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Now is the time to review your business’ borrowings

Apr 01, 2014

Over the last few years many South Australian small businesses have been feeling the pressure from their lenders. Interest rates have been increased over and above the official Reserve Bank rate increases, interest margins have been increased due to liquidity or cost of long term funds and the availability of loans has been diminished by tougher credit guidelines.

But according to Phil Wigley, Director of Finance at Perks Integrated Business Services “there is light on the horizon and banks want to lend to businesses”.

In the past five years, conditions for borrowers have rarely been better with the banks fighting hard for business customers. The price of credit has fallen, bank margins are narrowing and some banks are even easing credit standards in a bid to get business in the door.

“The banks are telling me they are open for business because they are under huge pressure to grow their loan books” Says Phil Wigley.

“Within our client base at Perks, we first saw it in the residential lending market with the banks competing aggressively on price, well below published rates and then a softening of the strict credit criteria. We’re now seeing it in business lending. The appetite for loans is on the rise and competition is intense” says Phil.

With such a competitive lending environment, now is the perfect time for business owners to review their borrowings, in the same way they critically assess all other parts of their business.

A review of a business’ borrowings is not only about interest rate, other critical issues a business owner should consider are:

  • Are their finances structured in the most tax effective manner?
  • Does the structure provide adequate asset protection?
  • What are the personal guarantees that are being provided in support of their borrowings?
  • What are the pros and cons of putting their home up as security?
  • Are they adequately risk insured personally for their level of debt?
  • What is their true overall interest rate?
  • What fees are they paying?
  • What is the difference between a commercial bill and a business loan?
  • Should they choose a fixed rate, variable rate or a mix of the two?

For more information or a review of your business’ borrowings call the Perks Finance team on (08) 8273 9223.

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