The number of small businesses choosing to borrow money from the non-bank sector has doubled over the past three years, according to new research from debtor finance firm Scottish Pacific Business Finance.
These figures come from the latest Scottish Pacific SME Growth Index
which polled around 1,200 owners, CEOs or CFOs of small and medium-sized businesses across Australia.
When asked how the businesses were planning on funding growth over the coming six months, 21.7% of SMEs said they would look to the non-banks. This was up from the 10.8% recorded in 2014.
An increase in the number of alternatives available has created a greater awareness in the broker community about these lending choices, CEO Peter Langham told Australian Broker
As a non-bank, Scottish Pacific has relied on brokers to get its lending out there in the public for the past thirty years, he said.
“We’ve increased the number of finance brokers that we deal with during the year. I think there’s more awareness from brokers out there of alternatives to banks – not just through Scottish Pacific’s efforts but through the introduction of some of these fintechs or new small lenders.”
This trend will continue with an even greater number of SMEs opting for non-bank lending in the future, Langham said.
“Certainly in the SME sector, you’ve got business owners who just really haven’t got the time to get all the information a bank needs. Hence, they use brokers a lot as the broker can help put all that information together.
“The increase in the number of lenders and the importance of brokers will mean that businesses have more choices than just the banks.”
Brokers need to do some research on their own and be open to the different options out there to gain the full benefit of this increased SME demand for non-bank lending options, Langham said.
“At Scottish Pacific, we do an awful lot of promotions and marketing to the brokers to try and get our message out there. Brokers have to embrace this because they need to know as many different options as possible so they can satisfy the needs of their clients.”
Scottish Pacific’s research also found that the number of SMEs opting to source funding from their main relationship bank dropped from 38.4% to 27.1% over the past three years.
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