SMEs feel no loyalty from banks – survey

Australian SMEs are highly disillusioned about lending prospects and predict recent natural disasters will have a long-term impact on the business sector, according to a new report.

The Melbourne branch of finance consultancy WHK Australia surveyed 531 companies across all states about their business banking relationships.

The latest WHK SME Pulse Survey, which is conducted four times a year, reveals a whopping 94.2% do not feel their bank has been loyal to them over the past six months.

Eight out of 10 respondents say access to bank lending has not eased over the past year, while 40% have been hit with interest rate rises in the past three consecutive quarters.

Despite the hardship, 44% of SMEs plan to increase the size of their lending facilities, and intend to so by more than a third of current levels.

Only 8.1% say they will decrease their lending facilities, while 47.8% say they have no plans to change anything.

According to WHK Melbourne chief executive Carl Walsh, the fact that most SMEs aren’t willing to make any changes demonstrates a perceived lack of competition and choice in the banking sector.

“The results show that [44% of] SMEs are planning to increase borrowing – this is probably because they have exhausted their ability to equity fund their businesses and the only course open to them is to borrow in order to grow,” Walsh says.

Meanwhile, 79.2% of SMEs believe the recent floods, cyclones and fires will have a negative impact on the economy.

Queensland and Victoria – which are home to more than a third of Australian SMEs –are the hardest hit regions, according to the Australian Bureau of Statistics.

“For a segment that employs millions of Australians and contributes almost 60% of Australia’s GDP, this represents a significant risk to the performance of the overall economy,” the report states.

“While for those individual businesses looking to recover from the devastation, the lack of confidence and low priority of SME concerns at a Federal Government level makes the prospect of recovery ominous.”

According to the survey, SMEs continue to show a lack of confidence in Australia’s minority government, with 84.8% believing they are neglected by government policy.

A total of 8.3% are unsure as to whether they are a focus of the government, while just 6.9% believe they are.

“This result comes on top of the November survey where only 8% of SMEs believed that Australia’s minority government could be effective,” the report says.

“For a sector that feels the government and banks are largely ignoring them, this will make the prospects of recovery and growth dim.”