Small-business neglect denied by the bankers
By S V Venkataraman
It is often said a good bank is the financial heart of the community. But the perception of many small and medium businesses is that bankers are highly selective about who they do business with.
Bankers say they are ready to extend credit if the project is right and "other things are equal." They add: "There is no limit to which we can carry our willingness to help a business venture. But there are norms that must be satisfied - after all, we are answerable to our depositors and shareholders."
"Nothing can be farther from truth," says an Asian businessman from Christchurch, who wished to remain anonymous. "Bankers no longer give the small entrepreneurs the consideration they deserve. In my own case, despite a clean record of transactions, my bank refused to consider my request of $100,000 to launch my information technology business.
"I began with borrowed funds from friends and now, seven years later, my turnover exceeds $20 million. I continue to deal with the same bank to prove I am loyal. My banker often asks me if I need additional finance. I say, no thank you."
The experience of Prakash Mane, chairman of Global Computers, whose enterprises account for total revenue of over $15 million, has been somewhat similar although he says competition among banks is becoming more intense.
"Unfortunately, this does not translate into action. Time is of the essence in today's business and, although banks are technologically advanced, the decision-making process is somewhat betrayed. Entrepreneurs today need quick action and decisions delayed could mean opportunities lost," he said.
He would like many of the charges to be reduced. Some regular transactions, including clearance of cheques, cost as much as $2000 every year, he says.
"New Zealand abounds in talent in a number of areas, especially the IT sector. Banks should take reasonable risks and extend a helping hand so that these talents are harnessed and developed. They should be an active catalyst," he said.
Michael Holt, managing director of PDF Communications, a growing design company, couldn't agree more.
"It seems banks are continuously chasing the big corporates, much to the neglect of the small-scale sector. I believe the success of an economy such as New Zealand rests with the small and medium enterprises. It is far more difficult to obtain a small loan of $5000 to tide over a temporary business need than to seek a larger amount for a longer time," he said.
His own bank, with whom he has dealt for 15 years, gave him a hard time for a small loan.
"It did not come about easily. It took more than two weeks and I signed 30 documents, providing various forms of reports and so on. A student can obtain a loan of $2000 without going through any of these procedures. It is unfair.
"I would like our banks to adapt home-based products that fit our needs; they should also realise there are only two types of businesses in New Zealand - the large and the small ones. The current state of affairs, given the inefficiencies and lack of discretion at the branch levels, is frustrating," he said.
Bankers contested the suggestion they render lip service to small and medium enterprises.
"The SME market has been the core strength of ASB Bank for a number of years now," says Peter Hall, general manager, corporate and institutional banking. "We have been growing our book at a compound growth rate of well over 20% per annum. We have been ranked in the top two for customer service to this sector by the University of Auckland periodic customer satisfaction survey. We see the expansion of our operations in the corporate sector as building on this core strength."
Julian Nalepa, general manager business at WestpacTrust in Wellington, said: "We are committed to meeting the needs of New Zealand business. I believe there are huge opportunities for small and medium businesses in terms of electronic banking and online banking.
"We have moved our business management to Auckland to be closer to where most business is taking place. We also have local relationship managers, local capability and local accountability, which means we can deliver services to meet the needs of New Zealand business."
Quoting a recent example, he said the bank had won a contract to provide banking services to members of the Retail Merchants Association.
"We won because we are a local bank with people on the ground who were able to bring together a comprehensive package designed especially for retailers, including credit card and eftpos facilities and transaction banking. We were able to develop the package in New Zealand - we didn't have to go across the Tasman for permission or support staff."
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