It’s cash rate time again, and this month we’re calling on the Reserve Bank to support the innovation dreams of small to medium sized enterprises by announcing a cash rate reduction tomorrow.
According to our latest Business Monitor research, a key priority for SMEs in 2012 is innovation through diversification. One third of our respondents nationally planned to introduce new products this year and/or extend their business activity into other geographical horizons.
CEO Tim Reed says, “A solid reduction in the cash rate – if passed on by lenders – will visibly impact these important GDP contributors. They will have more confidence to follow their desire to broaden product sets and explore new markets, bolstering their ability to compete globally.”
“Further, the sector needs strong leadership from the new small business minister. SMEs are facing a number of headwinds this year and are looking for clear recognition, guidance and support. We are concerned that the small business portfolio is not being given the serious attention it deserves. It accounts for 96 percent of Australian businesses; this is far too large a segment to ignore.”
The Business Monitor research found that interest rates were one of the top three pain points for SMEs, after fuel and price margins/profitability.
Mr Reed says, “Diversification is especially important to domestic businesses facing increasing competition from overseas sellers who are not only exempt from GST but are more accessible to Australian consumers due to technology improvements and our strong dollar.”
“Business loan demand, including overdrafts, saw strong growth in Q4 last year, up 10.5 percent on the prior year. Additionally, close to half of commercial credit inquiries came from SMEs. These businesses are already facing enough challenges without interest rates placing further pressure.
Lenders need to play their part and pass on any rate reductions, according to Mr Reed, “The Government has a role to play here in working to increase competition in the business finance market and stir lenders into presenting better deals to their SME customers.”
“We are looking forward to working with the new Minister for Small Business, Mr O’Connor, and sharing our insights into the needs and expectations of this important group. There is much to be done to support businesses with simple policies that make life easier.”
Do you have a business loan? Are you planning to obtain one this year? How much pressure do interest rates put on your small business?