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Effect of bank fees increment on SME

Australia is experiencing low cash rate and mortgage rate, for household customers. People are taking mortgages at a rate of 5%. But the sector of people who are paying for this comfort is the business people: especially Small and medium sized enterprises.

Bank fees on SMEs

The bank fees for business are showing an amount of 7.3 billion dollars, accounting to 7% rise. A survey has shown that the 43% of SMEs are experiencing an elevated rate on their loans.

Effect of the bank fee on SMEs

99.7% of all the business in Australia is pointing towards SMEs. This elevated bank fee is making them pay more than the other borrowers. If they are paying more for a secured debt than the going rate, the only way they can cover up the rise in cost, is by increasing their rates, thus inducing inflation.

On the other hand, the best way for making the ends meet is by cutting other expenses like reducing the number of employees, cutting overtimes and thus, affecting the employment status. In this situation, the SMEs will be losing the threshold of business leading to oligopoly or monopoly power of corporate disrupting the consumer choice and price. When an SME employer is trying to reduce his expenses, he is reducing his power of buying, affecting his sellers too.

Source: http://www.smh.com.au/money/borrowing/debt-pain-for-business-hurts-us-all-20130629-2p42d.html