Small business owners will be among the more nervous observers of today’s interest rate decision, with new research showing that more than a quarter of Australian SMEs use their mortgage to finance their business.
A survey of 1,043 sole traders and small companies by MYOB found that 28% use their home loan to keep their business afloat, by utilising the line of credit, increasing the amount of the loan, redrawing against the amount already repaid on the loan or by accessing cash funds sitting in the loan account.
Just one in ten small business owners said that they aren’t very interested in today’s interest rate decision, with 22% placing a critical importance upon the Reserve Bank’s announcement.
Analysts are split on whether the RBA will again lower the cash rate from its current level of 3.75%. Westpac chief economist Bill Evans has predicted a lowering to 3.5%, while a survey by mortgage provider Loan Market of its 20-strong network of brokers found that 55% expected no change.
MYOB’s study found an interesting variation in mortgage use based on geography, with 31% of Queensland small businesses using home loans for finance – the highest in the country.
By comparison, just 20% of Western Australian SMEs use their home loan to prop up their enterprises.
Tim Reed, chief executive of MYOB, says: “Unfortunately for property owners and business operators alike, the vast majority of lenders didn’t pass on last month’s cash rate cut in full. This was a double whammy for a large proportion of Australians.”
“For many business owners, even those without commercial finance, an interest rate move doesn’t just affect their ability to repay the family home loan.”
“For too many, home loan interest rate moves also affect their ability to keep their livelihood on an even keel.”
“Business conditions are still sluggish and one quarter of SMEs expect their revenue to drop between March this year and March 2013.”
“It would make a real emotional and financial difference to the public if the Reserve Bank dropped the cash rate again now and lenders followed suit with both home loan and business loan interest rates.”
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