What Every Business Owner Needs To Know About Banks

Every business owner needs money to keep their business running slickly but few know the truth about the banking system itself…

 If you listen to talking heads from leading banks, you’ll sense their fear of fintechs. The new kids on the block are disrupting the way that small businesses access finance – and it’s shaking up the power old institutions used to own.

The Truth About Banks

Truth is, the banks are restricted in how much they can help you. There are heaps of rules and regulations around the way they lend which fintech’s are managing to find new solutions to. Fintech’s are nimbler than old school banks.

It’s important for SMEs (Small and Medium sized Enterprises) to understand that the narrative around “unreliable lenders” is often self-serving.

SME’s and business owners need to understand that often banks are operating in a way to directly benefit themselves. Aggressive regulations ensure the big banks aren’t vulnerable themselves – but it certainly isn’t in the customer’s best-interest.

Basel III Standards

Take Basel III for example. Basel III (also known as Third Basel Accord or Basel Standards) is a set of regulations designed to reduce damage to the economy. Essentially, this is a set of rules to ensure banks don’t take on excess risk.

Banks must hold more capital against their assets. This decreases their balance sheets and their ability to leverage themselves.

Basel III regulations saw the minimum amount of equity that banks hold rise from 2% to 4%.

There is also an additional buffer of 2.5% required.

Therefore, the total equity requirement for banks sits at 7%.

Often banks like to secure an even higher percentage; basically, as a self-serving safeguard.

Academics have criticised Basel III for allowing large banks to retain control. Many think tanks, including the World Pensions Council, argue that Basel III has used public policy to instill anti-competitive practises. In the US the Federal Deposit Insurance Corporation criticised Basel III for effectively pushing small banks out of small business loan market.

And this is precisely why we launched ebroker.

Do you need a financial solution to get your small business moving? Call ebroker today on 1300 44 14 14

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