SMEs negatively impacted by rate rise: DBM
Results from DBM Consultants’ Business Financial Services Monitor has found small and medium businesses would be highly sensitive to and adversely affected by an increase in interest rates.
The Business Financial Services Monitor surveyed 1,000 businesses in September 2009 to determine the how they would respond to a one percent rise in interest rates over the next 12 months.
The survey found 83 percent of SMEs believed their business would be negatively affected by a rate rise, 58 percent believed their costs would likely increase, 36 percent said their profits would decline and 19 percent said they would have to hold back on growth plans.
DBM Consultants Managing Director, Dhruba Gupta said: “With over 70 percent of SMEs carrying some form of debt, it is not surprising that SMEs expect that there will be a direct effect on their cost of doing business.”
He added monetary and bank lending policies must be carefully managed to avoid negative consequences.
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The reality us that SMEs rely on borrowed funds to survive. They might by loans, overdrafts or credit cards. Monthly small business operators have to cut it close by balancing their cashflow requirements. So any change in finance costs will ultimately be a negative for small business. That will in turn mean that costs of goods and sevices provided by small business to consumers will increase. The RBA does not care aboutr SMEs or consumers. Their economic policies are set in the stone ages.