New players chase
banks' business loans ...
As
the Big Four reach similar prices,
others see a gap in the market.
Business lending
has been very much in vogue recently. Last month we looked at Westpac's
reduction in business lending rates. We saw the CBA follow Westpac's
lead and we anticipated that other institutions would follow in
the short term.
The CBA offer
a rate of 7.2 per cent for residentially secured overdrafts, add
on the line fees to give a rate of 8.32 per cent. While this product
is very similar to the Westpac facility, the CBA did go one step
further by cutting its base variable rate by 1 per cent. This meant
immediate benefits for existing customers at no extra cost.
The "Big Four"
have now priced themselves at similar levels. Residential mortgage
lending has been very competitive in the past three to four years.
During this time businesses would often find themselves using their
houses as security for a business loan, yet would not get the type
of rates available if the loan was to purchase the property.
This did not seem
to make a lot of sense to business, even considering the risk factor,
because at the end of the day, defaulting would result in the bank
getting the property.
With this type of pressure
from consumers, and mortgage originators looking to get into the
market, not to mention pressure from the Federal Treasurer, the
banks really had no choice but to price closer to the residential
rates.
Now that the major banks
have cut their rates, it would seem to be only a matter of time
before mortgage originators start to do the same. The next step
will be the introduction of some specialty Business Loan originators.
A new, non-bank lender
Companies like
FinDirect, a new financing company exclusively targeting the SME
market, are the start of a new breed. A subsidiary of mortgage originator
Ashe Morgan Winthrop, which has already $4 billion worth of commercial
loans, FinDirect's claim to fame is that it will accept commercial
property as security: still bricks and mortar, but not the family
home.
It also envisages
an approval turnaround of less than two hours, courtesy of sophisticated
software that will do all the decision-making ... unless you fall
into a grey area and a real person is required to give 'tick or
flick' decisions.
"We're trying
to fill the large void that currently exists within the small-to-medium
lending market," says Darrell Weekes, FinDirect's national sales
and marketing director. "We are determined to give these businesses
what they've been yearning for for years."
One little-mentioned
bonus is the automatic $35,000 car-lease (or $20,000 equipment-lease)
option that accompanies every successful application.
You may reach
FinDirect on ... Ph: 1300 363 773.
