The volume of funds requested by SMEs halved in Q420, according to SME lending platform Lend.
After reviewing the figures surrounding applications, loan amounts funded, and approvals of loans lodged by affiliate partners (including brokers and accountants) since COVID-19, the fintech Lend Capital (Lend) has found that applications and loans funded have dramatically dropped in the last few months.
According to Lend’s data, the total funds requested through the platform in Q420 (ending 30 June 2020) totalled $252,679,227 – a dramatic drop from the previous quarter, when $433,909,012 was requested.
The number of applications also decreased in the June quarter, dropping by 46 per cent.
Lend also found that while the volume of loans requested dropped by 41 per cent in one quarter, the actual number of loans that were funded decreased by 82 per cent (or by 71 per cent when in dollar value terms).
Moreover, when compared with the same period last year (when $499,483,229 of loans were requested through the platform) the volume of loans has dropped by half (49 per cent).
While there were decreased applications across all industries, Lend found that hair and beauty, retail, and hospitality were hardest hit, with a 60 per cent decrease in applications between the March and June quarters.
Speaking to The Adviser, the CEO of Lend, Bill Baker, said he believed the dramatic drop in funds requested and approved was due to the coroanvirus pandemic taking hold in March 2020 and subsequent changes in risk appetites at the lenders.
Mr Baker said: “When we talk about funds lent, we believe that [drop] is due to the uncertainty in the current environment; the lenders are even more focused on risk and their ability to recover the funds that are lent out.”
The CEO also echoed recent sentiments that the government’s SME Guarantee Scheme was welcome in principal, but didn’t go far enough in helping non-bank lenders lend money cheaply.
“Non-bank lenders have welcomed the support of the SME Guarantee Scheme, and the recognition of the ‘alternate’ lending industry, but still had to produce the funds to lend and did not receive any relief as far as receiving funds to lend at a discounted rate,” the CEO said.
“With the ever-changing environment, lenders have had to continually review their credit policy and risk appetite, and have had to do this in real time.”
Noting the drop in funds requested by small businesses, Mr Baker suggested that government incentives, such as JobKeeper, may be helping keep businesses afloat, but added that “many business owners are simply treading water until they can see a clear pathway out”.
He concluded: “We are optimistic about the next quarter, and early indicators already show an improvement despite the unfortunate circumstances facing Victorians.
“Our lenders are getting creative in how they can provide funds to Australian SMEs and this, too, is a promising show of faith that the Australian economy will bounce back and, as always, will [do so] through the strength and value of small businesses.”
Donelle Brooks, the head of third party at Lend Capital, added that brokers had a key role to play in ensuring that SMEs are aware of their finance options at this time.
She told The Adviser: “Brokers are actively trying to seek funds for their clients, while managing the impacts of COVID-19 on their own businesses.
“Education is key, understanding the different types of products that their clients can leverage to get access to equity is vital. Brokers are starting to utilise platforms or technology like the Lend Platform, which takes out the guesswork for the broker and often can provide several options to match the clients circumstance.
“Brokers are playing such a vital role in finding solutions for business owners, with a significant increase in resi brokers moving into the commercial space to offer ‘whole of service’ solutions for their clients,” Ms Brooks said.
The figures from Lend echo the trends seen in the latest Sensis Business Index – which found that more than a quarter of the 1,015 businesses surveyed in the first week of August had been “knocked back” by credit providers, with a further 36 per cent experiencing difficulties obtaining credit.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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