Business lending to amp up with low rates

by Julia Corderoy13 May 2015
Historically low interest rates are firing up the SME sector and brokers should be prepared to take advantage of it. 

Despite the NAB Monthly Business Survey revealing that business confidence remained unchanged in April at relatively subdued levels, research conducted by Bibby Financial Services among SMEs shows that despite weak economic conditions and concerns that government policies are not working, SMEs are ready to invest. 

According to the survey, conducted before last week’s cut to interest rates, 72% of medium-size businesses intend to invest in their businesses in the next 12 months. 

However, with last week’s RBA cash rate decision, it is likely that even more SMEs are planning to invest in growth by increasing borrowing, according to Bibby.

“The good news is that interest rate cuts are having a positive effect. We have seen an increase in the level of borrowing after several years of below trend growth in business lending. Among businesses that intend to borrow over the next 12 months, 32% said they will borrow to fund growth and more than one in five (22%) will borrow to fund innovation projects,” Mark Cleaver, managing director, Bibby Financial Services Australia and New Zealand.

“Both indicators have increased from July 2014, which is an encouraging sign, showing businesses are prepared to invest in the future and become more proactive in driving growth.”