Page 998 - Week 04 - Wednesday, 31 March 1993
Next page . . . . Previous page . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .
There are many genuine problems faced by small business people when dealing with banks. First, and probably most often complained about, are the fees and charges that are often levied with no explanation and, most importantly, absolutely no recourse. Regularly, when the renewal of a loan is due, there is a requirement for increased collateral by the bank, thus in effect moving the goalposts. This type of behaviour causes very real problems for small business people, who often do not have any major assets to draw upon. I think many of the complaints that have recently been made public by people having problems with various banks have been due to this. People have had absolutely no capacity to meet the banks' increased requirements for backup for loans. People, in the end, have had to sell their businesses to meet the banks' demands.
We have heard many stories of banks actually refusing to renew loans despite there being no previous problems with repayments. Once, these sorts of loans were automatically renewed. Those days have certainly gone. Fixed term loans, loans taken - often at the advice of the bank - for short-term cash flow problems, cannot be discharged early. I get lots of complaints along these lines. While I do not suggest that banks are not entitled to charge for services, they should equally not be able to seek payment for a non-existent impost. The banks should be allowed to charge only for the cost of terminating the facility. This extra impost can cost small business people money that they just do not have.
Banks often refuse to lend money based on a going concern, despite the best business plan and ability to prove capacity to pay. This forces owners to take out second mortgages on their homes to support business ventures. Surely, in instances where a loan is required and a small business person can show that that loan can be backed up by the cash flow of the business, second mortgages should not be required. Overdraft facilities are another impost on small businesses. A charge to establish an overdraft is of course acceptable, but then to be charged a regular fee, whether the overdraft facility is used or not, seems a little bit unrealistic, particularly when the interest rates on overdrafts that are used are particularly high.
Business cheque accounts regularly do not attract any interest. Why? I believe that all positive balance accounts should attract interest, given the fact that business cheque accounts attract considerable cheque fees. Merchant fees, that is, fees charged to a business for credit card facilities, can also be a large impost. Small businesses bear the brunt of a fee that can be as high as 4 per cent. In effect, this means that banks are receiving a double fee. The merchant pays a fee, and the card holder pays interest for using the card, if they do not pay their bill on time. This seems to be double dipping by the bank for a system that the bank itself introduced. Of course, if the card holder pays their account on time it means that the merchant picks up the total cost.
One thing that I must admit really irks me in my business is being charged $9 every time somebody presents a bad cheque.
Mr Wood: Never in Red Hill. I cannot believe that.
MRS CARNELL: There are some, unfortunately. Should not the cost be borne by the presenter of the cheque, not the small business person who has already lost on the deal? The banks never let anything go past without an extra charge. It would appear that the banks provide little to small business customers.
Next page . . . . Previous page . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .