According to a KPMG report published in February, New Zealand should expect further instability within the banking sector. This comes after a turbulent twelve months, which has seen many of the country’s banks take a hit to their profits.
The main factors driving uncertainty are proposed regulatory changes as well as changes to the Reserve Bank’s capital requirements. An 18% minimum for the Big Four Australian owned banks and 16% for smaller banks (the current minimum requirement is 10.5%).
Also, there is a proposed overhaul of the role of the Reserve Bank, more supervision of banks and finance companies, plus the introduction of a deposit protection scheme in the works. These changes will affect the entire NZ banking system and it is looking likely that customers may need to plan for an increase in mortgage rates as well as a squeeze on lending in the coming months.
As far as businesses are concerned, we may see banks turn away perceived high-risk customers, becoming much more conservative about to whom they lend, how much they lend and under what restrictions. This combined with a possible increase in mortgage rates could lead to a squeeze on credit and a knock-on effect impacting SME lending.
How your business can weather uncertainty
One of the biggest issues facing SMEs is maintaining healthy cashflow. Having certainty around the money coming into your business means your obligations to employees, suppliers and customers are met on time. In addition, your business may be in a better position to change and grow – taking advantage of new opportunities.
When there is a squeeze on lending, particularly from traditional banking avenues, the pinch is usually felt in the SME community. SMEs are more likely to have business and personal finances linked in some way, perhaps though assets such as the family home or high interest personal loans to help fund the business. SMEs in this situation are less well equipped to weather periods of uncertainty than their larger counterparts as they have so much at stake.
While we have seen spectacular growth of alternative finance options overseas, there has been a mentality amongst Kiwis to tread cautiously and keep within the traditional financing frameworks offered by big banks. This is beginning to change, partly because of a weariness of big banks after a series of high-profile scandals surrounding profits before customers, but also customers are becoming savvier about what they need.
Alternative solutions such as Apricity Finance offers businesses a way of leveraging their invoices to access their own money sooner. Our view is that getting working capital into the business earlier is the key to long term success. A reliable invoice finance facility can have a stabilising effect on the cash flow of your business. Rather than being under the cloud of servicing a debt, you may find you are in better control of your financial situation.
Is Apricity Invoice Finance right for my business?
An Apricity Invoice Finance facility is ideal for businesses providing goods or services to high credit customers. These may include; government, major telcos, supermarkets and infrastructure businesses, hotel chains, importers/exporters and distribution companies.
Our facility can be used as little or as much as your business needs, meaning you can scale up or back to meet your obligations. There are no lock in contracts or fees and we do not ask for personal assets as collateral. Our relationship with you is what sets us apart in this industry – we are here to help you grow.
Find out if an Apricity Invoice Finance is right for your business.