Delay is not an option

The next few months will offer a critical opportunity to build your business and create an extended customer base, but smart companies will not delay their visit to their bank’s lending department.

Already Julia Gillard and Wayne Swan are winding up their warning signals that not only will this be a tough love budget but even favoured sons and daughters in the ministries will have to demonstrate a willingness to cut core programs.

Departments that will reduce their expenditure dramatically include Health, Education, Employment and Work Place Relations and the Department of Defence. Swan expects export earnings to be down in the middle of this year and advises that he is framing this year’s budget in tough conditions made more difficult by the political determined commitment to cut corporate taxes and still deliver a surplus next year.

The banks have been telling the Senate that their intentions are good and that they are willing to lend to small and medium enterprises – just that their costs of raising capital are on the rise and there are not enough honourable small enterprise applicants in Australia as against getting superior profits by lending overseas. Their story is that they have to keep their shareholders interests ahead of any other consideration as the risks of supporting small business are still too high.

John Hewson challenges their story, suggesting that there is a rationing of credit to SMEs that is supposed to be the result of new international regulatory standards. He says, “cash is always tight in most SMEs and this bank credit crunch is sending many out backwards, especially as the Government is reversing its financial stimulus and the Reserve Bank has been raising interest rates faster than necessary.”

Peter Strong, the CEO of the Council of Small Business of Australia also challenges the big banks claims that they are heeding the call from the job creating sector. He says the banks still apply prohibitive charges and interest rates on existing loans and made new loans more difficult.

The Aussie consumer is willing to go out and buy provided that there are either heavy discounts for bringing purchases forward or high quality products and services that respond to effective demand.

Gary Morgan confirms this trend, saying that consumer confidence has increased 1.4pts to 117.6 as a rising number of Australians (56%, up 2%) say now is a ‘good time to buy’ major household items and an increasing number (41%, up 4%) say they expect their family to be ‘better off financially’ this time next year.”

So, to be clear, your bank will be willing to lend against firm business and marketing plans, provided that they can get above average returns from their investment. Smart companies do not have much time to walk in and challenge them to put their money where their PR and marketing department is acting as the mouthpiece.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.