SMEs are set to have better access to finance, with the Australian government making two key moves this month to free-up lending to small business operators.
Firstly, Treasurer Josh Frydenberg says he will instruct the corporate watchdog ASIC to tell banks to waive responsible lending standards for small businesses.
Mr Frydenberg says while small businesses are exempt from responsible lending standards, many have been inadvertently caught in the tightening of those standards in the wake of the Hayne Royal Commission.
“There’s a real grey area as to what is a small business loan and a personal loan,” Mr Frydenberg told Fairfax.
“Small businesses are exempt from responsible lending standards; however, they are being inadvertently caught in the tightening of those standards post the Hayne royal commission as many use the family home to secure finance.”
Mr Frydenberg also recently released exposure draft legislation to allow the government to invest in an Australian Business Growth Fund (BGF).
The government is committing $100 million to establish the BGF and partnering with financial institutions to provide equity funding to SMEs.
The aim is for the fund to mature to $1 billion to help SMEs get access to the finance they need.
Australia currently lacks a patient capital market for small and medium enterprises, the exposure draft’s explanatory materials states. Patient capital can provide entrepreneurs with the finance needed to expand without relinquishing control of their business.
“The government will help small businesses grow by co-investing with other financial institutions to establish a BGF that will provide equity finance to small businesses across a range of industries and locations,” the explanatory materials state.
Mr Frydenberg adds that many SMEs find it difficult to obtain finance other than on a secured basis – typically, against the family home.
They also find it difficult to access additional funding once they have pledged all of their real estate as collateral.
“With better access to more competitive finance, SME’s will be able to grow, fulfil their potential and continue to underpin Australian economic growth and employment,” Mr Frydenberg’s statement said.
Legislation to establish the BGF will be introduced to parliament before the end of 2019.
If you’re a small business owner wanting access to finance, you don’t have to sit and wait for the government’s initiatives to take effect.
Instead, get in touch with us. We’re happy to talk through your current situation and help you explore your options.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
The Reserve Bank of Australia (RBA) has cut the official cash rate by 25 basis points to a new record low of 0.75%. But will the banks pass on the interest rate cut in full to you?
RBA Governor Philip Lowe said this third rate cut in five monetary policy meetings was made to support employment and income growth.
“The Board also took account of the forces leading to the trend to lower interest rates globally and the effects this trend is having on the Australian economy and inflation outcomes,” he said in a statement.
“It is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target.”
The RBA previously cut the official cash rate on July 2, just one month after making its first rate cut in almost three years (since August 2016).
Now the real question is: will you benefit?
This little infographic by the ABC makes for pretty interesting reading.
It shows just how much of the last two RBA rate cuts each of the big four banks passed on to its customers in June-July.
Indeed, not one of the big four banks passed on both rate cuts in full, with each bank passing on somewhere between 0.40-0.44% (out of 0.50%).
As such, it will be worth keeping an eye on just how much of this most recent rate cut your lender passes on, not to mention how that stacks up against the competition.
With three RBA cuts so close together, it can get a bit confusing as to just how much of these cuts your lender is passing on to you.
The good news is we’re following the market closely and can tell you which lenders pass this third rate cut on to their customers in full, and which lenders don’t.
So if you’d like to find out, then please get in touch – we’d love to help break it down for you.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
More than one-in-five SMEs are having cash flow problems due to business loans being rejected, according to new research.
The report, by market analysis firm East & Partners on behalf of Scottish Pacific, also shows just one in 10 SMEs believe they are on top of their cash flow.
More than one-in-five business owners cite being rejected from a lending product as the main reason for their cash flow issues, the report states, and a similar proportion of SMEs were unable to take on new work because of these cash flow problems.
“[This] is a massive wake up call to SMEs and their advisors to make sure they are funding their business in a way that optimises cash flow,” says Scottish Pacific CEO Peter Langham.
“A business struggling with cash flow can only stretch working capital so far before something has to give.”
Business owners see government red tape and compliance as the biggest thorn in their side, with almost three-quarters naming this as their greatest cash flow issue.
Other major cash flow problems stem from suppliers reducing payment terms and customers paying late.
Another interesting tidbit arising from the report is that – for the first time – Australian SMEs are more likely to use a non-bank lender, ahead of their main bank, to fund their 2019 growth plans.
The report shows that over the next six months, 19% of SMEs intend to choose a non-bank lender to fund their growth, compared to 18% of SMEs who intend to stick with their main bank (down from 38% in 2014).
According to East & Partners Head of Markets Analysis, Martin Smith, the rising demand for non-bank lending options to fund new growth investment reflects the reality that there is now a broader array of non-bank lending alternatives to match business owners’ funding requirements.
While SMEs are now increasingly looking to lenders beyond the main banks, Scottish Pacific CEO Peter Langham says many SMEs fail to take advantage of the alternatives available to them.
“When it comes to funding growth, overwhelmingly SMEs opt to put their hands in their own pockets – 83% of business owners say this is how they plan to fund revenue growth,” Langham says.
“Some business owners remain unaware of funding alternatives.”
If you’re an SME owner experiencing cash flow problems, or looking to fund your business’s growth, then get in touch.
We’ve got a number of lenders on our panel and would be happy to run you through some options to help secure your business now and into the future.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Lending to Aussie households spiked 3.9% in July, the strongest growth seen since October 2014, according to the Australian Bureau of Statistics (ABS).
The bumper month follows a 1.9% rise in June 2019, suggesting the tide has finally started to turn in the lending market.
“Whoa. Quite the surge in housing credit in July,” remarked CoreLogic’s head of research Tim Lawless, “haven’t seen numbers like this since 2015/16”.
Lending for investors rose 4.7% in July with rises across all states and territories, while lending to owner-occupiers also recorded substantial gains at 5.3%.
Meanwhile, home loans to first home buyers rose 1.3% in July. This is the fourth consecutive month of growth for this segment.
The rise came the same month that the prudential regulator, APRA, eased loan serviceability standards.
Essentially, APRA stopped telling lenders to assess whether borrowers could afford their repayment obligations based on a minimum interest rate of 7%.
BIS Oxford Economics’ Maree Kilroy adds that investor sentiment also received a boost following the Coalition government’s federal election victory, and pointed to back-to-back rate cuts in June and July.
“After withdrawing from the market for several years, investors have reacted positively,” Kilroy says.
Lawless agrees that the surge is due to “two rate cuts, easier credit, sentiment boost post-election and removal of macro-prudential”.
And his colleague, Cameron Kusher, suggests this might only be the beginning.
“Importantly this is only to July. We could see these figures go much higher by the time we are right in the middle of spring,” Kusher says.
As Kusher suggests, this might just be the beginning of a lending surge.
Spring usually brings plenty of new properties onto the market – everything looks nicer in spring!
So if one of them happens to catch your eye, get in touch and we’ll be happy to guide you through the process of obtaining finance.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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Ever thought about investing in solar panels for your home? If so, you’ll know it’s a big decision and there’s a lot to wrap your head around. Fortunately, the consumer watchdog is proposing a new retailer code to make solar purchases safer and easier.
Australia is the sunniest continent on Earth. Yep, even more so than Africa.
Which is why it makes sense that more than two million homes have already decked out their rooftops with solar panels.
Sure, the initial outlay is between $5,000 and $10,000, but solar installations usually pay themselves off in two to six years – and then they save you a whole lot of money on power bills in the long run.
The thing is, though, household solar can be tricky to research if you’re not familiar with the industry – not to mention all the potential government rebates and incentives you need to wrap your head around.
The Australian Competition and Consumer Commission (ACCC) has proposed a new consumer code for retailers selling solar and energy storage systems, with a draft determination due on September 9.
The New Energy Tech Consumer Code (the Code) sets minimum standards of good practice and consumer protection and will apply to all aspects of customers’ interactions with participating retailers.
That includes their marketing, finance and payments, warranties and complaints handling processes.
“Products like solar panels or battery storage involve significant financial outlays for households,” ACCC Deputy Chair Delia Rickard explains.
“This Code aims to give consumers more protection and more information to help them make informed purchases.”
Signatories to the Code must comply with obligations, including that they:
– avoid high-pressure sales tactics
– ensure their advertising is clear and accurate
– educate consumers about their rights
– provide clear information about product performance and maintenance
– take extra steps to protect vulnerable consumers
– implement effective complaints handling processes.
The proposed code will also effectively prevent signatories from offering finance through ‘buy now pay later’ arrangements.
There are a number of state government programs across Australia that offer interest-free loans for eligible households in the solar space, including in NSW, Victoria, Queensland and South Australia.
If you’re not eligible for any of the above schemes, rest assured that there are other smart ways to finance the installation of household solar.
If you’d like to find out more, get in touch. We’d be happy to talk you through some of your options.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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Indulgences such as caviar, wagyu beef and the finest bottles of wine shouldn’t count against you when lenders assess your application for finance, a Federal Court judge has said.
Ok, so maybe Federal Court Justice Nye Perram has a slightly different grocery list to the rest of us.
But his recent judgement should be welcome news to potential borrowers who have splashed out on the odd luxury over the past six months and are worried that it would completely derail their loan application.
Well, the corporate watchdog (the Australian Securities and Investments Commission, aka ASIC) filed a court case against Westpac in 2017 in an attempt to strengthen lending standards.
ASIC argued that Westpac’s automated decision system relied solely on a household expenses benchmark that underestimated real living expenses and, as such, was flawed.
However, Justice Perram ruled that Westpac had done nothing wrong by using its automated system, rather than manually checking the borrowers’ living expenses, when approving more than 260,000 home loans between December 2011 and March 2015.
Justice Perram said that current laws do not explicitly require banks to check expenses.
“[I’m] unable to discern why, as a matter of principle, the consumer’s declared living expenses must be considered,” he said.
“I may eat wagyu beef every day washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare.
“The fact that the consumer spends $100 per month on caviar throws no light on whether a given loan will put the consumer into circumstances of substantial hardship.”
Basically, what Justice Perram is saying is that just because you fork out for expensive items before you apply for a mortgage, doesn’t mean you’re incapable of reducing your expenses once you’ve taken out a loan.
The Australian Financial Review (AFR) followed up on the decision with a scathing smackdown of ASIC in an editorial that asked: “why did ASIC even bother?”.
“Leave banks – the institutions with the expertise and incentive to write good loans – to assess risks for home loans. Not second-guessing bureaucrats,” the editorial stated.
“After all, it is hardly in a bank’s own interest to lend to people who are unlikely to be able to pay the money back.”
CoreLogic Research Analyst Cameron Kusher meanwhile wrote that it was not only a big win for Westpac, but the entire lending industry.
“The judge in the ASIC/Westpac case seems to really get it. While you might spend a lot more before you get a mortgage, getting a loan is about knowing someone has the capacity to change their spending behaviour once they have a mortgage,” he said.
“Lending has become so prescriptive when it is really the unexpected life events that cause someone to default on their mortgage. You can’t foresee everything.”
Meanwhile, ASIC commissioner Sean Hughes said the commission was consulting on new guidance in relation to responsible lending obligations.
Westpac says the decision provides clarity for the interpretation of responsible lending obligations, however consumer groups who found the decision “disappointing” are calling on the government to amend responsible lending laws.
While this court ruling may have the potential to somewhat relax the tight lending standards currently in place, it’s better to be safe than sorry when applying for a loan and we can provide you with some good tips on how to get your accounts in order.
After all, it is still up to the lender’s discretion (perhaps hold off on the caviar for a while longer!).
So if you’re considering applying for finance in the near future, get in touch.
We’d be more than happy to help guide you through the ever-evolving responsible lending landscape.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Businesses that put off paying large tax bills for too long may soon find that the Australian Taxation Office (ATO) has notified credit reporting bureaus.
The proposal is part of The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No.1) Bill, which was recently introduced into parliament.
The Bill will provide the ATO with the discretion to disclose to credit reporting bureaus when a business has a debt of $100,000 for 90 days or more.
“This will reduce the unfair advantage obtained by businesses who do not pay their tax debts and will encourage businesses to engage with the ATO to manage their tax debts,” says assistant treasurer Michael Sukkar.
Credit reporting bureau CreditorWatch adds: “By (the ATO) disclosing this information, the default would be visible on a commercial credit report and the credit scores of companies could be negatively affected.”
Unlikely – the key word above is “discretion”.
Mr Sukkar says it will apply to “particular businesses that are not effectively engaging with the ATO to manage their tax debts”.
So, if this applies to you and your business, the most important thing you can do is not bury your head in the sand.
First, get in touch with the ATO, which encourages businesses to engage with it to manage their tax debts. You may be able to enter into a “sustainable payment plan” that is agreed upon by both parties.
However, not everyone enjoys the ATO impatiently hovering over their shoulder waiting for them to pay off a large tax debt.
If you’re one of those people, it’s definitely worth getting in touch with us to explore some of your other options with business loan lenders.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Good news for mortgage holders this week, with the RBA saying “it’s reasonable to expect an extended period of low interest rates”.
Figures released on Wednesday show that core inflation, the RBA’s preferred measure, is currently at 1.4%.
However, Reserve Bank of Australia (RBA) Governor Philip Lowe says it is highly unlikely the RBA will contemplate higher interest rates until it’s confident that inflation has returned to 2-3%.
“Whether or not further monetary easing (aka further rate cuts) is needed, it is reasonable to expect an extended period of low interest rates,” he said in a speech.
“On current projections, it will be some time before inflation is comfortably back within the target range.”
The RBA will meet again on Tuesday, however it’s appearing increasingly unlikely that it will cut rates for a third consecutive month.
That’s because June quarter inflation figures released on Wednesday narrowly beat out the market’s expectations (+0.5.%) with a rise to 0.6%.
As a result, most experts are predicting that will be enough to postpone a third RBA rate cut to 0.75%, but not enough to prevent it from happening between now and the end of the year.
If you want an update on what the RBA’s latest comments on long-term low-interest rates mean for your current home loan situation, then get in touch.
We’re following the market closely and will be happy to run you through some mortgage and refinancing options.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Great news for home buyers – housing affordability is the best it’s been since 1999, according to new data released by the nation’s peak housing and building body.
That’s right – housing affordability is comparable to the days when the Y2K bug had us fearing for our lives, Nokia Snake was the pinnacle of mobile gaming, and median house prices in Australia ranged between $112,000 (Hobart) to $272,000 (Sydney).
These days, however, median prices range from $420,000 (Hobart) to $840,000 (Sydney).
But here’s where it gets a little interesting.
For a home buyer with an average income purchasing a median-priced dwelling (assuming a 10% deposit), mortgage repayments will consume the smallest proportion of their earnings since 1999, according to the Housing Industry Association (HIA) Affordability Index.
The main reason housing affordability is comparable with levels seen in 1999, despite house prices rising significantly faster than incomes over the last 20 years, is that interest rates are (in the vicinity of) 4.6% today compared with 6.7% in 1999, says HIA senior economist Geordan Murray.
Average earnings have also increased by 113% over the past 20 years.
While the median home price has increased by 228%, the lower interest rates have kept the cost of servicing a loan the same, points out Murray.
“The combination of lower home prices, improvements in wage growth and lower interest rates have contributed to the ongoing improvement in the HIA Affordability Index for the June 2019 quarter,” adds Murray.
HIA’s Affordability Index is calculated for each of the eight capital cities and regional areas on a quarterly basis and takes into account the latest dwelling prices, mortgage interest rates and wage developments.
All eight capital cities saw an improvement in the affordability index over the quarter to June 2019, with Darwin seeing the greatest improvement with its index up by 4.8%.
This was followed by Melbourne (+3.0%), Perth (+2.6%), Brisbane (+2.6%), Sydney (+2.4%), Canberra (+2.4%), Hobart (+ 2.2%) and Adelaide (+1.0%).
There are a number of recent initiatives that are not reflected in HIA’s Affordability Index but are nonetheless providing further benefit to purchasers, HIA points out.
There’s the reduction in income tax, the easing of APRA restrictions on mortgage lending, and the Australian government’s First Home Loan Deposit Scheme.
“The passing of the federal government’s income tax package means that millions of Australians will have extra income to put towards a deposit for a new home,” says HIA managing director Graham Wolfe.
If you’d like to take advantage of the current housing affordability conditions, then get in touch.
We can help arrange a home loan that’ll put a smile on your face and get you partying like it’s 1999.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Whenever the Reserve Bank of Australia (RBA) changes the official cash rate we all hear about how it will impact home loans. But it affects many other areas of finance and the economy, which we’ll look into today.
The RBA has cut the official cash rate to a new record low of 1%, just one month after lowering it to 1.25% – which was the first rate cut in almost three years (since August 2016).
Now, whenever this happens we all hear about what it will mean for mortgage-holders.
But it also has a flow-on effect for many other areas of finance, which we’ll look into below.
If you’ve got a large chunk of your money in a savings account and you’re trying to save for a first home deposit, the latest two RBA rate cuts probably aren’t the best news for you.
That’s because you want your savings account to have the highest interest rate possible and a cut in the official cash rate will likely mean a reduction in interest you earn on your savings.
If you are worried interest rates are going to be cut further, and you want to lock in a rate for a particular length in time, you can look into a term deposit account.
Alternatively, if you think now is a good time to jump into the property market, feel free to give us a call and we can run you through your financing options.
If the RBA cuts the official cash rate, the interest rates on car loans generally go down too.
The bad news is that if you have already taken out a car loan it usually has a fixed interest rate for the period of your loan term.
The good news is with interest rates at an all-time low, if you’re thinking about buying a new car or refinancing an existing car loan, now might be the time to lock a rate in.
Changes to the cash rate affect interest rates on all kinds of loans, including commercial and business loans, asset and equipment finance, investment loans.
If you’re thinking about taking out any type of loan, or weighing up the pros and cons of refinancing, give us a call and we can give you the lowdown on the new landscape.
Yep, the official cash rate generally has an effect on the interest rate on credit cards too.
That’s because lowering the interest rate is meant to encourage people to spend more – including on plastic – which in turn can give the economy a boost.
If you’re someone who has been guilty of spending a little too much on your credit card, however, get in touch – we can help you look into consolidating it with other debts that are ripe for refinancing now.
Basically, it comes down to this: if you have an existing or prospective debt and you want to see how it all stacks up on the back of the two consecutive RBA rate cuts, then get in touch.
We’re following the market closely and can tell which lenders are passing on the rate cuts to their customers, which lenders aren’t, and present you with refinancing options.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
