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The opportunity for brokers to show SMEs the way

by Peter Langham5 minute read
Peter Langham

As a broker, are you a glass half-empty or glass half-full type of person? This will impact what your take is on a specific result in the latest Scottish Pacific SME Growth Index.

Our SME Growth Index, which takes the pulse of owners and directors of more than 1,200 SMEs around Australia, found that when reviewing existing borrowing requirements or deciding on new providers, SMEs generally prefer to handle the task internally (43.3 per cent).

If they do look outside, SMEs are more likely to review their borrowing arrangements with a trading partner or business colleague (27 per cent) than with their accountant (16.9 per cent) or commercial finance broker (11.6 per cent).

As a broker, you could see this statistic as a disappointment – or as an opportunity to target the almost 9 in 10 SMEs who aren’t coming to you for help in reviewing their borrowing arrangements.

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Personally, I think there is a great opportunity for brokers to increase the impact they have on their SME clients’ lending decisions.

The signs are there that the locked-on attitude of small businesses to their main bank is slowly ... slowly ... changing.

Amongst our Growth Index findings was an interesting statistic about the increasing willingness of Australia’s SMEs to look beyond their main bank to another bank or specialist non-bank lenders to fund growth.

The proportion of growth SMEs willing to move beyond their main relationship bank has risen in the past 12 months from 11.2 to 15.1 per cent.

The proportion of SMEs with declining or unchanged growth willing to move beyond their main relationship bank is even higher – it has almost tripled in the last year from 6.9 per cent to 18.2 per cent.

Relatively few respondents (16.1 per cent) indicated a willingness to share facilities between two main lenders or to seek a mix of bank and non-bank specialist providers (12.7 per cent).

Ultimately, most small businesses (89.4 per cent) remain heavily reliant on their own capital to fund growth as a result of difficulty accessing credit.

More than a third (39.7 per cent) of SMEs are seemingly comfortable allocating all of their credit facilities to their main relationship bank when reviewing their borrowing requirements.

Not only do few SMEs seek third-party assistance for reviewing their banking, a staggering one in two just don’t review their primary bank relationship at all, nor feel the need to seek a new credit provider.

This suggests a high number of small businesses remain unaware of the specialist product solutions and service propositions offered by alternative bank and non-bank providers.

Only one in five SMEs review existing lending requirements and their core business banking relationship on a regular basis.

As few as 4.8 per cent of SMEs always keep a look out for the best credit facilities that fit best with their business.

With a high proportion of SMEs not seeking third-party assistance when reviewing borrowing arrangements and showing complacency towards their primary business banking relationship, there is a clear opportunity for detailed education and advice for the largest business segment employing the highest number of Australians nationally.

What role can you as a broker play in making your SME clients aware of all the options available to them?

To download your own copy of the Scottish Pacific SME Growth Index, click here.

langham intro

Peter Langham

Peter Langham

AUTHOR

Peter Langham is chief executive of national working capital solutions specialist Scottish Pacific Business Finance, which handles more than $10 billion of invoices each year, providing funding lines exceeding $800 million. Originally training as an accountant, Peter has more than 30 years’ experience in the debtor finance industry. He has overseen significant growth at Scottish Pacific, which has consistently outperformed the market over the past five years. Scottish Pacific was named by brokers as Best Cash Flow Lender in The Adviser's Non-Bank Lending Awards for 2014, 2015 and 2016. The group was also named Best Trade Finance Provider at the Trade Finance Global Excellence Awards 2015.

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