it matters and is a key to success.
The Financial Advisory team at Mazars consists of experienced business bankers who have had great success in supporting clients achieve an optimal capital structure, fit for purpose banking facilities, relationships with the right personnel, and competitive terms.
At Mazars, debt advisory services are delivered in the best interest of our clients without any conflicting remuneration, so clients are assured of a transparent independent service.
If you require additional business funding or are less than satisfied with your current banking arrangements, please consider our complementary finance facility review. For more information, contact your usual Mazars Advisor, the Authors or alternatively, our financial advisory specialists via the form below or on:
Authors: Angela Winton & Owen Dingle
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