NAB business banking chief: Business credit flowing, but be realistic about your plans

Businesses have never been in a better position to get credit from the banks, but they need to be realistic about the current economic situation facing SMEs, NAB’s business banking head has told SmartCompany.

The comments come just a few days after NAB head Cameron Clyne said on ABC-TV program Inside Business that business credit has hit a 30-year low.

But Joseph Healy says while credit is at a low point, it’s not because the banks aren’t lending. Rather, he says, it’s because businesses don’t want to make long-term investment decisions during a period of economic instability.

“They’re unsure about what the future holds with weak business sentiment and confidence. There are a number of factors at play that causes them to be cautious,” he says.

Among them include the higher dollar, a cautious consumer, and a downturn in several industries undergoing structural reform.

“Until we see that confidence coming back, it’s difficult to see any material shift in the current business credit outlook.”

But there is some hope. Overall, Healy says, investment levels are quite high, even if they’re skewed towards the resources sector.

However, he says the competition for small business funding is at its highest levels in some time.

“The competition for small business is really intense right now, and they’re competing to get a lot of business. From an SME perspective, it’s never been as good a time as it is now.”

Businesses may feel differently. SmartCompany readers regularly lament lack of access to banking credit, and blame the funding institutions for not freeing up the coffers.

But Healy says in order to access funding, SMEs just need to have realistic expectations and incorporate those into their business plans.

“I think we need to be clear on business plans,” Healy says. “The business plan has to be sensible, and it has to be grounded in the world we’re operating in right now.”

“This is not a criticism in any way, shape or form, but entrepreneurs tend to be optimistic people. And that may come through the business plan in some ways.”

Healy says it’s easy for optimism to get the better of you in a business plan. But banks want to see an analysis of every part of the business, and that means undergoing a strict review of the proposal to make sure it lines up with expectations.

“There are some serious issues that businesses need to demonstrate they’ve thought through, and now, more than ever, realise the importance of thinking carefully through financial planning and so on.”

“You need to make sure you have the right kind of capital structure in place. I’m conscious that until 2009 or 2010, many businesses didn’t actually focus on that.”