Access to finance not a major concern for small business, claims ABA

by AB31 Oct 2013

Access to finance is not a major issue for most small businesses, claim the Australian Bankers’ Association (ABA) and the Council of Small Business of Australia (COSBOA) - but those businesses seeking to grow can have concerns.

Their report, Small Business Access to Finance – Year to March 2013, was commissioned from DBM as a way to garner information about small business credit and to inform public discussion.

“The banking industry has heard small businesses’ concerns about getting the credit they need to grow. At the same time, particularly with demand for credit down, banks are very keen to lend to viable businesses. We wanted to understand why this mismatch was occurring,” says ABA CEO, Steven Münchenberg.

“In discussions with COSBOA, we realised we didn’t have an accurate picture of small businesses’ current use of credit, their revenue forecasts or what the future demand may be from this sector.”

Münchenberg adds that small businesses who expect their revenues to increase are more concerned about access to finance, regardless of whether or not they currently have a loan. A little less than half of the businesses surveyed expect their revenue to grow and of these, 14.5% are concerned about access to finance, he says.

“There are only a small proportion of small businesses working in each industry sector which may be planning to expand due to revenue growth and are worried about access to finance. Mining and utilities has the highest proportion at 16%, followed by communications services at 11%, manufacturing at 9%, transport and storage and wholesale trade at 8%.”

This, says Münchenberg, is understandable because conditions remain ‘below average’, although business confidence has slightly increased.

“It’s too early to know yet whether this trend will continue. Firms involved in trade may feel a little more optimistic given the depreciation of the exchange rate over recent months. We will be continuing to discuss these issues with COSBOA and look for ways to make it easier for small business to apply and obtain finance while at the same time balancing banks’ obligations to be responsible lenders.”

The main findings of the report are:

  • Of the estimated two million small businesses in Australia, 49% have a business lending product, other than a credit card. This is almost one million small businesses (980 000). If credit cards are included this rises to 71% or 1.42 million small businesses.
  • 11% of small businesses say that access to finance or the capacity to finance further growth in the business is an issue. Of these, 7% already have a loan and 4% do not.
  • Overall, 44% of small businesses expect their revenue to grow; and of these, 14.5% are concerned about access to finance. Almost a quarter of these businesses have a turnover of less than $50 000; a third have a turnover of $200 000 to $1 million.
  • The proportion of small businesses that expect revenue to increase and are concerned about access to finance, across all industries, is 6.6%. Above this level are the mining and utilities industry