SMEs turn to non-bank funding in COVID-19 stimulus absence

In the latest round of ScotPac’s biannual SME Growth Index, it was revealed that more than double the amount of Australian small- to medium-sized enterprises (SMEs) sought out non-bank funding facilities in 2022. The figure stood at 12 per cent a year prior, with a further 20 per cent of SMEs intending to divest or merge operations this year.

This round of research was conducted by East & Partners, interviewing 718 SMEs with annual revenues of $1 million to $20 million in August 2022.

External administrations rose by 26 per cent from October to November 2022, which presented a rise of 24 per cent year-on-year, according to CreditorWatch.

According to ScotPac, almost 30 per cent of SMEs surveyed said they accessed the government’s JobKeeper stimulus or another form of COVID-19-related government schemes.

The research further revealed since the end of stimulus payments, the top replacement funding methods reported by SMEs were raising equity at 45 per cent, increased borrowings (39 per cent), and reassessing funding methods (33 per cent).

ScotPac group executive, client acquisition and asset finance, Craig Michie, said this year is shaping up to be a year for SMEs to consult with their advisers and re-evaluate their options and financial positions.

“For many SMEs, the support they received from Government during the pandemic period was their first experience of external finance,” Mr Michie said.

“It opened the eyes of business owners to the power of working capital, and that has prompted a lot of SME owners and operators to investigate the potential to leverage finance options as part of their strategic planning for 2023.

“We encourage all SMEs to speak with their brokers and other advisors this year about appropriate finance solutions for their situations, whether that is funding an asset or acquisition, taking on new employees, or repaying the tax office.”

Growth Index reveals top SME lending ‘themes’

ScotPac’s Growth Index further revealed the most common lending themes for SMEs when it came to sourcing new business finance or refinancing existing loan facilities in 2023.

Topping the list for SMEs was the onboarding process, with 95 per cent of businesses saying they wanted “the least amount of paper and administrative hurdles”. This was a jump up from 90 per cent at the onset of COVID-19 in early 2020.

The next most crucial factor was rapid credit approval, with 72 per cent of SMEs reporting that as key to their decision-making, up 67 per cent from March 2020.

Thirty-six per cent of SMEs reported consistently high levels of customer service were highly valued, which was up from 31 per cent in March 2020.

[RELATED: Rapid credit approval ‘critical’ for SME lending: ScotPac]

Written by Adrian Suljanovic

Last Updated: 23 January 2023

Published: 24 January 2023