Alt funders overtake banks

A new trend has emerged in the SME lending space, with Australian small businesses more likely to use a non-bank to fund growth rather than their main bank, according to a national survey.

Small business owners’ reliance on non-banks is the highest it’s ever been, with 18.7% of SMEs planning to fund revenue growth with such a lender, as charted in the September 2019 SME Growth Index commissioned by Scottish Pacific and drawing data from over 1,000 businesses.

Conversely, business owners planning to fund their growth via their main bank has halved, dropping from 38% in the first year of reporting in 2014 to 18.3% in the most recent data.

The main reason given for turning away from banks, cited by 21.3% of the SMEs, was avoiding having to use property as security against new or refinanced loans, up from 18.7% in September 2018.

Other considerations contributing to the gravitation towards non-banks included reduced compliance paperwork (19.8%), short application times (17.1%), royal commission disclosures (8.8%) and banks’ credit appetite (6.9%).

Of the SME owners relying on non-bank funding, 77% utilise invoice finance, 23% merchant cash advances, 10% peer to peer lending, 9% crowdfunding and 5% other online lending.

Just 2.6% of those surveyed indicated they would not consider using a non-bank lender – down from 4.0% last year.

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Source: Alt funders overtake banks