RBA Rate Decision: What Australian Businesses Should Check
The RBA has moved rates again.
For Australian business owners, the immediate reaction might be obvious: borrowing is getting more expensive.
But the interest rate itself is only part of the story.
A change in rates can affect cash flow, serviceability and borrowing capacity. It can change how a lender assesses a deal. And in some cases, finance that stacked up six months ago may need to be structured differently today.
But that doesn’t automatically mean businesses should stop borrowing, investing or pursuing growth.
The more useful question is:
Does your finance still support where you’re trying to take your business?
That’s the conversation businesses should be having now.
Don’t make a finance decision based on the headline
One of the biggest mistakes a business owner can make when rates rise is reacting emotionally.
“Rates are up, so we’re not borrowing.”
That’s the wrong starting point.
Instead, look at what the capital is intended to achieve.
Are you buying equipment?
Funding an acquisition?
Purchasing commercial property?
Increasing capacity?
Investing in growth?
If the opportunity is expected to generate a strong commercial return, a higher borrowing cost doesn’t automatically turn a good investment into a bad one.
The decision needs to come back to the fundamentals:
What will the capital achieve?
What return could it generate?
What will the debt do to cash flow?
Can the business comfortably service it?
Does the opportunity still make commercial sense?
Businesses shouldn’t borrow simply because money is cheap.
And they shouldn’t automatically stop borrowing because it has become more expensive.
Your borrowing capacity may have changed
Higher rates don’t just affect repayments.
They can also affect serviceability - the assessment lenders use to determine whether a borrower can comfortably meet their debt obligations.
As borrowing costs increase, serviceability calculations can become tighter.
That can potentially change:
How much a business can borrow
The structure of a proposed facility
Repayment requirements
The level of security required
Which lenders may be appropriate for the deal
A transaction that worked under one set of conditions may therefore need to be approached differently when conditions change.
That’s where understanding the broader lending market becomes important.
The lowest interest rate isn’t necessarily the best finance
When borrowing costs rise, it’s understandable that businesses become even more focused on securing the lowest possible rate.
Rate matters.
But it is only one part of a commercial finance facility.
Businesses should also consider:
Loan term
Repayment profile
Security requirements
Covenant obligations
Flexibility
Fees
Working capital impact
Capacity to access additional funding
Whether the facility can support future growth
A facility can look attractive because of its headline rate but ultimately restrict the business through its structure or conditions.
The better question isn’t simply:
“Who has the cheapest rate?”
It’s:
“Which finance structure best supports what we’re trying to achieve?”
The cheapest finance isn’t always the best finance.
Now is a good time to review existing business debt
A changing rate environment can also be a useful trigger to look at the finance already sitting inside the business.
Start with the basics.
What interest rate are you currently paying?
What are your repayment obligations?
When do your facilities mature?
What security has been provided?
How much borrowing capacity or equity remains available?
And importantly:
Is your current lender still the right lender for your business today?
Businesses change.
Their revenue changes. Their assets change. Their strategy changes. Their funding requirements change.
The finance structure that suited a business several years ago may not necessarily be the structure it needs today.
That doesn’t mean refinancing is always the answer.
It means existing debt should be reviewed rather than automatically accepted.
There isn’t one commercial lending market
This is something that can get lost in conversations about interest rates.
There isn’t one lender appetite or one universal approach to commercial finance.
Different lenders can have different:
Credit policies
Risk appetites
Industry preferences
Security requirements
Pricing
Serviceability criteria
Preferred deal structures
One lender may have limited appetite for a particular transaction while another may actively want that type of business.
So, while a changing rate environment can make some transactions more challenging, it doesn’t necessarily mean finance isn’t available.
It can make how the deal is structured, positioned and taken to market even more important.
Look six to twelve months ahead
Business owners should also be thinking beyond today’s interest rate.
What is the business likely to need over the next six to twelve months?
Will you require:
Equipment finance?
Working capital?
Acquisition funding?
Commercial property finance?
Refinancing?
Additional capital to support growth?
The worst time to start considering finance options is when the money has become urgent.
Starting earlier gives a business time to understand its borrowing position, prepare information, consider different lenders and structures, and address potential issues before they become obstacles.
Put simply:
The earlier you understand your funding options, the more options you generally have.
What are the headlines missing?
Rate movements matter.
Higher borrowing costs can put pressure on cash flow and profitability.
But focusing exclusively on the rate can obscure the bigger picture.
What ultimately matters is how the lending environment interacts with your business, your debt, your cash flow and your strategy.
Well-run businesses will continue to encounter opportunities in higher-rate environments.
The question is whether those opportunities make commercial sense - and whether the finance supporting them has been structured appropriately.
Businesses that perform well aren’t necessarily those waiting for perfect economic conditions.
They’re businesses making informed decisions in the conditions they actually have.
Review Your Commercial Finance Position
If the latest rate movement has prompted questions about your existing business loans, refinancing options, borrowing capacity or future funding requirements, it may be worth reviewing your current position.
George Capital Finance Solutions works with Australian businesses to assess funding requirements, explore lender options and structure commercial finance around their broader business objectives.
Speak with the GCFS team to review your commercial finance options. (02) 9072 9288.
This information is general in nature and does not take into account your individual objectives, financial situation or needs. Consider seeking professional advice appropriate to your circumstances.