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SMEs increasingly turning to non-bank lenders: PayPal

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Reporter 5 minute read

Two in five small businesses have used a non-bank or alternative lender in the past, and nearly the same number are more likely to consider a non-bank in the future, a new study has found. 

New research commissioned by PayPal has revealed that 75 per cent of small to medium-sized enterprises (SMEs) in Australia believe securing a traditional business loan has become more difficult, with a further 67 per cent expressing that the process of getting a loan approved is increasingly hindering business.

Further, one in five SMEs indicated that they have been refused a bank loan in the past.

PayPal’s study additionally found that two in five SMEs, or 42 per cent, have used a non-bank lender previously, with almost as many, or 39 per cent, saying that they would be more inclined to consider a non-bank in the future. This is compared to 18 per cent who suggested that they would only consider a traditional bank loan. 


The preference for non-banks was more prevalent among SMEs that have been operating for under five years, with the figure rising to 70 per cent among SMEs that have previously used a non-bank lender. 

Commenting on the findings, Andrew Baines, general manager of PayPal Credit in Australia, said: “The businesses we work with have told us that securing a traditional business loan can be a long and drawn-out process; time which many small businesses just don’t have.  

“Increasingly, we are seeing businesses seek tailored solutions, which meet their business needs and bridge the gap left by traditional funding providers. In order to remain successful, it is important that Australian SMEs are weighing up their options and sourcing the best lending solution for their business.”

Similar to the findings of recent research by Scottish Pacific and Prospa, the PayPal study found that the majority of business owners are worried about cash flow, with 61 per cent of survey respondents anxious about the cash flow in the current financial year and 48 per cent more stressed than they were last year about cash flow. 

However, more than a quarter of SMEs, or 28 per cent, said they are always concerned about cash flow. 


SMEs who were polled for the study attributed the increasing cash flow pressure to customers spending less, rising costs, and stricter lending requirements imposed by the major banks.

The release of the study follows PayPal’s announcement that it has surpassed $500 million in funding provided to Australian SMEs through PayPal Working Capital, since the alternative finance offering was launched nearly five years ago. During that time, more than 25,000 business loans were provided to over 7,000 small businesses.

“We can see that there is an ongoing demand for alternative finance solutions to support small businesses and to help them thrive,” Mr Baines said. 

[Related: ASBFEO calls on brokers to help SMEs]

SMEs increasingly turning to non-bank lenders: PayPal
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