Pick up any paper and the business section headlines flashes DEAL APPROVED. Mergers and acquisitions, debt leveraged buyouts, equity raisings are all taking place with the Australian marketplace. The economic wheels of commerce continue to roll forward.

In striking contrast, it may feel a little different operating within you own commercial or agri-business with a perception that your relationship with your bank is a little off centre. Your bank may be hesitant, resistant, non-conforming or reserved as to the funding capability for your business to jump on an investment that has been 10 years in the waiting.

Credit has tightened but it hasn’t closed. From the privileged position of riding shotgun to many commercial businesses, it is those that harness the financial will power to push through the credit headwinds to take on strategic expansion assets (at these opportune times) are the ones that set their foundation for the next phase of growth.

Their trading environment is the same as everyone else’s. What sets them apart is their willingness to invest their time and resources to ensure their bank presentation correlates exactly to the requirements that lenders need in today’s lending environment.  And decisions are being made in the business to strengthen this resolve.  It is this very invested process that creates the barrier to entry for those businesses who can participate in the expansion play, and for those that don’t (or can’t).

In retrospect, there are four provisional emotional pathways that a human’s behavioural physiology needs to navigate in order to let go of the past and the “old way” of banking and transition into the new world order of lending.

In summary, the first transitional phase is denial (recognising that the banking world has changed). The second is frustration (being angry that change has taken place and the need to lay blame). The third is lassitude (lack of will power and energy to change generally because of the fear of the unknown). The final position is action (accepting the new environment and taking the decisive steps to adapt to it).

People in business who can move from the first to the fourth state of mind in the quickest amount of time are the ones that increase their probability of success.  Whilst a business is trapped in stages 1 to 3, a material opportunity cost can be accruing or their probability of survival is being diminished.

Our credit tightening cycle has only just begun. There is now plenty of anecdotal evidence of its reality in the Australian market and it is not going to soften any time soon. Take stock of your own transitional path and heed to Stage 4 with optimal efficiency.

The price of capital is cheap. Australian 10-year bonds are trading at the same level as the 90-day interbank swap rate. The price is not the issue. It is the access to capital.

Robinson Sewell Partners operate in STAGE 4, so please reach out if you would just like to know where to start this journey.

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