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Interest rates fall | Business profits rise | Twelve Grains Capital



Interest rates for business loans have been trending down for the past year, according to the Reserve Bank of Australia. The most recent data, which is for October, shows that over the past year average interest rates have fallen:

  • 0.38 percentage points for small businesses

  • 0.27 percentage points for medium businesses

  • 0.19 percentage points for large businesses



Smaller businesses tend to get charged higher interest rates than bigger businesses, because they’re deemed to be higher-risk. At the same time, lenders often charge new customers lower interest rates than existing customers, because competition for new customers is intense. The latest data shows new borrowers are getting average discounts of:

  • 0.91 percentage points for small businesses

  • 0.21 percentage points for medium businesses

  • 0.20 percentage points for large businesses

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Businesses have enjoyed solid growth in their gross operating profits over the past 18 months, despite covid. The latest data from the Australian Bureau of Statistics (ABS) shows the average company's gross operating profit enjoyed year-on-year increases of:

  • Jun 2020 quarter = 12.9%

  • Sep 2020 quarter = 18.5%

  • Dec 2020 quarter = 15.2%

  • Mar 2021 quarter = 11.7%

  • Jun 2021 quarter = 5.4%

  • Sep 2021 quarter = 5.4%



Part of the reason gross profits have been so strong during the pandemic is because of stimulus packages provided by both federal and state governments. Another is that wages have been constrained – wages grew just 2.2% over the year to September, according to the ABS, which is extremely low by historical standards. Recent Roy Morgan research found that 49.7% of businesses expect to be in better financial shape this time next year, compared to 17.4% who expect to be worse off. Want to expand? Call me for a loan