Banks need to lift their game with small business

4/7/05
Banks should nurture relationships with their Western Australian small business clients or risk losing them.
Small Business Minister John D'Orazio said the State Government's decision to exempt loan refinancings from mortgage stamp duty would add pressure on banks to improve their services to small business.
Mr D'Orazio said the Small Business Development Corporation's Ready Response Network had sought responses from small business operators regarding their attitude towards banks.
"More than half (52 per cent) of the small business operator respondents said they had changed - or had considered changing - their bank within the last two years," he said.
"The most common reason cited for wanting to change their bank was poor relationship management, particularly by the bank manager.
"Other reasons included lower fees and charges at another institution, the speed and efficiency of service and lower interest rates.
"The availability of business lending, ability to access bank services and branch closures and bank locations were mentioned.
"Banks were also criticised for a lack of understanding of small business, poor relationship management and excessive focus on property assets for security of business loans.
"Another frequent criticism was impersonal, automated phone systems instead of local numbers."
The Minister said respondents identified the inconvenience and time involved in changing banks, the bank fees and charges associated with changing and the difficulties in evaluating alternatives as barriers to changing their bank.
"Most respondents (59 per cent) told us they found it difficult or very difficult to compare products offered by different banks," he said.
"About 30 per cent said they found it neither difficult nor easy to compare bank products and 11 per cent found it easy or very easy.
"When asked what banks could provide to make it easier to compare their products, the most common response was comparison charts or tables.
"Other suggestions included using simple language and greater transparency in product descriptions."
Mr D'Orazio said 117 businesses had responded to the survey providing a good indication of underlying small business attitudes.
He said from January 1, 2006, loan refinancing undertaken by small businesses would be exempt from mortgage duty. The definition of small business for this exemption would be based on the existing payroll tax wages exemption threshold of $750,000 per annum.
Under the existing arrangements, businesses paid stamp duty at the rate of 40 cents per $100. Therefore, savings as a result of the refinancing exemption were $4,000 on a $1million mortgage and $20,000 on a $5million mortgage.
As part of its commitment to improving the relationship between small business operators and the banking industry, SBDC participates in the Australian Bankers' Association Small Business Forum.
Minister's office: 9213 7150