New SME funding guide launches

Targeted at brokers, accountants, bookkeepers and financial advisers “because of the key role they play in helping business owners with financial decisions”, the Business Funding Guide aims to “help tackle the access to funding crisis faced by Australian small businesses” by outlining the range of finance options available and help them identify the right funding solutions for their clients.

It includes a guide of the main funding options, a funding decision flowchart, a funding matrix and several scenarios, and comes with a companion guide for SME clients – FitsME: Essential Guide to Business Funding.

It is hoped the guide will also result in more SME funding applications being approved. 

The guide covers a range of topics, including: 

• Tips for getting business accounts in order
• What a business plan should include
• Finance fitness checks
• How to identify the right type of funding
• Debt options
• Relevant resources

Speaking to The Adviser about the new Business Funding Guide, the ASBFEO said that “brokers are key in helping small businesses find suitable lenders for them” given the ever-growing range of products and services being released into the SME space.

Ms Carnell elaborated: “We know that about a third of small-business owners have had their applications for bank loans rejected. Many more have not bothered to even apply as they’ve been told that unless they have significant equity in real estate, their application will fail.”

She continued: “Not that long ago, 85 per cent of small-business financing was coming from the major banks. [This was] not just the initial loans but lines of credit, overdrafts, all sorts of products. 

“Now, that has changed and the banks are much less interested in lending and, at the same time, the fintech industry has grown significantly. Now, there are more products and companies doing SME financing and these are areas of significant growth through a range of different products provided by different organisations. 

“So, it is really important that small-business owners have the opportunity to deal with someone that can go and access the best product or products for them,” she said.

Ms Carnell continued that brokers, accountants and financial advisers were well placed to deliver SME finance solutions because “small businesses are too busy running their businesses to have a solid knowledge of what is in the marketplace, what is going to be best for them, what fits their position better, etc.

“And that is where brokers come in,” she told The Adviser.

Likewise, the CEO of Scottish Pacific, Peter Langham, told The Adviser: “Finance brokers exist because there is the big gap between the business borrower and the way banks operate. That has been a strong, established practice for a long time, but not everyone has a broker at their fingertips and there is a lack of awareness amongst a lot of business people about it.

“So, there is a need out for brokers’ help out there, and this guide is another tool that they can use.”

Mr Langham added that the companion guide for SMEs is also a useful tool for brokers as they can “share it with their customers and give added value to them”. 

While the new Business Funding Guide isn’t intended to make advisers a “world expert in this space”, it is meant to help accountants, financial advisers and brokers get “up to speed” with the changing SME lending arena, the small business ombudsman added. 

“The market has changed really quickly. Fintechs and the range of fintech products didn’t exist five years ago and it was not that long ago that the banks were ringing up small businesses asking whether they wanted more money. But that is not the case anymore…

“What we are trying to show is the other options that are out there other than your traditional offerings and major banks. And possibly, for me, the message is that if your bank says they can’t help you because you haven’t got equity, don’t assume that means you can grow your business, because there are lots of other options. 

“There isn’t a one-size-fits-all, there are really different products that fit certain businesses,” she said.

“Certainly, we hope this is the sort of document that – for accountants, brokers and other financial advisers – they can have a read of it, understand the scenarios, the types of questions you should ask, see the types of products on offer that small businesses may need and what the pros and cons of them are. 

“So, we hope it has made it easier,” she said.

Mr Langham agreed, adding: “I hope the guide will broaden the scope for brokers. Some brokers may concentrate on particular areas, but if they look at this guide, they might find other opportunities where they can develop their business and their advice even further.

“So, if it strengthens the position of brokers as trusted advisers, then that is going to be beneficial for everybody – for the borrower, for the broker and for all lenders, including banks.”

The ASBFEO and Scottish Pacific developed the guide in consultation with several mortgage industry stakeholders, including the Australian Finance Group’s GM for commercial, Keiran Evans; the Commercial & Asset Finance Brokers Association’s CEO, David Gill; and commercial brokers such as Kathryn Brodonaro (Allbiz Finance Brokers), James Grima (Omniwealth) and Jo Anderson (Loan IQ).

Contributing lenders included Heritage Bank, Judo Bank and Moula, along with associations such as the Australian Finance Industry Association and the Customer Owned Banking Association.

[Related: ASBFEO calls on brokers to help SMEs]