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Cash is King – Interest Rate Risk Management for local businesses

This old adage is certainly true in times of uncertainty, and more so in the aftermath of natural disasters as we have seen in Qld, but the Wide Bay specifically over recent months. 

Mastering the volatility of interest rate risk – Creating certainty in every environment

Uncertainty can affect your business, disrupting your cash flow, undermining profitability and even delaying future plans for growth.

Changes in interest rates are a major source of volatility – the interest rate market is moving constantly, which can make it hard to control your costs (see chart below). While you can’t control interest rate movements, which are influenced by market rate movements and changes in cost of funds as well as margins, you can protect your business from interest rate risk.

We understand how important it is to create a strong, certain foundation for your business. We also understand how interest rates work and how they will affect your business. Our team of Interest Rate

Specialists will work closely with you to create the unique solution to interest rate risk that your business needs.

 A study in volatility: three-year fixed Business Markets Loan Rate – 2000-2012*

 

Creating an interest rate strategy

The first step in managing your interest rate risk is creating a plan. Here’s what you need to think about:

Find the right approach: the NAB Business Markets Loan®

The Business Markets Loan (BML) provides the flexibility you need to help you take control of your interest rate risk. As the environment changes, so can your loan.

 One loan, great flexibility

The BML is a simple way to manage interest rate risk while tailoring cash flow to match your specific needs. Features include:

 One call, immediate restructure

Once your credit has been approved and the contract signed you can, at any time, change the floating rate to any other component with a single phone call. All without the hassle of re-signing loan documents or having your credit re-approved.

 The BML also allows you to adjust your loan as your business needs change (with 24 hours notice). For example, you can make additional payments if you have extra cash flow.1

 One bank, many interest rate specialists

We understand that life is unpredictable – markets move and your circumstances can change. We won’t make you live with the wrong loan. Your Interest Rate Specialist and Business Banking Manager will continuously review your interest rate strategy to make sure it is right for your business.

 For floating loan – your specialist will consider all the solutions available.

 For existing fixed loan – your specialist will consider innovative solutions to best suit your needs i.e. other strategies can be put in place before the fixed component expires.

 The following examples are just two of the many solutions available:

This enables a business to secure an interest rate ‘today’ to commence at a known date in the future.

Example 2: Restructuring your existing fixed rate prior to the expiry

There are times when the yield curve may provide the opportunity to follow the market lower by extending the fixed term. Situations such as these can have an immediate cash flow benefit.

 If your business loan is currently fixed with another bank, NAB may be able to assist you to move by blending in any economic cost into the fixed rate of the new NAB loan.

 Things to consider

As interest rates may move, there are risks associated with fixing interest rates and using interest rate management products. Any request to break a fixed rate or a cap, collar or floor before the end of the agreed term may result in costs and charges being imposed which are dependent on the prevailing interest rates and the time remaining to maturity.

1 Economic cost may apply when changing components other than floating

Your NAB team in Bundaberg – contact details

 

Shaun Rose                                        Jason Chester
Senior Business Banking Manager    Business Banking Manager
T
: 07 4150 7310                                   T: 07 4150 7315
M: 0414 266 419                                  M: 0488 762 069
E:shaun.b.rose@nab.com.au              E:jason.r.chester@nab.com.au

Wayne Turrell                                   Darin Cook
Business Banking Manager              NAB Business Markets
T: 07 4150 7305                                 T: 07 3234 5599
M: 0428 025 682                                M: 0429 002 016
E:wayne.r.turrell@nab.com.au          E :darin.cook@nabcapital.com

 

Important information:

National Australia Bank Limited (ABN 12 004 044 937), its related bodies and any officer, employee, agent, adviser or contractor thereof (“NAB”) do not warrant or represent that the information, recommendations, opinions or conclusions contained in this document (“Information”) is accurate, reliable, complete or current. The Information has been prepared for dissemination to professional investors for information purposes only and any statements as to past performance do not represent future performance. The Information does not purport to contain all matters relevant to any particular investment or financial instrument and all statements as to future matters are not guaranteed to be accurate. In all cases, anyone proposing to rely on or use the Information should independently verify and check the accuracy, completeness, reliability and suitability of the Information and should obtain independent and specific advice from appropriate professionals or experts. The Information is not intended as an offer or solicitation for the purchase or sale of any financial instrument. To the extent permissible by law, NAB shall not be liable for any errors, omissions, defects or misrepresentations in the Information or for any loss or damage suffered by persons who use or rely on such Information (including by reasons of negligence, negligent misstatement or otherwise). If any law prohibits the exclusion of such liability, NAB limits its liability to the re-supply of the Information, provided that such limitation is permitted by law and is fair and reasonable. NAB, its affiliates and employees may hold a position or act as a price maker in the financial instruments of any issuer discussed within this document or act as an underwriter, placement agent, adviser or lender to such issuer.

 

Please be aware that any telephone calls to NAB may be recorded. If you would like more details regarding the privacy of your information at NAB, please visit the NAB website.

 

© 2012 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686

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