The Bank of New Zealand (BNZ) says it has significantly increased the number of small business loan applications it’s approving after relaxing its lending criteria.
Tony Marlow, BNZ’s head of retail banking for small business, told interest.co.nz the bank was now approving more than 65% of applicants having been turning down 65% just a few months ago. This came after BNZ eased its lending process for small business customers.
The bank defines small businesses as companies with annual turnover of up to NZ$1 million or five or less employees and says it has boosted its share of this market to 17% today from 15% last October based on lending growth and main bank market share.
Although reluctant to go into specific details, Marlow said the credit criteria easing came in the way BNZ staff examine the financial data customers and potential customers provide to the bank.
“We’ve eased how we use the customers' financials to evidence how they can meet their commitments to us,” he said.
“We were declining 65% of propositions that were being put in front of us, now it’s well up over 65% in the positive,” said Marlow.
“Over the last five months we’ve swung that since easing the criteria.”
Increase in small business managers
Lending criteria easing was implemented in May and has coincided with major expansion in the number of BNZ small business managers since October from 27 to 79, with plans to hire another four in Auckland.
The managers are now available to customers between 7am and 7pm on week days and from 8am to 2pm on weekends. Previously they were only available during traditional week day working hours.
Some of the BNZ’s changes had been implemented due to customers saying they found banks difficult to deal with and staff inaccessible. Marlow said some small business people had made the point that: “We come down from the ladder or out from under the car and we’re really wanting to talk to you and all we get is a phone message.”
BNZ has also started running networking sessions for small business owners one Tuesday per month and was branching into areas such as podcasts and launching an e-newsletter for small business customers.
Marlow acknowledged there was a lot of deleveraging going on and said times remained “extremely” challenging for small businesses. Reserve Bank figures show industry wide lending to businesses down 7.5% year-on-year in June to NZ$72.8 billion.
“I don’t see any one segment flying in the face of the recession that really could say ‘the recession appears to be over’,” said Marlow.
“Places like services and retail and hospitality I still see as severely challenged in the market. It’s very quiet for them from what I can see. They’re all quieter than they’ve been for a long time.”
On a brighter note some tradesmen were saying they’ve got a good level of forward work in place.
“But I can talk to another one who says they haven’t had that luxury yet,” Marlow added.
Small business owners had been “very cautious” through the recession. Some were now looking for ways to fund their business and/or be sustainable rather than necessarily just going back to borrowing more money.
“During a recession businesses flatten out. So as you come out of it, there’s a requirement for more equity or more debt or more cashflow as you reestablish or grow your business,” said Marlow. “What I am seeing more of is the challenges remain around cashflow.”
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2 Comments
“We’ve eased how we use the customers' financials to evidence how they can meet their commitments to us,” he said.
What does this mean? Have they eased their credit criteria or have they eased the requirement to see the customer's financial statements? If it is the second, how does the customer evidence debt servicing ability? Hmmm, sounds dangerous to me especially given the we are entering the most dangerous part of the credit cycle for lending. It seems counter intuitive but more companies go bankrupt coming out of a recession than going into it.
And so shines a tiny light in a weary world..........
Nice story Gavin but it's a real rarity at the mo..... you will find a hundred coverse stories for every one of these shiny tid-bits you dredged up.
Let's hope they use the profit to start a small enterprise...............maybe making For Lease Signs for empty real estate outlets.
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