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The tide might be turning for small businesses looking for money with the big banks more forthright and even more believable when they say they are supporting small business. And while the jury is still out on how committed they really are, there are some positive signs.

The first public expression of a new attitude came with the arrival of Ralph Norris as the head of the Commonwealth Bank. On taking the top job he quickly admitted that the bank’s relationship with small business could be better and he promised to lift the bank’s game with the sector.

Let me admit that the new attitude quite shocked me. Historically, micro or very small businesses were not on the radar screen to banks unless the business was flying high and/or the business owners were prepared to hand over the deeds to their house.

One of the greatest ironies that over the past two years is that big business has discovered that small businesses are potentially great customers. They spend more on things such as banking services, IT services and telecommunications. And on top of that they are big buyers of small business equipment. Gerry Harvey’s very healthy bottom line and share price at Harvey Norman, in no small measure, is linked to his sensible marketing to small business.

Michael Blomfield, executive general manager of Local Business Banking at the Commonwealth Bank, thinks the old corporate culture in big banks worked against good relationships between them and their small business customer base.

“Small business is from Venus and big business is from Mars,” he me. “Once lending $10 million to a $50 million dollar customer was more important than $50K deals for $1 million customers.”

That, he argues, does not apply now.

“We are listening to feedback and it has told us we have done a bad job,” he admitted. “In pure economic terms, small business is a soft competitive space and so we’re focusing on capturing value ignored in the past.”

Blomfield says cashflow lending is still hard but he thinks things are improving, saying a year ago the bank didn’t even offer the product, but it does now.

An interesting development for small business and gaining access to loans is the arrival of mortgage brokers now chasing small business customers.

Pam Sullivan, director of All Finance Services in Joondalup Western Australia and a director of the Mortgage Finance Association of Australia, says residential property mortgage brokers are looking to diversify into commercial lending because in some states in Australia the housing market has slowed considerably.

“Brokers wanting to enter the commercial arena either need to undertake a commercial course to obtain the extra knowledge or work with on a buddy system with another broker who can assist them,” he said. “Several lenders are now paying referral fees to brokers for commercial business which could also be attractive to a broker who is not experienced in this area.”
Ms Sullivan expects small business will have access to a greater range of lenders and products to suit there individual needs.

“If they go to their bank they only have access to what that lender can offer which is not always the best one out there,” she said.

This will include helping small businesses into cash flow lending opportunities, which if we take a line on the success of mortgage brokers in helping to provide better loans at better rates of interest, has to be a good thing, in general.

Published on: Wednesday, June 24, 2009

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