More small businesses looking beyond banks for finance
(22 September 2015 – Australia) Australian small businesses are less confident about their growth prospects, and demonstrate a greater willingness to look beyond their main bank to fund growth, according to debtor finance provider Scottish Pacific.
The Scottish Pacific SME Growth Index, which was conducted by East & Partners, surveyed 1,257 business owners, CEOs and CFO of SMEs with an annual turnover of $1-20 million.
The report indicates a 35 percent jump in the number of SMEs planning to search beyond their existing banking relationships and use specialist non-bank providers or other banks to support their business growth in the next six months.
Scottish Pacific Chief Executive, Peter Langham said more small business owners forecast short-term revenue decline - 16.8 percent of owners, up from 13.2 percent in August 2014. Their predicted average revenue decline rose to 4.6 percent from 3.9 percent last year.
"Fewer SMEs predicted positive growth and the average short term growth rate forecast dropped from 8.6 percent to 6.5 percent," Langham said.
"Despite the Budget 2015 small business initiatives, taxes remain the biggest barrier to SME growth (68.6 percent), along with credit conditions (66 percent) and access to credit (56.2 percent). Cash flow is emerging as a significant hurdle with half of all growth SMEs (50.7 percent) saying it is a key challenge."
Significantly, the report highlighted that only 4.8 percent of SMEs actively keep an eye out for credit facilities that fit best with their business. A further 50 percent of SMEs don't get around to reviewing their primary bank relationship and only 20 percent review this regularly.
Langham said that over 15 percent of growth SMEs said they would fund growth by using specialist non-bank providers and funders other than their main bank, up from 11.2 percent in 2014.
"It's important that small business owners are aware of the range of funding options available to them to support their growth. If the banks say no, or if they don't like the conditions placed on them, there are many other viable options including debtor finance and P2P lending," he said.
"We've noted the increase in growth SMEs willing to borrow from another bank or specialist non-bank lender. This increase is even greater amongst SMEs who see themselves as declining or with unchanged growth - the number of these businesses looking beyond their main bank for funds has almost tripled in the last year from 6.9 percent to 18.2 percent.”
Langham added that although a growing number of small businesses owners were seeking out alternate funding, many remained unaware of other options available if they do not meet bank criteria or do not want to put their house on the line for the business.
"Governments, the financial services industry and SME associations should be energetically communicating funding options to SMEs, who often didn't have the time to seek alternatives, or were unaware of them." Langham said.
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