Banks now discounting to SMEs, but expert says entrepreneurs must shop around

Banks are now providing discounts to win SME customers, with one finance expert saying businesses should shop around and even pressure lenders into competing with each other to get the best deal.

The comments come as the banking industry has been under fire over the past week, with Senator Steven Fielding labelling the Commonwealth Bank “greedy thieves” for posting a $6 billion profit for the full-year.

Zenith Capital managing director Richard Korda says banks are providing discounts for as much as 125 basis points, and this is occurring among the four major banks.

The key here is being clear and direct about what your business can bring to the table. Korda says if you’re able to convince these lenders why you should receive a discount, then you may be successful.

“It’s as simple as just putting it out there, and offering a really good case of what you have to offer. It also comes down to research, and going around and seeing what everyone else is offering, because you can shop around and ask them to match each other.”

“It’s occurring with most of the major banks. Basically, if the loans are large enough, the client is a good enough client and the bank is prepared to make a move, then these discounts are being provided at a pretty consistent rate.”

But Korda says SMEs aren’t often receiving these discounts because they simply don’t ask. If they put forward their case and manage to talk one-on-one with a bank representative, there is a good chance they’ll be able to score a discount.

“I think for people going out there now, it’s natural to ask for a discount. You just have to ask the question, and I think the banks have big enough margins now that they’re able to service some of those customers by doing these sorts of deals.”

Korda says he has a client which just received a discount rate of 0.97 points on a loan with a standard rate of 9.37, and has heard of discounts of up to 1.25 points – but lenders are hesitant to move far beyond that.

“I think that’s the maximum we are seeing, and in some instances we are starting to see those moved back a little as well. So it’s not moving far beyond that.”
These discounts are being offered to existing clients, but Korda says there is definitely scope for new businesses looking for finance to ask for these types of rates.

“I don’t think there’s really a difference here where the discounts are being offered. It’s just that you have to be offering a credible project and you have to have a good deal.”

“You also need to be talking with someone there, because it’s easy to get someone over the phone who can just be removed from the situation, so you want to talk to someone who knows business and understands your needs.”

The comments come after NAB chief executive Cameron Clyne said he is seeing more discounting in the lending market as business confidence increase, with executive general manager of NAB business Geoff Greer also seeing prospects for increased profitability among SMEs.

“We’re seeing more radical pricing in parts of the business portfolio from peers in terms of percentage terms and returns,” Clyne told various industry analysts last month.