SME access to finance drops to ‘five-year low’

Tracking SME activity, expectations and confidence, the index found that 31 per cent of SMEs struggled to access finance within the September quarter, up from just 20 per cent the year before.

Similarly, just 14 per cent of SMEs said that accessing finance was “relatively easy”, down from 34 per cent in the same period last year.

Overall, the net balance was 31 points down on the same quarter last year, with a net balance of -17 for the September 2018 quarter index.

This marked the lowest recorded level since the June Quarter 2013 report.

Businesses in the finance and insurance, manufacturing and retail sectors were shown to have found it most difficult to access finance, reporting net balances of -52, -28 and -26, respectively.

Only Tasmania recorded a positive balance across all states and territories, with Victoria reporting the lowest negative balance of -23.

Overall, however, SMEs remained positive. While the confidence index was seven points lower than in the last quarter, the national average confidence level was +42, with 60 per cent saying they were feeling confident in their business prospects.

Healthy sales and specific business strengths were cited as reasons for this confidence. However, many businesses also highlighted cost pressures as impacting confidence.  

Speaking of the report, Sensis chief executive officer John Allan commented: “In the midst of the banking royal commission, these results support fears expressed by small and medium business owners about inability to access finance.

“While we see another positive balance when it comes to confidence, the jump in SM[E] confidence we saw in the June quarter has dissipated.”

He continued: “With the issues around accessing finance featuring heavily in the royal commission, it will be interesting to see if this continues to fall.”

The federal government has been active in trying to improve access to finance, announcing earlier this month that it would “encourage the establishment of an Australian Business Growth Fund to provide longer-term equity funding” and create a new $2 billion Australian Business Securitisation Fund (ABSF) to help provide additional funding to small business lenders.

In a joint statement, Treasurer Josh Frydenberg and the Minister for Small and Family Business, Skills and Vocational Education, Michaelia Cash, have announced that the ABSF will “significantly enhance” the ability for small businesses to access funds by providing “significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms”.

[Related: Government peels more red tape to save SMEs $300m]