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Business credit remains tough in difficult times

Guest post by: Ken Richards

Article Overview: There’s been a lot of talk about the impact of the global financial crisis on interest rates and access to finance. Whilst the banks maintain that they are providing finance, and certainly that appears to be the case with residential mortgages, the availability of finance to business remains an issue. It is finally receiving a greater level of attention in the mainstream press, with The Australian and Australian Finance Review both publishing articles on 27 March.

Business credit remains tough in difficult times

There's been a lot of talk about the impact of the global financial crisis on interest rates and access to finance. Whilst the banks maintain that they are providing finance, and certainly that appears to be the case with residential mortgages, the availability of finance to business remains an issue. It is finally receiving a greater level of attention in the mainstream press, with The Australian and Australian Finance Review both publishing articles on 27 March.

The Australian quotes Christine Christian, Chief Executive of Dunn & Bradstreet; "There are a large number of firms that can't obtain financing and have run out of cash". Further to this, the Australian Financial Review quotes The Australian Chamber of Commerce; "A lack of affordable finance is threatening to derail the recovery among small and medium firms" and that "access to, and renegotiation of, affordable finance has now become the most substantial issue facing the day to day well being of Australia's small and medium business sectors".

Whilst the banks will take some time to ease credit criteria from their current levels, credit is still available; however, it can be difficult to obtain even for very profitable businesses. With over 30 years of equipment finance experience, Interlease knows what's required to obtain business equipment finance in challenging times.

For a number of businesses, the biggest challenge in obtaining finance is presenting the business in the best possible light and in a manner that banks prefer to assess credit-worthiness.

Article by Ken Richards

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Article Tags: australian finance, banks, business credit, difficult times, finance, global financial crisis, interest rates, mainstream press, profitable business, residential mortgages, The Australian, The Australian Chamber of Commerce



Related Forum Posts
Re: What Businesses to Bail Out? - A year after the government bailed out the big banks , the big automakers and one very big insurance company , the Obama administration seems to have finally gotten around to helping small business. In his weekly address on Saturday , the president shined the spotlight on small business owners and their struggle to get the credit they need to help get their businesses back on their feet. “These are the very taxpayers who stood by America’s banks in a crisis,” Obama said, “and now it’s time for our banks to stand by creditworthy small businesses and make the loans they need to open their doors, grow their operations and create new jobs.” Unfortunately , that’s easier said than done. It was one thing for the government to buy up stacks of bad debt and pump billions of dollars of liquidity into the financial system. It’s quite another to persuade a bank to lend money to a small business that, even in good times, may have a tough time making a go of it. That’s why it’s going to take more than browbeating banks and super-sizing SBA loans to get America’s small businesses off the respirator and out of the emergency room. It’s going to take revenue–sales generated by customers armed with paychecks, credit cards and home-equity credit lines who feel confident enough to start buying again. But with gun-shy banks and credit-card companies cutting consumer credit to the bone, small businesses are going to have a tough time making sales to customers who have to dig into their wallets and come up with cash. And with double-digit unemployment predicted to continue for many years to come, paychecks will also be in short supply.............
Re: Kevin. What happened to all others moderators? - Thanks Kevin for your reply, I will be fulfilling my obligation of a moderator from now on. I was going through some rough times in the past months, that was why I was not consistent. Thank God the rough times is gone and i am back. Tough times never last but tough people last.
Re: Fed rate cuts . . . - Prime may be down but the Lender's tightened up, so the rate going down really doesn't help the avarage Joe or the fair credit borrower. Seems that pro-franchise Lenders all over the country all raised their standards. Where I used to be able to get someone franchise financing with a credit score of 650 and minimum collateral (30- 40%) with little management experience or no direct industry experience; the Lender's now want credit of 670+ and 50 - 70% in collateral on a minimal level (depending upon the lender and the franchise) and they are all requiring stronger & related experience (industry experience preferred). New franchises to the franchising industry are very hard to get financing for, unless you are a really strong borrower with strong related experience. If you are opening a restaurant franchise, the lenders want to see you have restaurant and management experience. Lenders also want to see a long track record with a franchise and they want to see 75+ units up and running successfully before they put down their guard. These are truely tough lending times and i don't really think the lower rate helps the avarage person.
Re: What Businesses to Bail Out? - Shri, I agree. Just within my own little circle of family and friends there have been at least 4 people who have filed for bankruptsy. Who do they think gets stuck paying off their debts? Do they think they just go up in smoke never to be heard about again? I know times are tough, but people don't want and /or aren't willing to change their lifestyles to reflect the tough times. And I'm not just pointing fingers at others......I can't get my own husband to understand the depth of the problems our economy has only begun to feel. When you see ONE bank being rescued by the feds for a cool 85 billion dollars, you better believe there's a problem. We, as a nation, are not being responsible and I think our founders would flip in their graves if they knew the mess we were in.
Too Much Too Easy - There are many people I know that were extended far too much credit and it was very easy. That seemed especially true when people wanted to buy houses over the last 5+ years. Now we have the fallout that times are getting tough, mortgages have been radically mismanaged and a lot of people are facing possible foreclosure. I saw a higher rate of possible foreclosures on the horizon because people were way overextended - and the problems are happening all over. I've been wondering if now is the time to make some strategic purchases, but it seems that it might be better not to acquire any additional debt with the economy in the precarious situation it is right now. Hard to know for sure. Chris


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