Today’s 0.25% interest rate rise will hurt SMEs in more ways than one. Not only will it pull dollars directly from SME owners’ pockets through higher loan repayments and overdraft rates, but business will also take a hit as customers trim their budgets to fit the new interest rate environment.
A new Suncorp survey of more than 700 Australian SMEs tells the story, with more than a quarter of those surveyed saying they expect today’s interest rate rise to drive their profits down.
But there are steps SME owners can take to minimise the impact of today’s rate rise on their business – and prepare for the likelihood of further rises to come in the near future.
Here are six tips for coping with a higher interest rate environment, from Lamberts Hall Chadwick partner Andrew Faulkner and Peter Larsen, Suncorp’s executive general manager of small business banking:
- Take the opportunity to shop around for the best possible deal for your debt – banks and financiers are always looking for good business to lend to.
- Make your cash flow position solid to limit your need to use overdraft facilities – and the high overdraft interest rates that come with them.
- Review your credit and supply arrangements – remember higher interest rates will affect your customers and suppliers as much as you.
- Don’t let cash lie around earning little or no interest. If you have a business loan, use a business offset account to minimise the amount of interest paid on the loan.
- To speed up cash flow, make sure your EFTPOS terminal provider settles every day of the week. Businesses can lose thousands every year by not receiving EFTPOS settlements over the weekend.
- Sweep the funds from cheque accounts into a linked high interest account. Use the linked high interest account to make electronic payments such as payroll.