New Bank Loans Aimed At Small-business Sector
The Age
Monday February 15, 1999
The annual autumn home loans war has spilt over into the business-banking sector, with two lenders launching new business-banking packages.
Wizard Mortgage Corporation yesterday unveiled a new small-business loan at 5.99per cent interest.
The loan, which allows business borrowers to combine their home loan and business loan into one facility, does not feature a rate penalty for higher-risk borrowers.
The Bank of Melbourne is also setting its sights on the small-business market, promising to save businesses up to 35per cent on the cost of a loan compared with rival products.
The head of business banking, Mr Rob Giles, said the new loan rate of 6.65per cent was substantially lower than the 8 to 10per cent rates common in the market.
However, there are cheaper loans available. According to the independent interest-rate monitoring firm Cannex, standard business loans range from a low of 5.45per cent offered by the Bank of Queensland to more than 8per cent. Most lenders also charge a margin on top of the base price depending on the borrower's level of risk.
Mr Giles said business borrowers should look closely at their loans to ensure they were not paying too much. ``Some $12 billion worth of business loans (out of a total of $50billion) in the market are being charged at rates between 8 and 10per cent per annum," he said. ``Another $8billion are on rates of 10per cent or higher."
A spokesman for Wizard, Mr Mark Bouris, said there was no longer any excuse to charge more for business loans.
``Some lenders will tell you that lending to a small business is riskier than home lending (but) ... that is simply not true," he said. ``If a loan is secured against residential property, as almost all business loans are, there is no reason to be charged a higher rate."
© 1999 The Age