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SMEs bullish on growth despite capital constraints

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James Mitchell 3 minute read

A new report by a non-bank SME lender has found that 30 per cent of Australian businesses complain that capital constraints are hampering their ability to function efficiently.

The latest Alleasing Equipment Demand Index found that of those businesses, 52.4 per cent said they had fundamental problems accessing sufficient capital from banks, investors, other lenders and shareholders.

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The index, which also examines the current asset inventory and plans for future investment of Australian businesses, found that the lower corporate segment (annual turnover $20-100 million) struggle the most, with 30 percent citing it as an issue.

Alleasing’s chief executive Daniel Blizzard said businesses believe there are fundamental inefficiencies in the way capital is distributed in the Australian market.

“Providers of capital appear to have too much demand on limited funds, or they consider many businesses to be outside of acceptable risk parameters,” he said.

“More than half of the businesses suffering from capital constraints have told us they can’t access sufficient capital or credit to fund their expansion plans, which indicates there is still a lot of unmet demand.

“With the implementation of Basel III, banks will inevitably become more cautious on how many loans they grant. As a result, businesses will need to find alternative capital sources to continue to grow and remain profitable.”

Alleasing’s research shows that 25.6 per cent of businesses plan to increase their asset base in the first quarter of 2017, with an average increase of 6.5 per cent.

Mr Blizzard said SMEs are the most bullish, with 34 per cent stating they plan to increase their asset base in the first quarter of 2017, up from 30.2 per cent in Q4 of last year.

“These results play into the economic uncertainty of the last few months. GDP fell 0.5 per cent in the September quarter, leading to speculation of a second quarterly fall, which would mean a technical recession. However, the December release of balance of trade figures noted the best result in almost three years,” he said.

“This paints a picture of a business sector caught between a natural desire to expand, and a cautiousness about overcommitting in an environment of uncertainty.

“Business sentiment is subdued as we wait to see how economic forces, both at home and globally, will play out in the initial months of 2017.”

[Related: Banks 'on notice' over SME loans]

SMEs bullish on growth despite capital constraints
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James Mitchell

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.

 

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