(10 December 2024 – Australia) The share of SMEs planning to partner with a non-bank lender for new investment in the next six months has increased to a record high according to the latest edition of ScotPac’s bi-annual SME Growth Index Report.
Australia’s longest-running SME sentiment check on revenue growth prospects finds the proportion of SMEs planning to source non-bank lending for new business investment in the next six months has increased 54 percent, marking a further increase from 47 percent in October 2023.
In contrast, just 35 percent of SMEs said they intend to source new investment funding from their main relationship bank or a peer, down from 47 percent in the corresponding period last year.
SMEs in a business growth phase – which account for 40 percent of the national market – led the exodus from the banks. More than four in every five businesses in this category are looking elsewhere to secure a lending solution, with over half intending to source non-bank lending to support new investments.
“The headline figures spell out just how much business finance has evolved over the past decade. The days of cumbersome, one-size-fits-all SME financing are gone, replaced by a growing demand for more flexible options that are faster and more accessible” commented ScotPac CEO Jon Sutton.
“SME owners and operators are increasingly becoming aware of the benefits of non-bank lending, which often include alternatives to borrowing against the family home. That has motivated them to talk to their brokers and look beyond traditional funding arrangements.”
“Despite record increases in SME non-bank lending, key signs point to further rises in coming years. First, demand from SMEs for fresh working capital is on the rise as SMEs operate in an environment of rising costs and uncertain demand. Second, there remains a large, untapped market of SMEs who are self-funding business investment. And third, awareness of the speed and ease of non-bank lending products continues to grow through a combination of networking, technology and broker activity.”
Across the Years – SME Business Investment Plans 2014-2024
- The share of SMEs planning to invest in their business in the next six months reached a decade-high of 65 percent in September 2019 (pre-COVID), followed by a 10-year low of 52 percent a year later in September 2020 (mid-COVID).
- The current level of 60 percent of SMEs planning to invest in the next six months matches that recorded in the very first SME Growth Index Report in 2014.
- The proportion of SMEs planning to use non-bank lending for new business investment has grown remarkably from 15 percent in September 2018 to 54 percent today.
About the SME Growth Index
- Commencing in March 2014, ScotPac’s twice-yearly SME Growth Index is Australia’s longest-running research report on SME sentiment towards revenue growth prospects.
- The Round 21 research was conducted by East & Partners who directly interviewed a natural representative sample of 726 SME enterprises by state and sector with annual revenues of A$1-20 million.
- SMEs surveyed have operated continuously for an average of 15.4 years and manage, on average, 55 full-time employees.