Specialist lenders more attractive to SME borrowers

by Phil McCarroll22 Sep 2016
Small business owners looking to finance future growth are increasingly likely to turn to specialist non-bank lenders in their search for capital.

According to the latest SME Growth Index from debtor finance firm Scottish Pacific, the past 12 months have seen a marked increase in the popularity of non-bank lenders among small business owners.

“Businesses are increasingly looking beyond the banks to fund growth and to help ease cash flow concerns,” chief executive officer peter Langham said.

“From this time last year, there has been a 30% increase in SME owners planning to fund their growth using a specialist non-bank lender, with one in five now indicating their intention to do so,” Langham said.

Whether it be from banks or non-banks, the index shows SMEs will likely need to source capital from elsewhere if they do wish grow, with a nearly a quarter predicting a decline in revenue.

“Over the past two years, SMEs predicting revenue decline have almost doubled [from 13.2% to 24.2%], while those predicting increases have halved their growth forecasts [from 8.6% to 4%],” Langham said.

“The current environment is clearly placing pressure on Australia’s small to medium business community,” he said.

For the first time since the Index began in September 2014, SMEs forecasting positive growth are outnumbered by SMEs forecasting negative growth or no change by 51.6% to 48.4%.

On a similar note, SME owners said cash flow is their most pressing issue, with nearly 75% of owners saying it kept them awake at night.

“SMEs nominated cash flow as the most stressful element of business. They cited credit conditions as a key barrier to growth,” Langham said.

“With the Index highlighting that cash flow keeps 72.5% of respondents awake at night, it’s crucial for these leaders to find the right funding to support their business.”

Langham said the negative tone of the Index may have been fostered by uncertainty  the aftermath of the Federal Election and the UK Brexit referendum, he said it still shows the need to have right regulatory and funding systems in place to support the SME sector.
 

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