While a commanding 90% of Australian small businesses polled expressed frustration over finding and maintaining funding, the research found those dealing with non-banks communicated having had better experiences.
The latest SME Growth Index data, conducted by East & Partners on behalf of non-bank lender ScotPac, found loan conditions to be the biggest pain point for small business owners.
According to ScotPac CEO Jon Sutton, that’s nothing new.
“Loan conditions have always been the main source of annoyance when we’ve asked SMEs about their funding frustrations, and during the pandemic it has been no different,” he said.
“The research found small businesses with non-banks as their primary funders had significantly fewer concerns about loan conditions, flexibility and ease of dealing with their funder during 2020.”
After frustrations with loan conditions (84%), SMEs named having to provide property security (80%) and lack of flexibility (74%) as their two biggest woes; however, the figures differed drastically among SMEs using non-bank borrowing rather than bank finance:
The largest proportional increase in frustration from the previous study was around funders being hard to deal with, a sentiment which troubled 47% of small businesses 18 months ago and 56% now.
“There was also a significant increase during the 2020 pandemic year of SMEs showing frustration that their funders can’t meet all their needs (22%, up from 16%),” Sutton said.
Significantly, more than a quarter of small businesses communicated they do not feel secure with their current lender, highlighting the need for “clear communication and good ongoing relationships with funders”.
As Sutton sees it, this widespread area of SME concern creates an opening for brokers.
“Given that businesses using non-bank funding have fewer concerns about loan conditions and find non-bank lenders more flexible and easier to deal with, this provides the perfect opportunity for brokers to start a conversation with their small business clients about types of funding that can help their business, that go well beyond traditional property-secured funding,” he finished.
