ANZ to explore smaller business market

Bank has pledged $1 billion for start-up loans to attract new customers.

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ANZ (ASX: ANZ) has announced that it will explore Australia's smaller business market, having pledged $1 billion for start-up loans for the next year to attract new customers.

Whilst smaller businesses contribute roughly 20% of Australia's GDP, the perception has been that the big four banks have favoured larger businesses and have ignored the needs of the smaller companies. The ANZ, however, is currently approving more than 70% of lending applications from small businesses, and is wishing to increase that rate.

With a few hundred thousand small businesses entering the market every year, Nick Reade – ANZ's general manager of small business banking – conceded that "we need to be a part of that market". The company is offering fee waivers and other extras to further entice small businesses.

With confidence returning to the market since the global financial crisis, the ANZ announced that total borrowing applications were up 30% year-on-year, according to The Australian.

The National Australia Bank (ASX: NAB) has also recognised signs that confidence is returning to the market, and believes that banks should be focusing their attention on the local market as desires to borrow and invest are growing.

High levels of competition are forcing the banks to seek competitive advantages wherever they can. For instance, while ANZ and Westpac (ASX: WBC) have been responsible for sending a number of jobs offshore in an attempt to save costs, Commonwealth Bank (ASX: CBA) has elected to keep jobs local – wishing to maintain its excellent customer service.

Foolish takeaway

ANZ has recognised that small-business lending is a relatively unexplored and underappreciated market by the big 4 banks. Pledging $1 billion for the full year in this area could yield great results for the company, and therefore, its investors.

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