Do SMEs put banking issues in the ‘too hard’ basket?

Think again. Scottish Pacific commissioned research seeking the views of more than 1,200 small business owners and directors across Australia, and found that only 4.8 per cent of SMEs actively keep an eye out for which credit facilities work best for their business.

That’s great news for banking incumbents if not even one in 20 owners are actively seeking the best funding options.

The Scottish Pacific SME Growth Index found that 50 per cent of SMEs don’t ever get around to reviewing their primary bank relationship, and only one in five review this regularly.

There are many reasons this could be the case, ranging from time-poor owners putting a bank review in the ‘too hard’ basket, through to apathy or contentment with the deal they are receiving from their financier.

When the health and growth of the nation’s small business sector is so crucial, this statistic is a shame since there is no doubt SMEs could find a better deal – or prompt their current provider into a better deal – by shopping around.

From the research, it is notable that 15 per cent of growth SMEs said they would fund their growth by using specialist non-bank providers and funders other than their main bank. This is up from 11 per cent a year ago, and while it is from a low starting base, it appears small business owners are becoming more receptive to funding options outside their main bank.

Ultimately, most small businesses remain heavily reliant on their own capital to fund growth, with the SME Growth Index finding that more than 89 per cent were reliant on their own capital as a result of difficulty accessing credit.

It’s important that small business owners are aware of the range of funding options available to them to support their growth. Brokers can play an important part in making sure their clients are on top of all options available.

While a growing number of small business owners are seeking alternate funding to grow their businesses, many owners remained unaware of specialist product solutions offered by non-bank providers if they don’t meet bank criteria or don’t want to put their house on the line for the business.

If the banks say no, or if SME owners don’t like the conditions placed on them, there are many other viable options, including debtor finance, currently used by more than 4,500 Australian SMEs with combined annual revenues of $65 billion.

Governments, the financial services industry and SME associations should be energetically communicating the wide range of funding options to SMEs to help open up funding opportunities for them.