SMEs look to non-banks to fund new growth
(25 September 2019 – Australia) For the first time, Australian SMEs are more likely to use a non-bank ahead of their main bank to fund their 2019 growth plans, according to a recently released Index.
The September 2019 SME Growth Index, to be launched this week, is conducted by banking analysts East & Partners, on behalf of national working capital funder Scottish Pacific. Twice a year owners, CEOs and key decision makers of small to medium businesses across Australia, with annual revenues of $A1-20m, are interviewed for the research.
Scottish Pacific CEO Peter Langham said during the five years of Index reporting, business owners planning to fund their growth via their main bank has halved – from 38% in 2014 to 18.3% now.
The September SME Growth Index found intention to fund new growth using non-banks is now at its highest, with 18.7% of SMEs saying they’ll support their 2019 revenue growth plans by using non-bank funding.
Only 2.6% of SMEs would not consider using a non-bank lender, almost halving from 4% last year.
The Index results follow recently released Australian Banking Association statistics that show small business loan applications to banks have declined by one-third since 2014.
“While it’s pleasing that business owners are increasingly aware of options outside a property-secured bank loan, the SME sector still has a long way to go in taking advantage of the alternatives available to them,” Mr Langham said.
“This is highlighted by the fact that when it comes to funding growth, overwhelmingly SMEs opt to put their hands in their own pockets - 83% of business owners say this is how they plan to fund revenue growth.
“Some business owners remain unaware of funding alternatives. There’s a much larger group of SME owners who are aware of non-bank funding but don’t fully understand how it works. They are too busy to research it, so put this in the “too hard” basket. When they can’t secure bank funding, they just tip their own money in to fund growth.
“There are smarter ways to fund long-term business growth. We’re working with the relevant government bodies, SME advisors and SMEs themselves to try to increase Australian business owners’ understanding of a range of different ways to fund their enterprises,” Mr Langham said.
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