Small SMEs three times more likely to use personal finance to support their business: ScotPac

Australian SMEs with annual revenue up to $5 million are three times more likely to tap into personal finance facilities like credit cards to manage rising business costs than larger SMEs with revenues of between $5 million to $20 million.

However, the overall use of personal finance facilities to fund business costs has fallen sharply in the past seven years with 47% of SMEs reporting they never used personal finance sources for business purposes, compared to just 12% in 2016.

The findings are contained in the latest round (Q1, 2023) of the bi-annual SME Growth Index by ScotPac, Australia’s leading non-bank business lender.

Related insights from the SME Growth Index Report include:

• 33% of small SME owners reported ‘occasionally or infrequently’ using a personal finance facility to support their business, compared to 19% for large SMEs.
• 24% of small SME owners never use their personal finance facilities to support their business, compared to 75% for large SMEs.
• Small SMEs (35%) are five times more likely to consider a drawdown in equity compared to large SMEs (7%) to help manage rising prices.

ScotPac CEO, Jon Sutton (pictured), said the figures showed that more needed to be done to make small SME owners aware of alternatives to personal finance facilities.

“The large recent drop in the use of personal finance for business costs is a good sign but there are still too many SME owners mixing their personal and business finances,” Sutton said.

“While larger SMEs historically had access to a broader range debt funding sources than smaller businesses, there are now a host of tailored and accessible non-bank finance products to support most SMEs in most situations.

“These include invoice finance facilities that provide working capital while SMEs are waiting for client payments, and online business loans that can see funds approved and dispensed in as little as 24 hours.”

Mr Sutton encouraged all SME owners to consult their broker or advisors about ScotPac finance options.

“There is an outdated perception that access to new business finance or to refinance an existing facility is too hard for small SMEs,”Sutton said.

“ScotPac has the most flexible range of SME finance products in the market and the scale to deliver cost-effective solutions across a breadth of industries and business situations.

“Over 35 years of operation we have become a trusted partner to thousands of SMEs large and small, and our team are there to support business owners every step of the way.

“So, before tapping into a personal finance facility, small business owners should be tapping their broker on the shoulder for advice,” Sutton said.