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Brokers take credit for plummeting business interest rates

14 Jan 2018 7:42 PM - Article written by MORTGAGE PROFESSIONAL ASSSOCIATION, January 2018
Small business rates are the lowest they’ve been in decades, thanks in part to brokers

Small business interest rates are at their lowest level since records commenced, RBA data reveals.

Interest repayments on current loans for small businesses are $9bn lower than at the same time in 2011, and the lowest since the RBA began keeping records in 1993.

“The average interest rate paid on all current loans held by small businesses has fallen in the past six years from 8.40% in 2011 to 5.30% now” explained Australian Bankers Association chief economist Tony Pearson. “Based on a loan of $100,000 that equates to an interest saving of around $3,000 per year.”

For larger businesses, the average interest rate has fallen from 7.10% to 3.40% over the past six years. With a total $747 billion in outstanding loans to large businesses, they are saving $27.6 billion on interest repayments.

The role of brokers

According to the RBA, brokers have played an important role in reducing interest rates and saving small businesses money.

In a submission to the Productivity Commission’s ongoing Inquiry into Competition in the Australian Financial System, the RBA noted that “increased use of brokers has lowered the search costs and increased price competition in some segments of the small business loans market.” 

In some areas of commercial lending, the influence of brokers is particularly evident. 67%  of new commercial equipment finance is sourced through brokers, according to the Commercial Asset Finance Brokers Association of Australia (CAFBA).

CAFBA called for a relaxation of anti-money laundering and anti-terrorism laws to make it easier and cheaper for small businesses to access finance.

Industries that need finance in 2018

Commercial brokers should look at sports and recreation facilities operations and dairy cattle farming, a new report by IBISWorld indicates.

IBISWorld has predicted the top five growth industries and five contracting industries for 2018. Sports and recreation facilities operation is set to grow by 9.3%, with an annual revenue of $1.5bn. The huge dairy cattle farming sector will grow by 8%, providing opportunities to rural brokerages such as multi-award-winning Robinson Sewell Partners.

Other growth industries include wind and other electricity generation, petroleum exploration and nature reserves. Contracting industries include motor vehicle manufacturing, intellectual property leasing, outdoor vegetable growing, sugar manufacturing and concreting services. 
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