Growing trust in alt lenders

by Madison Utley23 Apr 2019

Independent research commissioned by Scottish Pacific has revealed that SMEs are now about as likely to borrow from an alternative lender as they are their primary bank. 

The data, collected from November 2018 to January 2019, showed that the portion of SMEs who plan to turn to their main bank to fund growth has dropped below the 20% mark for the first time, more than a 3% decrease from the September 2018 figure. 

This marks a significant decrease from the 38% of SMEs who planned to secure a loan from their primary bank when Scottish Pacific conducted its first poll in September 2014.

The research suggests that, if the trend continues, alternative lenders will pass traditional banks as the key funders in Australia by the second half of 2020.

Scottish Pacific CEO Peter Langham said, “Small business owners traditionally have been rusted on to their banks, but they are becoming increasingly open to non-bank alternatives to fund their operational and strategic growth needs as more businesses shop around for a customised funding solution.”

Langham cited tightening credit conditions at banks and the desire for flexible funding as two of the major drivers causing the shift in preference.

Non-bank lenders were listed as the first-choice funders for almost 18% of SME owners, up from 15% just six months ago.

Additionally, the percentage of SMEs who said they would not consider a non-bank lender dropped from 43.5% to less than 33%.

A commanding majority (96%) communicated that the main draws of alternative lenders are fast approval, reduced compliance, and the flexibility of not having to borrow against the family home.