I am told that the ANZ and Commonwealth banks have pulled back from their considerable support for funding people buying and operating newsagencies. Their moves are contrary to what the federal government understands to be the position of banks in terms of support for small business.
Both the Commonwealth and the ANZ have been major supporters of newsagents for many years. The ANZ actively sought to support the channel with access to finance for the purchase and operation of newsagencies.
Their pull back may impact the sale of businesses. It may also lead to some existing newsagents are required to reduce their exposure to the banks.
The changed circumstances of bank lending for newsagents is something which needs to be covered in detail with our key suppliers.
Yes this is so.
After a briefing I had with the major lending authorities re policy of lending for the purchase of newsagencies and refits (including National policy ANZ and CBA Sth East QLD) (early july)I updated Nana with this information. CBA are conducting are feasibility study with KPMG similar to the one they did on Management Rights industry in QLD recently. I also informed all our clients by email early July. As far as I am aware most suppliers have this knowledge through NANA Basically the Banks are only lending on a “case by case” basis There is more information available but again it is more pertenant to the industry than the general public. Particular criteria has to be met before they will consider the application and once received the submission may take up to 3 moths to be approved if all the criteria isn’t met in the first application. It is now quite a process and a newsagent selling should enquire before they put theirs on the market just what it is that they need to meet.
Considering other industries we are not doing too badly, Cafes and restruarants and other small business are not attracing loans on the business at all.
Don’t you just hate those pesky small business taking up all the money from the home buyers.
It never stops making me smile that they do not link that by helping small businesses that this will lead to more employees and in the end more people that can afford house repayments. Less small business means less people employed.
But hey what do I know, I’m not on $16m per year like the bloke from the CBA.
Yes Luke, they have it all wrong. A family home consumes wealth a business creates it.
An interesting timely article in yesterday’s Sunday Telegraph re Banks and their lending policy at the moment and its ahttp://www.dailytelegraph.com.au/news/banks-crippling-small-businesses/story-e6freuy9-1225925984331
for those interested
ffect on SME’S
The link is
I Saw that article Graeme, very scary. It seems all business owners have an infectious disease and must be avoided like the plague. Like Luke said, its astonishing that people are being paid $16m per year to make those kinds of decisions.
what most dream of winning to last a life time, one makes in 12 months . unbelievable .
The lesson for all newsagents from the GFC and the subsequent contraction on small business lending is to rely less on your bank. Pay down your loan(s), reduce your overdraft and become more self reliant. While this may be a challenge, it will reduce your costs and make the business more profitable.
Amazing that our Govt. at the time garuanteed the “BIG 4” against the GFC only to see them make Billion dollar profits and “Pullback” from lending to small business!!!!
We are with the ANZ and have had our funding cut “to meet new bank guidelines”. I complained and they said there was “nothing they could do”.
Mark you are right about the need to reduce reliance on banks. While this if difficult for small businesses like ours we must do it for our own sake.
To be fair the banks have little immediate incentive to lend to small business at present. They’re seeing strong profits from home loans, unemployment is very low and the economy is traveling relatively well.
In the medium term small business certainly needs access to more lending, but without an incentive the banks won’t be giving it until they see that the demand is indirectly affecting their revenue.
If our economy starts to plateau for a while or begins to head south then we need to see governments pushing incentives for small business leaning; the same as we have been seeing in countries hard hit by the GFC.
That’s the point Jarrod, they cannot see past their own noses. Who pays the employee wages that are used for home loans?
govt should provide funding at commercial rates to SME to help grow the economy, be heaps better that the billions wasted so far in way of stimulus, can you image how loud the big 4 would squeal if this was seriously put forward
Rick,
That very bill is going through in the USA as we speak.
Luke,
Banks can change interest rates and lending policies quickly, so they have little need to think long term.
Rick,
Our economy is not in such a position that we need to take the same action being taken in the US. A stimulus for business lending in Australia could create artificial, unsustainable, economic growth.
The stimulus package was designed to “prop up” part of our economy during the GFC. It helped many sectors, especially retail, weather the worst of the storm.
Let’s not mix up the amount of money available for lending (bank stock in trade) with the amount of profit they make by having this (money – stock in trade -) available at good rates.
The good rate availability is long gone- there is a shortage of those funds. This enables or determines (whatever) the Banks “Cherry picking” process. Risk minimisation rises to the fore and unfortunately small bus. is low priority.
Yes it would be great to have a “Business Bank” supported by Government and turn the current Big 4 or should I say officially change theri name from Banks to Building Societys for that’s what they have become.
I don’t see any immediate chage -certainly not for some years anyway- so to pay down your debts as quickly as possible is the way to go.
Back to my original post, my concern is that the banks are imposing new restrictions on borrowers of good standing because of a head office change of heart about the newsagency channel.
The best approach newsagents can take is to reduce bank fees. We can do this by making the paying down of bank debt our first priority.
Jarrod, maybe you should look outside your own area that is still doing OK due to the mining boom, low business lending is directly linked to the ability of people to repay home loans because without small business millions will be unable to pay off home loans and we will go the way of the US with homes we cannot sell and the arse will fall out of everything.
I understand the banks do not give a hoot at the moment but neither did the US banks back in 08 and look what happened, just to say we are not like that is also short sighted.
We have a relatively small loan secured by our family home, so if things go south we sell the house and keep the shop
(because in the end that’s what pays for everything not where we sleep) but it amazes me that the banks pay no attention to what is generating all the $$$$.
Luke,
despite claiming to the contrary in their advertising the banks make their decisions based on numbers. This is why the ANZ and Commonwealth decided as they did recently re newsagents.
While it is difficult for many to do, eliminating bank debt has to be the top and urgent priority for newsagents.
Bank loans and overdrafts can make us lazy. If the only resources we have are what we have ourselves then we are more likely to make more considered business decisions.
It is hard to eliminate bank debt when they move the posts, having to turn long term debt into short term debt will send a lot of newsagents to the wall.
It’s good to hear you paid for your office refit with cash Mark and did not have to borrow for it, but some are not in your position.
Again I state that by luck we are not in a position that we rely heavily on bank debt but a great deal of our industry does and those getting into the industry still do. We got out of bank debt by letting go of all 6 full time staff and working 16 hours 7 days a week for the past 3 yrs.
Luke, I’ve not mentioned the office refit.
Luke,
The fact is the unemployment is incredibly low. I have not seen or heard of any indication that this is going to change dramatically any time soon.
The situation in the US was dramatically different. They had an overly competative, unregulated banking system that engaged in large amounts of high risk lending. That is is no way the situation here in Australia.
Did you know that 21%of all male workers do not get 38 hours per week so it is not incredibly low so say the I M F ,that is why retail is a little slow ,people do not have the money and when you add it to the increase it state charges it is not good
You stated “Bank loans and overdrafts can make us lazy. If the only resources we have are what we have ourselves then we are more likely to make more considered business decisions”, so we will need to have cash for refits and upgrades ourselves and not look to the banks for finance because they are treating newsagents like they have the pox?
Luke with thhe current bank rules many newsagents will find it challenging to get loans for shopfits unless they can offer 100% security through cash or property.
Newsagents have to do what you have said here you are doing – chasing new traffic and better margin and focusing on profit every week.
Shoppings centres are offering money for refits or partial refits where it is necessary under the lease to upgrade. This amount doesn’t come free of charge.
It can be added onto the rent over a period of time.
It is a method of finance helping both sides when the banks refuse to lend (if one doesn’t have the collatoral) on fixtures. Banks also are not lendind on stock. It is prudent to say here that the banks have three different criterias for lending to SME’s.
1.For the current business owner.
for everyday trading.
This includes trimming back of unused overdraft facilities. You will lose it if you don’t or haven’t already used it.
2. For current business expansion- must be backed by collatoral or iron clad gaurantees as well as an approved(by them) business repayment plan.
3. To the prospective purchasers. – Proven background ability to manage or run the business. Sufficient finance to cover cash flow deficiencies-especially in holiday resort areas or other fluctuating or seasonal business activities.- The ability to repay principal and Interest over a pre agreed period ot time.
Some banks are asking the new proposed owner to supply ongoing -every six (sometimes 3 ) months upgrade in figures after takeover for an intial period of a least 12 months.
The banks also require from the vendor – Profit and Loss – Balance sheets-Tax returns and sometimes group certificates for staff payments..
It is a new ball game out there howver the criteria needs to be met or no Sale.
The Golden rule applies- “He who has the Gold Rules”.