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SMEs Display Increasing Non-Bank Lending Preference

SMEs Display Increasing Non-Bank Lending Preference

(7 September 2022 – Australia) Non-bank lending preferences for small to medium sized enterprises (SMEs) have doubled in the past four years, outstripping banks according to the latest round of the ScotPac SME Growth Index.

The results are based on direct interviews with 717 small businesses across Australia with A$1-20 million turnover conducted by East & Partners. The long running analysis found that the proportion of SMEs in Australia planning to borrow from non-bank lenders has doubled in the past four years to 31 percent.

That figure now exceeds SMEs’ preference for bank borrowing, which declined by four percent year-on-year to 28 percent. In particular, respondents reported non-bank lenders were generally twice as fast at approving loans than banks, with average bank loan approvals stretching to 35 days, and in some instances stretching beyond 55 days.

The research found that frustration with bank onboarding processes and approval times were a key driver for the decline in banks’ preferences. 55 percent of respondents plan to invest in their business in the next six months. In addition, 41 percent said they will seek new funding options in 2022, on average applying for A$753,000 in funding.

“Excessive documentation and drawn-out approval times are pain points that add to the time and stress of running a business. SMEs want hassle-free financing, personalised service and fast and responsive turnarounds to match their cash flow needs” commented ScotPac CEO Jon Sutton.

“Despite the rising interest rate environment and cost of living pressures, it is pleasing to see more than half of the SMEs interviewed are confident to invest in their businesses in the next six months” Sutton added.

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