Four in five SMEs embrace multiple lenders – ScotPac

Four out of five SMEs are now collaborating with more than one lender to fulfill their working capital needs, including for specialised services such as invoice finance, asset finance, and trade and supply chain finance, ScotPac reported.

This readiness among SMEs to engage with multiple lenders has driven the preference for non-bank lending to an all-time high of 47%, doubling the rate recorded in March 2022, according to ScotPac’s latest bi-annual SME Growth Index.

The key findings come as a robust 61% of SMEs expressed plans to invest in their businesses over the next six months, a substantial 15% increase year-on-year and the highest level since 2019.

On secondary working capital relationships

When asked about their approach to secondary working capital relationships:

• 67% of SME owners and operators said they considered ease of credit approval as the primary factor for selecting a secondary provider
• 37% prioritised higher credit limits among the top three factors when evaluating non-bank lenders
• 60% of SMEs without a secondary lender found the onboarding process with a new provider to be challenging

Of SMEs intending to invest for growth, 15% expressed uncertainty about how to fund new business investment, the ScotPac study found.

Lending and broker relationships

Jon Sutton (pictured above), CEO of ScotPac, underscored the significance of maintaining strong broker relationships given the heightened investment intent and SMEs’ inclination to explore diverse lending options.

“Despite the macroeconomic headwinds of rising wages, stubbornly high inflation and uncertainty about interest rates, Australian SMEs are continuing to invest in their businesses at near record levels,” Sutton said. “While some of that growth can be attributed to higher input prices, the strength of SME investment intent goes beyond this factor alone. An emerging driver is choice.”

He highlighted the opportunities for brokers to assist SMEs in navigating the market, given the big number of SMEs planning to self-fund their growth plans, or still unsure of how to fund new investment.

“Speed, ease, and simplicity remain the key decision drivers for business owners when choosing a secondary working capital provider,” Sutton said, adding that “whether SMEs are looking to invest in assets, inventory or expertise, ScotPac has the tools and the team on hand to quickly deliver a package to match their needs.”

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