SMEs fed up with providing property as security

by Madison Utley08 Apr 2019

Recent data has shown that being required to provide property as security against new loans is one of the most pervasive frustrations in the SME space, second only to loan conditions.

Scottish Pacific commissioned research spanning more than 1,200 SMEs across all industries from November 2018 to January 2019.

Of those surveyed, 80% communicated that they resent providing property as security to fund their SMEs, with two-thirds going as far as saying they would “definitely” be prepared to pay more in interest to avoid using their personal property as collateral.

According to Scottish Pacific CEO Peter Langham, “This has more than doubled in the past few years, rising from 29.5% to 65%.”

“A not-too-distant future where there may be more entrepreneurs renting than buying, means that business owners will increasingly have to consider business borrowing secured against assets other than property.”

Speaking to Australian Broker, Langham stressed the importance of finance brokers in educating and guiding SME business owners to more ideally structured solutions. 

He explained, “Business owners need assistance in understanding what options are out there as opposed to being given more options. If there are more options, they might not even know about them.”

The data also revealed that for the first time, SME owners are about as likely to turn to alternative lenders as they are a traditional bank, which “unshackles the family home from business growth and frees it to be used in other ways to secure their personal financial futures.”

However, Langham again reiterated that despite the widespread discontentment with the predominant standing arrangement, a majority of SME owners don’t know about many of the options available to them.

“Too many business owners remain unaware they can use balance sheet assets as security instead of property - assets including equipment and invoices issued.

“Business-owners are time poor. They need support from brokers,” Langham concluded.