Banks are still battling for business borrowers – time to cash in

The credit squeeze may be making life tough for the banks, but they haven’t given up competing for business borrowers – and that means there are savings to be had for savvy business owners.

The credit squeeze may be making life tough for the banks, but they haven’t given up competing for business borrowers – and that means there are savings to be had for savvy business owners.

A ranking of business attitudes towards the banks reveals a shift in sentiment in recent months, with the Bank of Queensland overtaking St George Bank as the preferred bank for business owners.

The BOQ scored 60.9/100 in the East & Partners Business Banking Sentiment Index, overtaking St George for the first time since the survey of 750 businesses was first taken in 2006.

The change in banking allegiances highlights the fact that, even in the current tight credit environment, at least some banks are still competing to lend to businesses.

Steven Anderson, head of research with independent finance comparison firm InfoChoice, says business owners should exploit that competition by shopping around for the best deal.

“If you have a strong business model, you will still find banks want to lend you money,” Anderson says. “It is worth trying to negotiate with your current banker if you know another institution has a lower rate, or even switching – it is more difficult in the current environment, but certainly not impossible.”

Anderson points out there are still quite a wide range of rates available on the various business lending products, whether fixed, variable, secured or unsecured.

For example, according to InfoChoice, a business borrower looking to take out a residentially secured variable rate overdraft in NSW could find interest rates from 8.67% (Commonwealth) to 10.83% (NAB), with a range of different associated fee structures.

Because banks are more conservative in the current environment, business owners able to offer security for finance will get a better than usual interest rate advantage over unsecured finance.

“A secured overdraft should be around same rate as a residential mortgage. Banks are moving to bring mortgage and secured business lending rates into line, so around 10% would be about right,” Anderson says.

And the different customer service levels offered by banks can also make a difference – a point illustrated by the BOQ’s increased popularity, which has partly resulted from increased efforts to build relationships with business borrowers.

“Rates and fees are obviously important, but we have a lot of business owners bemoaning the loss of the bank manager and to some that relationship may be worth a lot of money,” Anderson says.

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