ABA and CPA warn about debt facilities
(10 December 2009 – Australia) The Australian Bankers’ Association and CPA Australia have released a fact sheet ‘refinancing your debt’ urging small business to consider their current debt arrangements and to watch out for predatory lenders.
Data published in October from East & Partners suggests that more than half of all SME’s will be looking to borrow more in the next six months.
In light of facts such as these, the information sheet from the duo is designed to assist small businesses with the decisions they make when entering into debt agreements and provide a checklist of considerations which small business owners may need to examine when undertaking the cost/benefit of replacing debt facilities.
The pair also warns that there are predatory lenders in the market which offer to consolidate loans and eliminate company debt, but the loans can come at a very high cost and can put businesses in jeopardy.
David Bell, chief executive, ABA, said that for many small businesses the initial financing arrangements put in place at start-up are still in place many years later.
Mr Bell also said that an example of this is when a company starts off with a simple overdraft facility and may arrange for several modest increases in the facility over time, without consideration of the suitability of the debt arrangements to its current and future needs.
Small business owners and their advisers should review existing debt finance arrangements on a regular basis to ensure that the debt facilities suit the life cycle of the business, Mr Bell added.
Whether the business is experiencing the rapid growth after start-up, expanding, considering exporting or are a mature business, banks can help with products and services which meet a variety of businesses needs, Mr Bell highlighted.
CPA Australia CEO ,Alex Malley, said it was important that businesses are aware of the options at their disposal.
Businesses are already faced with a significant rise in operating costs in the current global economic climate, so it is important that they minimise the cost of their debt, Mr Malley added.
In light of facts such as these, the information sheet from the duo is designed to assist small businesses with the decisions they make when entering into debt agreements and provide a checklist of considerations which small business owners may need to examine when undertaking the cost/benefit of replacing debt facilities.
The pair also warns that there are predatory lenders in the market which offer to consolidate loans and eliminate company debt, but the loans can come at a very high cost and can put businesses in jeopardy.
David Bell, chief executive, ABA, said that for many small businesses the initial financing arrangements put in place at start-up are still in place many years later.
Mr Bell also said that an example of this is when a company starts off with a simple overdraft facility and may arrange for several modest increases in the facility over time, without consideration of the suitability of the debt arrangements to its current and future needs.
Small business owners and their advisers should review existing debt finance arrangements on a regular basis to ensure that the debt facilities suit the life cycle of the business, Mr Bell added.
Whether the business is experiencing the rapid growth after start-up, expanding, considering exporting or are a mature business, banks can help with products and services which meet a variety of businesses needs, Mr Bell highlighted.
CPA Australia CEO ,Alex Malley, said it was important that businesses are aware of the options at their disposal.
Businesses are already faced with a significant rise in operating costs in the current global economic climate, so it is important that they minimise the cost of their debt, Mr Malley added.
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