SME’s planning to partner with non-bank lenders is set to increase

The share of SMEs planning to partner with non-bank lenders for new investment in the next six months has increased to a record high of 54%, up from 47% 12 months ago.

By contrast, just 35% of SMEs said they intend to source new investment funding from their main relationship bank or a peer, down from 47% in the corresponding period last year.

SMEs in a business growth phase – which account for 40% of the national market – led the exodus from the banks. More than four in every five businesses in this category are looking elsewhere to secure a lending solution, with over half intending to source non-bank lending to support new investments.

The headline findings are contained in the latest edition of ScotPac’s bi-annual SME Growth Index Report, Australia’s longest-running SME sentiment check on revenue growth prospects.

Related insights include:

•    60% of Australian SMEs plan to invest in their business in the next six months, up from 52% at the height of the COVID pandemic (September 2020).
  •    94% of SMEs intend to use their own funds as part of the capital mix to underwrite new investment, despite the proliferation of available lending solutions.
  •    A third of SMEs intend to raise new equity, a threefold increase since the start of the SME Growth Index in 2014.

ScotPac CEO, Jon Sutton said the headline figures spell out just how much business finance has evolved over the past decade.

“The days of cumbersome, one-size-fits-all SME financing are gone, replaced by a growing demand for more flexible options that are faster and more accessible,” Sutton said.

“SME owners and operators are increasingly becoming aware of the benefits of non-bank lending, which often include alternatives to borrowing against the family home. That has motivated them to talk to their brokers and look beyond traditional funding arrangements.”

Sutton said that despite record increases in SME non-bank lending, key signs point to further rises in coming years.

“First, demand from SMEs for fresh working capital is on the rise as SMEs operate in an environment of rising costs and uncertain demand,” Sutton said.

“Second, there remains a large, untapped market of SMEs who are self-funding business investment.

“And third, awareness of the speed and ease of non-bank lending products continues to grow through a combination of networking, technology and broker activity.”

For brokers, Sutton said the current environment played to their strengths of helping their clients navigate a crowded lending market to find the right solution.

ScotPac continues to expand and refine its range of flexible lending solutions to meet rising SME demand. As the largest and longest-established SME business lender in Australia and New Zealand, we are proud to support more than 8,900 businesses.