I HAVE run my own small travel and leisure company for the past 22 years. Most of my business comes from tourists, mainly from overseas, although I have had a fair amount of business from domestic tourists. Due to the 2008 global financial crisis my business took a massive reduction in numbers from both these groups.
The stubbornly strong Australian dollar has almost cut off international tourists although I have adjusted my business and cut costs to factor in a lower turnover. Since the GFC began, Australia has remained largely immune to the global downturn, but this is only because of the resource sector businesses like mine have continued to struggle with interest rate rises and borrowing costs.
Last week's consumer price index put the index into the Reserve Bank's target for inflation, between 2 and 3 per cent, so I am hoping the Reserve can finally cut interest rates. The problem now is that the big banks, one of which my loans are with, are going it on their own with rates. How should I go about finding a better deal? Should I expect a cut in rates?
You're not alone. I walk the city and see "for lease" signs dotting retail windows, "50 per cent off" ads all over the shopping malls, and small businesses struggling because they can't get access to credit. I see the ads on TV for banks' deposit rates, but little mention of their small business loans.
To be fair, the banks aren't at fault when it comes to lending to SMEs it's simply that residential mortgages are more profitable and less risky than a small business loan. Gone are the days when a travel agent, butcher or local bookshop owner could walk into their bank branch, have a meeting with the manager and arrange for a line of credit. Nowadays, the banks have centralised their lending decisions, so those valued relationships between bank manager and local business owner are increasingly difficult to find. And as tough as it is to obtain a loan, once you have one, you start the guessing game of what your rate will be.
When the CPI came out last week, even the nation's top economists were surprised at how low the number was. It was a true indication of how businesses in Australia are doing, and how consumer spending has come to a halt. And it all but sealed the deal for the RBA to cut rates at tomorrow's monetary policy meeting. But the question still remains what does it matter if your lender doesn't pass the savings on to you?
The hard truth is that you can't influence the major bank's decision to pass on a rate cut, but what you can do is look for a better deal.
There are great comparison sites out there that show you how your rate compares with other lenders.
You might be surprised to know that regional and non-bank lenders can often offer you a much better rate, with advice and a personal relationship to match.
There are 3.5 million small businesses out there, and every single one of them has the ability to let their feet do the talking, including you.
You can't change the RBA or your bank, but you can change the future of your own business.
And if the RBA drops rates and your bank follows suit? Take advantage of the situation. If you're not struggling to make your payments, take the savings from the rate cut and put it straight back into your loan, or put it into a high interest fund or savings account.
Either way, your best option in this tough economy is to pay down debt, save where you can and above all, don't give up. Good luck.
Mark Bouris is executive chairman of Yellow Brick Road, a wealth-management company and small business adviser that sells products and services for home loans, financial planning, insurance, superannuation, investments, accounting and tax. His advice here is intended as guidance only. Go to ybr.com.au.
If you have a question for Mark Bouris email it to Max Mason at firstname.lastname@example.org