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Financing struggles restricting SME growth

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Reporter 6 minute read

The growth aspirations of small business owners are being stifled by the difficulties they face when seeking to obtain funding to access capital, new research has revealed.

According to a new survey of 500 small business owners and self-employed Australians, conducted by business and accounting software provider Xero, and published in its State of Lending Report, one in five small business owners said that access to capital is the greatest pain point or perceived threat to their long-term growth aspirations, with a quarter of small businesses noting they lack confidence in their ability to invest in the business.

Xero reported that small businesses owners said that they would consider borrowing an average of $85,562 in the next 12 months and $159,641 over the next five years if they were assured of funding.

Further, the research found that SME owners would use some of the funds to hire an average of six extra staff in the next 12 months and 16 extra staff in the next five years.


“Small businesses are the engine room of the Australian economy, and many have clear aspirations for growth, but accessing capital remains an obstacle,” Xero noted.

“Government, financial services firms and the accounting sector can all play a part in helping business owners understand their options for financing.”

Additionally, Xero’s report noted that two-thirds (67 percent) of small business owners who are focused on growing their business long-term, would primarily fund their growth through business profits, while 19 per cent said that they would rely primarily on personal savings. Only 8 per cent of respondents focused on long-term growth said that they would primarily fund growth through a business loan.

The report stated that if SME owners could secure funding, they would invest in:

  • Marketing (61 per cent)
  • Equipment (46 per cent)
  • Hiring more staff (31 per cent)
  • Systems and processes (30 per cent)
  • Materials (25 per cent)

Technology would reduce financing woes


Xero’s research also found that businesses consider applying for a loan time-consuming and complex, with 80 per cent of business owners stating that they believe documentation and other requirements in obtaining a business loan for small businesses are “onerous”.

Of the respondents that have secured finance, 42 per cent said that the greatest difficulty was manually providing financial information to the lender.

Further, 71 per cent of small business owners said that they would be interested in applying for business finance if there was an electronic process to facilitate it and create the documentation on their behalf.

Xero also cited comments from the Australian Small Business and Family Enterprise Ombudsman’s Affordable Capital for SME Growth report, in which it said: “Small and medium enterprises need to work with their bookkeepers, accountants and trusted advisers to prepare the business for lending.

“Obtaining a loan depends on businesses demonstrating their creditworthiness — having current business plans, cash flow forecast, demonstrable profitability and a track record of paying bills on time.”

[Related: Credit squeeze flagged as greatest threat to SME growth]

Financing struggles restricting SME growth
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