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SMEs look to non-banks for funding

by James Mitchell10 minute read
SMEs look to non-banks for funding

A new report has found that small businesses are looking to move beyond traditional banks to fund business expansion.

The latest Scottish Pacific SME Growth Index, released this week, found that three-quarters of SMEs who identify as being in a growth phase say better cash flow would have produced revenue growth of 10 to 50 per cent in 2016.

The Index shows a record percentage of businesses plan to use non-bank financing (22 per cent, doubling from 11 per cent in September 2014). This contrasts with declining bank borrowing intention (29 per cent, significantly down from 38 per cent over the same period).

As well as the growing intention to fund business by using non-banks, just under 95 per cent of SMEs indicated they planned to use their own funds to support their business, and once again respondents cited access to and conditions of credit in their top three barriers to business growth.


“It seems the day is approaching when non-banks will match or pass the banks as the first port of call for small-to-medium business funding,” Scottish Pacific CEO Peter Langham said.

“With interest rates at record lows, SME access to credit should not be a problem. And yet SME owners and leaders indicate that their full credit appetite is not being fulfilled,” he said.

“In light of ASBFEO’s Small Business Loans Inquiry which highlighted the need for a fast solution for small businesses at loggerheads with their banks over access to finance, it’s important for SMEs and their advisers to be across the full range of finance options available to them,” he said.

Only 8.5 per cent of all SMEs reported that they were satisfied with their cash flow (just 5 per cent of growth SMEs were satisfied). Seven out of 10, whether growth, consolidating or declining SMEs, said better cash flow would have improved 2016 revenues by more than 5 per cent.

Seven out of 10 growth SMEs indicated improved cash flow would have produced at least 10 per cent revenue growth, with almost a quarter saying they could have achieved 25-50 per cent revenue growth.

[Related: Brokers 'integral' to non-bank lender success]


James Mitchell


James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.