While small and medium sized businesses usually have access to different types of finance, many of them are not aware of their options.
This is the main issue specialist lender Scottish Pacific has encountered in its lending business for Australian SMEs.
“Generally, small business owners prefer not to have to offer their homes as security. And if they’re a larger public company, they don’t want to have to go to the market every time they break a very strict issue covenant,” said Scottish Pacific CEO Peter Langham yesterday, when the company announced its half-year result.
The problem is that banks often demand both these two options.
“Because we’re not securing against property, but against assets of the business such as their debts, equipment or stock – and offering less restrictive terms – we can offer more flexibility and peace of mind to these small and medium businesses,” said Langham.
He noted that based on his company’s Growth Index bi-annual survey of 1,200 businesses with turnover of between $1m and $20m, the number of businesses using non-bank funding has been growing.
“The demand is definitely there,” he said.
The company, which chiefly provides debtor finance, generates 40% of its new business from brokers and has a database of about 4,000 brokers.
It has been marketing the specialised finance division that it launched last year as a diversification opportunity for brokers. The division offers funding solutions including bad debt protection, asset-backed lending, and progress claim finance.
The company announced yesterday that the division’s net revenue grew at a slower rate in the first half of FY18 due to the drag from its UK operation and the slower-than-expected take-up of its progress claim finance.
It reported net revenue of $54.3m and pro forma profit before interest and tax of $23.2m – up by 8.8% and 9.4% respectively over the corresponding FY17 period – with its debtor finance growing 10.4% in net revenue.