Homepage FCR (Financial & Corporate Relations Pty Limited) newsroom

RBA rate cut welcomed by business lender

Announcement posted by FCR (Financial & Corporate Relations Pty Limited) 04 Dec 2012

Bibby pre-Christmas release

BibbyLogo

MEDIA RELEASE  

RBA rate cut welcomed by business lender

Sydney, December 4, 2012 - The Reserve Bank of Australia (RBA)’s official cut in interest rates will help to underpin greater levels of business investment at a time when the economy needs more activity outside the mining sector, according to Bibby Financial Services Australia.

The RBA today dropped official interest rates to 3.00 per cent from 3.25 per cent. That decision came after official data revealed on Friday a drop in business credit of 0.3 per cent, reversing a rise of 0.3 per cent in September, leaving business credit broadly unchanged since June. This compares to a modest recovery in borrowing by households.

Gary Green, Director of Bibby Financial Services Australia, said borrowing activity by businesses, particularly small and medium-sized businesses (SMEs), has been held back by uncertain economic conditions and a lack of confidence about the future.

“A further cut in official interest rates will help boost business confidence and prompt greater levels of investment in all sectors of the economy, which the Australian economy needs,” Mr Green said. 

“The RBA’s credit data suggests that the business sector is struggling and that borrowing costs remain too high. Our own research shows that SMEs fear their customers or suppliers could become insolvent in this uncertain economic environment, as revealed by our own Bibby Barometer Small Business Survey.

“With some SMEs struggling to meet make ends meet in this sluggish economic environment, our recommendation to all SMEs is to increase their focus on cash flow and working capital, particularly with the Christmas holidays almost upon us.”

While business credit for large businesses has recovered modestly since the GFC, business credit growth for small business has been stagnant. The outstanding value of bank loans that are larger than $2 million increased by 10.5 per cent from June 2011 to July 2012 after declining over the previous 2.5 years[1]. However, the outstanding value of loans valued at less than $2 million has remained largely unchanged since 2009.
 

Mr Green said to smooth out cash flows, SMEs have been taking advantage of debtor financing in recent times. 

Over the year to September 2012, there was a 13.9 per cent rise in the level of debtor finance or factoring, while the number of businesses seeking such finance had grown by 3.8 per cent, according to data from the Institute of Factors and Discounters (IFD). In NSW alone, debtor financing jumped by 48.2 per cent from a year earlier.
 
“This indicates debtor financing is providing new levels of support to Australian businesses,” Mr Green said.

He also noted the increased average size of debtor finance facilities evident from the IFD statistics, suggesting that debtor finance is gaining acceptance amongst increasingly larger SMEs.
 

Debtor finance allows a business to quickly convert its unpaid invoices into cash, and is in effect a line of credit extended against the business' receivables, which is often one of the largest current assets on the balance sheet.

ENDS

Media contacts

Rebecca Murray, FCR: t (+612) 8264 1002/ +61 423 338 005

Andrew Briggs, Bibby Financial Services (Aust): t (+612) 9310 8921/ + 61 403 096 807

Bibby Financial Services is one of the world’s leading global debtor finance specialists (also known as invoice finance, factoring, cash flow finance and invoice discounting) - a flexible and accessible cash flow funding tool for small and medium sized businesses.  With over 6000 clients in 15 countries worldwide, Bibby Financial Services is part of the Bibby Line Group, a family-owned business-to-business services group with origins in shipping dating back over 200 years to 1807.
 
Debtor finance is designed to improve business cash flow and support business growth by releasing cash tied up in unpaid invoices. Unlike other funding arrangements, no real estate security is required, making it more accessible for small and medium sized business owners.

Bibby Financial Services Australia has grown dramatically, in recent years at an average 20% pa, due to increasing awareness of debtor finance as a smart choice for improving the cash flow, and a commitment to providing flexible, tailored solutions quickly. It now serves clients nationally, via a network of offices in Sydney, Melbourne, Brisbane, Perth and Adelaide.

For more information on Bibby Financial Services please visit www.bibby.com.au or follow them on


[1] RBA September 2012 Financial Stability Review.