Our Scottish Pacific SME Growth Index is a twice-yearly snapshot of Australia’s small to medium sized business sectors showing cashflow issues that many businesses face today, below is the fourth of six key insights found in our September 2018 report:

What attracts SMEs to non-bank funding

Alternative lenders are firmly on the radar of SMEs, who are attracted by the fast approval turnaround times and streamlined compliance requirements.

Despite an SME lending landscape dominated by the Big Four banks and their subsidiaries, 96% of SMEs could name a key advantage to borrowing from an alternative (non-bank) lender.

One in four business owners nominated rapid credit approval as the main reason they’d use an alternative lender.

Avoiding the banks’ onerous, document-heavy regulatory requirements when seeking credit was the next biggest drawcard, nominated by almost one in five SMEs.

Another advantage was the incentive of not having to borrow against property, cited by one in five SMEs.

A similar proportion of SMEs independently nominated avoiding use of non-property assets as security and personal guarantees as the key reason they would use an alternative lender.

Almost one in 10 SMEs (8%) said the revelations from the Banking Royal Commission would prompt them to seek out non-bank alternatives to fund their business.

When SME owners were asked why they would NOT consider alternative lenders, one third said they would ALWAYS consider an alternative lender despite any perceived disadvantages.

Only 4% of SME owners say they would never consider a non-bank lender. This is good news for the emerging fintech industry, and the long-established debtor finance sector, who are offering SMEs broader funding options beyond the banks than ever before.

However, there’s work to be done to make business owners aware of these options.

A quarter of business owners wouldn’t consider alternative lenders because they “don’t know who they are”, 16% because of uncertainty about the stability of some of the newer entrants to the market, and 13% because they feared non-bank interest charges would be too high.

Overall, one-third of business owners were unsure about alternative lenders and their products (25% don’t know who they are, 8% don’t understand the product options).

With a public perception that the banks are “on the nose” or not willing to lend, and not enough SMEs fully understanding the alternatives, most business owners (89%) plan to use their own funds (assets, but predominantly cash), to fund growth.

A previous Index finding was that two-thirds of SMEs rely on personal finances such as credit cards to deal with cash flow issues.

Why are so many growth SMEs using inflexible debt in preference to more appropriate or sustainable funding solutions that would allow for them to grow without such intense cash flow pressures?

ASBFEO has taken positive steps over the past few years to raise awareness of funding options but it is clear that there is more to be done on this front by governments, industry associations, SME lenders and the range of business advisors used by the SME sector.

Like to know more? To download the latest copy of our SME Growth Index, click here.

Our next release will be available in March 2019 and will be available on our website.

Cash flow is by far the biggest stress point for business owners, as clearly shown by the results of our latest Scottish Pacific SME Growth Index.

Whether you’re a business owner or an accountant, adviser or broker working with SME clients, the important thing to note is that unlike the inevitability of death and taxes, there are ways to improve cash flow!

First, let’s take a look at the problem.

We polled 1200 SME business leaders from around Australia, and cash flow was cited by 79% as the issue most likely to cause sleepless nights.

Business owners say cash flow is increasingly the dominant issue causing stress, so we asked what caused their cash flow problems over the past 12 months.

Main causes of cash flow woes

SMEs continue to pinpoint government red tape and compliance issues as the main cause of cash flow problems. These issues were nominated by three-quarters of businesses, across the total market of growth, consolidating and declining SMEs.

The other key causes were the dual problems of customers paying late and suppliers reducing payment terms. This means business owners are feeling the pressure from both ends of the supply chain, which places major strains on efficient working capital management.

SMEs talked about having difficulty meeting tax payments on time, being unable to take on new work and capital expenditure due to cash flow restrictions.

This cash flow drain is holding back the whole sector, with almost all SMEs saying if cash flow had been better in the past 12 months they would have generated more revenue.

The cash flow squeeze is on, there’s no doubt. The good news is that there are actions business owners can take to maximise their cash flow.

Quick short-term cash flow fixes

• Improve invoice processes – you’d be surprised how simple improvements, such as giving customers multiple payment options, sending invoices and follow-ups on time and clearly stating details, can lead to improved payment times.
• Prepare cash flow forecasts – doing this helps you identify potential cash flow issues before they even happen. Ask your trusted adviser to help you prepare the forecasts, and run scenarios about how you would manage if sales increased or decreased.
• Check credit ratings before taking on a new customer and do regular checks on existing customers to avoid being caught out.
• Renegotiate supplier and customer contracts – it’s hard to survive on razor-thin margins, so regularly review what it costs to run the business, compared to what you charge customers.
• Request a deposit for large or special orders.
• Keep stock moving – if you have slow-moving or obsolete stock, replace it with items that have a faster turnover.
• For more cash flow management tips, download our free guide.

A more permanent solution to cash flow woes

Finding the right style of business funding can have a major impact on the working capital available to a business.

There is a style of finance that, for SMEs operating on trade credit terms, allows you to boost cash flow and relieve the worries, pressure and stress related to day to day financing of the business.

Invoice finance (also known as debtor finance or receivables finance) is a line of credit that smooths out cash flow peaks and troughs for businesses that sell goods or services on credit terms.

Invoice finance means that you receive an advance on invoices already owed, and your funding grows in line with sales (without the need to be constantly increasing the funding limit, as happens with an overdraft).

You can boost turnover by bringing cash receipts forward, using a line of credit linked to and secured by outstanding accounts receivable.

This gives you more confidence about taking on large new projects or clients; with the additional outlay in staff, raw materials and other resources that such growth requires.

Having cash flow certainty also allows you to negotiate supplier discounts for early payment.

Invoice finance is a self-liquidating facility – business owners are not taking on additional debt, but rather receiving an advance on money that is already owed.

It’s a great way to use today’s sales to fund tomorrow’s growth, and to avoid having to offer costly settlement discounts.

It can be used as a stand-alone funding method or in conjunction with an overdraft facility.

Invoice finance removes the requirement to offer the family home as security, allowing business owners to use their property assets to build personal wealth instead of being locked into the business.

There are variations in how the service is delivered, ranging from Confidential Invoice Discounting (for larger, more sophisticated businesses with a dedicated finance department) to the option of full management of accounts receivables (which allows smaller businesses to focus on their growth rather than chasing outstanding invoices).

Flexible options tailored to your needs

There are also various facilities able to be used alongside invoice finance, from trade finance solutions for importers and exporters through to asset finance that business owners can use to fund against plant and equipment or property, helping you unlock value from your balance sheet.

It’s all about having flexible working capital to support the business, so that the business owner is not wasting valuable hours fretting over bills and unpaid invoices.

Instead, business owners can take control of cashflow and boost working capital levels to accelerate growth and investment.

If you, or your SME client, are not sure which product suits best then try this quick solution-finder tool.

To download the latest copy of our SME Growth Index, click here.

Newly released SME Growth Index results

Twenty-two percent of survey respondents said Royal Commission fallout, with the banks tightening lending conditions during a year of Commission hearings, had already made accessing funding harder in 2018.

34% expect funding will be harder to access in the future.

The research was conducted from November 2018 to late January 2019, after the release of Commissioner Haynes’ interim report but before the release of the Royal Commission’s final recommendations.

Scottish Pacific CEO Peter Langham said it was vital that any changes introduced as a result of the Royal Commission recommendations do not negatively impact on the flow of funding in the SME sector.

“The research shows by far the greatest reason business owners seek new finance is to fund their expansion opportunities. It’s the key reason given by 58% of SMEs,” Mr Langham said.

“So, the easier it is for SMEs to get funds, the stronger the Australian economy will grow.

“Given recent economic forecasts, all the more reason that governments and the business community must prioritise making it easier, not more difficult, for SMEs to access funds.

“This is also a key reason why the Federal Government should reconsider the broker fee changes recommended by the Royal Commission. Good brokers play a vital role by helping time-poor business owners find the right product and provider that best suits their needs, allowing the business and the economy to grow,” he said.

SMEs look beyond the banks

Mr Langham said SMEs need fast and convenient access to money and if they are rejected by a bank due to tighter lending restrictions or lack of property security, they should know there are credible alternatives.

“Many SME owners have been rusted on to the banks out of habit. Choice is good for SMEs, and there are many alternative finance options they now have available, as long as they make an informed choice knowing the benefits and risks of the products.”

Independent research by East & Partners, commissioned by Scottish Pacific Business Finance, polled 1257 respondents, the owners and senior managers of SMEs across all states and key industries. For a free copy of the September 2018 SME Growth Index Report, enter your details here. The SME Growth Index is produced biannually, and the next report will be available in March 2019.

 

Cohen and Krass is a multidisciplinary practice based in Sydney. Since 2002 Cohen and his solicitor business partner have specialised in providing accounting, legal and business advisory services for SMEs and high net worth individuals.

“We work with people who are hungry to build their businesses, and we act as a virtual CFO for SMEs to set up financial improvement systems,” according to Cohen.

“The SMEs we work with are the type who have good credit risk but don’t always have the clout to say to their large business customers ‘pay me sooner’.

“We connect our clients, who include builders, professionals, distributors, wholesalers and retailers, to cash flow funding from a range of trusted funding partners, including Scottish Pacific and the Big Four banks.”

Why invoice finance?

“In many instances for our clients, invoice finance (also known as debtor finance) is an unknown quantity. They are good at what they do but might not always understand the financial options so they’re hungry for expert advice, and willing to pay for it and follow it,” Cohen says.

“A recent example of a client we introduced to ScotPac is a small business, with $300,000 turnover, battling cash flow issues.

“With debtor finance providing them 80% of the value of their invoices up front, and 20% after on average 70-80 days, we showed them how they could improve their cashflow quite dramatically.

“We suggested that the owner use the extra cashflow to develop internships to help him manage his growing business and for the clear space he needs each week to work on the business rather than just work in it.”

“That $300k business is now using debtor finance and is regularly saving a few thousand dollars on interest payments yearly by utilising his debtor finance instead of an overdraft or credit cards. That’s a small business that now has an extra $10-$12,000 in cashflow a year in the bag to fund their growth plans.”*

“Magic wand” to improve cash flow

What keeps Tony’s clients up at night is their cash flow worries.

“I say to them, “what if you had a magic wand to wave to improve your cashflow?” and of course they say “wave it!”.

“Invoice finance is a great way to do this – it may not be at face value as cheap as taking out an overdraft, but it grows as you grow and it doesn’t use your home as security. This always eases the burden on the wife or husband, knowing the house is out of the equation. It introduces flexibility in funding their business’ growth.

As well as being a qualified accountant, Tony has experience in commercial corporate banking, insolvency and reconstruction, and is passionate about SMEs having clear and achievable strategic business plans. The right finance is a key part of this equation.

“I ask new clients how they are funding their business, and often it’s by using credit cards to pay the business expenses. That’s not cheap finance. The cost benefit for debtor finance far outweighs the cost of their current funding.”

Interested in how Scottish Pacific Business Finance can help you? Submit an enquiry or call us.

*Savings will be dependent on each businesses’ individual circumstances

 

April, 2019 – 9pm

Outlined below are the main Federal Budget initiatives targeted at SMEs, along with whether small to medium business owners really wanted the Government to prioritise that initiative.

The data comes from a survey released this week of 1257 Australian SMEs, as part of Scottish Pacific’s March 2019 SME Growth Index.*

Company tax cuts top SME wishlist
Scottish Pacific CEO Peter Langham said SME company tax cuts being brought forward would be welcomed by the sector, given this was the top initiative SMEs wanted to see (nominated as top priority by 27% of business owners).

One in five SMEs want the newly elected government to prioritise cutting red tape by reducing their administrative and regulatory burden.

Asset write-off welcome
Almost 24% said continuing the asset write-off should be the Federal Government’s top focus for SMEs.

Mr Langham said they will be delighted with the Budget’s flagged increase of the instant asset write-off up to $30,000 (from $25,000) and opening this initiative up to SMEs with up to $50m turnover (an increase from $10m turnover).

$2b securitisation fund for SME access to finance
This government announcement will not have much of an impact at the coalface for business owners.

Mr Langham said SME Growth Index results showed that not quite 3% of business owners believed this should be the government’s SME priority.

Mr Langham said SMEs wanted government action on things they see affecting their business on a day-to-day basis, rather than big picture projects such as the NBN or small business funding initiatives.

“Simplifying the complex tax system and cutting red tape, and on a state basis getting rid of payroll tax, would have the biggest daily impact for Australia’s small to medium business sector.

“These are the everyday impact items that will energise SMEs, encourage business investment and drive growth and innovation,” he said.

 

* SME Growth Index research is conducted independently by banking analysts East & Partners, on behalf of national working capital funder Scottish Pacific. The owners, CEOs or senior financial staff of 1257 SMEs across all states and key industries, with annual revenues of $A1-20 million.

Scottish Pacific is Australasia’s largest specialist working capital provider, helping thousands of business owners with the working capital they need to succeed. Scottish Pacific lends to small, medium and large businesses with revenues ranging from $500,000 to $1 billion. www.scotpac.com.au

Note to journalists:
Scottish Pacific CEO Peter Langham is available for commentary this week on how the Federal Budget will impact SMEs.

Full SME Growth Index results for Government SME Priorities question available on request.

For information and interviews contact:
Kathryn Britt
Cicero Communications
Tel: 0414 661 616
[email protected]

Our Scottish Pacific SME Growth Index is a twice-yearly snapshot of Australia’s small to medium sized business sectors showing cashflow issues that many businesses face today, below is the first of six key insights found in our March 2018 report:

SMEs expecting growth but opportunity lost.

Half of the SMEs surveyed forecast positive growth revenue for 2018, estimating on average a 4.3% revenue increase.

The 50.2% of Australia’s SMEs forecasting positive growth revenue is the highest since the March 2016 Scottish Pacific SME Growth Index (but well short of the high of 62% in September 2014).

However, nine out of 10 SMEs (92.7%) indicated that problems with cash flow prevented them from generating more revenue in the past 12 months.

One in five SMEs (21.1%) said they were unable to take on new work because of cash flow restrictions.

These findings highlight the fundamental role that effective cash flow management plays in driving business growth.

When asked how much additional revenue could have been generated over the previous 12 months had cash flow been better, only 7.3% responded that better cash flow would not have led to more revenue.

Almost a quarter said they could have grown revenue between 10% and 25% with better cash flow, around a third said revenue could have been improved between 5% and 10% and almost one in five indicated growth of up to 5%.

This foregone revenue represents, according to East & Partners analysis, $A229.8 billion in lost potential revenue. This is based on ABS data that total revenue for the $A1-20m SME segment is $A1.4 trillion, and on 1161 of 1253 SME Index respondents indicating that better cash flow could have improved their revenue by an average of 11.7%.

Yet 43.5% of SMEs reported they are not using or considering non-bank lending options to improve their access to finance.

Companies reported that issues regarding cash flow and security of cash flow were a key potential barrier to growth, with 41% of respondents noting their concern, higher even than concerns about government policies (37.4%).

This round, SMEs’ positive revenue forecasts for the first half of 2018 ranged from 1.4% to 5.7% and averaged out at 4.3%.

Given the findings regarding the impact of cash flow on potential revenue, those forecasts could be higher if cash flow concerns were dealt with adequately.

One in four SMEs (25.4%) forecast negative growth, on average dipping by 6.4% – the highest average negative growth forecast since the Index began in 2014.

Like to know more? To download the latest copy of our SME Growth Index, click here.

Our next release will be available in September 2018 and will be available on our website.

Our Scottish Pacific SME Growth Index is a twice-yearly snapshot of Australia’s small to medium sized business sectors showing cashflow issues that many businesses face today, below is the second of six key insights found in our March 2018 report:

Cash flow situation improving

“Cash is King” is the business mantra underlying the success of generations of SMEs, and the results from the latest SME Growth Index point to an improving cash position for Australia’s small business sector.

Compared to 12 months ago, two-thirds of SMEs say their cash flow is now better, with just over one in 10 indicating they are in a worse or significantly worse cash flow situation.

Of the SMEs surveyed, 26.8% reported their cash flow position was “significantly better” than 12 months ago. A further 42.1% reported their cash flow was “better”.

Of the remainder, 19.9% reported no change, 6.6% reported cash flow was “worse” and 4.5% reported the position was “significantly worse”.

When only growth SMEs are taken into account, 21.1% say their cash flow is significantly better than 12 months ago, 38.2% say better, 28.5% unchanged, 8.6% worse and 3.7% much worse.

Each round, the Index asks SMEs to identify the key drivers of and barriers to their business growth.

For growth SMEs, 61.7% name cash flow as a key barrier to their growth. When the whole SME market is taken into account, cash flow is a key barrier nominated by 41% of businesses.

It is notable that growth SMEs recognise the value of long-standing customer relationships, with Index results ranking “anchor/core customers” as the most important driver for business expansion, ahead of “great people /staff/strong team” and the very pragmatic admission of “luck/good fortune/good timing”.

While cash flow is only one factor in the profitable operation of a business, it is a fundamental aspect of building a sustainable enterprise.

For the SMEs who are undergoing difficult cash flow conditions, there are a number of options available to improve their position.

However, the survey indicates that many businesses which are seeking to improve their cash position are not taking advantage of the alternatives that are on offer to traditional bank financing.

Overall, the high number of SMEs reporting better cash flow should act as a major driver of new capital expenditure and business investment demand within the Australian economy.

Like to know more? To download the latest copy of our SME Growth Index, click here.

Our next release will be available in September 2018 and will be available on our website.

Our Scottish Pacific SME Growth Index is a twice-yearly snapshot of Australia’s small to medium sized business sectors showing cashflow issues that many businesses face today, below is three of the six key insights found in our March 2018 report:

Differentiating a growth SME

Some clear patterns of SME behaviour emerge when you segment the SME Growth Index responses given by growth and non-growth businesses.

The following characteristics differentiate common strategic financial and business decisions undertaken by growth and non-growth SME owners.

A typical growth SME is:

• Either already using or considering the use of non-bank funding options (5 times more likely to than non-growth SMEs)
• More likely to consider cashflow and red tape as a business growth barrier
• Less likely to rely on credit cards to fund their business
• More likely to pro-actively make arrangements with the ATO to handle tax payments
• More likely to be planning new products, new services or both

A typical SME with declining or stable revenue is:

• More likely to use merchant cash advances to provide working capital and personal credit cards to ease cashflow
• More likely to consider their growth is being blocked by taxes, and credit availability/conditions
• More likely to offer discounts for early payment
• More likely to use a debt collection company to recover debts
• More likely to reduce their overall customer numbers and overall sales to manage working capital
• Spending more time than growth businesses on chasing invoices
• Less likely to be using or considering non-bank solutions

For growth SMEs using alternative lending options, debtor finance is by far the most popular working capital choice.

The alternative working capital options used by SME respondents in 2017 were: debtor finance (used by 77%), merchant cash advances (23%), P2P lending (10%), crowd funding (9%) and other online lending (5%).

Given the prolific media profiling of the growing fintech market, these results may seem surprising. However, the Index polls SMEs with a turnover ranging from $1 million to $20 million and it is likely that most of the current fintech take-up is from start-ups and small businesses coming in under the $1 million revenue mark.

Those SMEs that are growing are growing strongly (which is to be expected, given the low interest rate environment). Amongst growth SMEs, 36% plan to introduce new products in 2018, 56% are planning new services and 6% are planning both.

The Index indicates that declining businesses are feeling the heat. One in four SMEs forecast negative growth, with the average revenue drop of 6.4% being the highest average negative growth forecast since the Index began in 2014.

There is certainly scope for static or declining revenue growth small businesses to look more broadly at ways to finance their enterprises that would contribute to growth.

July 2, 2018

Australasia’s largest independent provider of working capital to SMEs, Scottish Pacific, has welcomed ASBFEO’s Affordable Capital for SME Growth inquiry recommendations.

Ombudsman Kate Carnell has released eight recommendations to increase the supply of capital and raise SME business owners’ awareness of alternative sources of finance outside traditional banking.

Scottish Pacific’s Chief Customer Officer Ben Cutler highlighted ASBFEO’s plans to develop a financial products guide so that business owners know what funding options are available and best suited to them.

“As the ASBFEO report indicates, and our own SME Growth Index research and 30 years’ experience of working with business owners shows, SMEs can become “rusted on” to their banks. This means they might not be looking for, or be aware of, other credible funding options,” Mr Cutler said.

“ASBFEO’s report quotes ABS statistics that only 15% of all businesses apply for debt or equity finance, and 90% are approved – with the vast majority of SMEs not even applying for funding. They highlighted that banks say only one in a hundred business owners over 30 years of age would consider changing banks.

“This finding is backed up by our SME Growth Index research, which shows that fewer than 5% of business owners actively keep an eye out for credit facilities that fit best with their business. 50% don’t ever get around to reviewing their primary bank relationship and only 20% review this regularly,” he said.

Scottish Pacific consulted with ASBFEO for their Affordable Capital for SME Growth inquiry.

Funding options for business owners

ASBFEO’s report says business owners will benefit from a clear understanding of the different forms of capital, and that SMEs and their advisers need to determine how much capital they require and also what type of product best fits their needs.

The report referenced the current poor level of awareness by business owners about funding options, citing figures from a recent RBA roundtable: the total Australian market for debtor finance is approximately 4,500 but nearly 65,000 SMEs could be utilising these products.

“Scottish Pacific has a 30-year history of funding thousands of business owners’ growth aspirations, with a style of funding that doesn’t put the family home at risk,” Mr Cutler said.

“So, it is frustrating to think that 65,000 businesses – more than 95% of the eligible market – could benefit from this style of finance, yet many are not aware of the option. Along with government and industry bodies, we’re trying to change this situation.

“It’s great for business owners to have wide funding choices and any effort the Ombudsman makes to put more options in front of SMEs, such as an SME Guide to Financial Products, is very welcome.”

The Ombudsman’s recommendations outline initiatives to increase the supply of capital and inform and prepare SMEs to seek capital, with a better understanding of all the funding options available.

“Recommendation Six is for business owners to work with their trusted advisers to get their enterprises finance-ready. We work closely with key introducers, brokers and accountants, and we see there is a vital role for them to play in helping business owners source funding, and be funding-ready,” Mr Cutler said.

Funding SMEs without putting the family home on the line

The Affordable Capital for SME Growth report points out that the banks’ risk-weighted appetite, focused on real estate, limits the lending available to Australia’s SMEs.

It states that home ownership in the key entrepreneurial period of life (ages 25-34), is down by over 30% over the past 25 years, and with some forecasters expect housing markets to decline this could have a major impact on business owners’ ability to access funds.

“Ever since the Global Financial Crisis, banks have required enhanced levels of real estate security for SME loans,” Mr Cutler said.

“This has driven business owners’ interest in alternatives to the banks, including debtor (invoice) finance, fintech solutions and crowd-sourcing.

“Scottish Pacific is the independent market leader in providing funding options that don’t put SME owners’ family home on the line, instead it secures funding linked to the business’ accounts receivable so that the funding line grows in line with the business.”

Mr Cutler suggested business owners and their trusted advisers should talk to the different alternative lenders, as well as the banks, to find the right style of funding for their business.

“When you are talking to lenders, get a feel for who is here to stay with you in good times and in bad and who is able to make things work for your clients. It really pays to broaden your working capital horizons.”

 

The Affordable Capital for SME Growth Report, based on ASBFEO’s inquiry to address the funding gap for small to medium sized enterprises, is available on ASBFEO’s website.

Scottish Pacific (ASX:SCO) is Australasia’s largest specialist working capital provider, who for 30 years have been lending to the owners of small, medium and large businesses, with revenues ranging from $500,000 to $1 billion.
Members of the public can sign up to access a free copy twice a year of the latest SME Growth Index.

For media information contact:
Kathryn Britt
Cicero Communications
Tel: 0414 661 616
[email protected]

Our Scottish Pacific SME Growth Index is a twice-yearly snapshot of Australia’s small to medium sized business sectors showing cashflow issues that many businesses face today, below is the fourth out of the six key insights in our March 2018 report:

How SMEs choose to fund growth

If Australia’s small to medium enterprises had a collective Facebook page, their relationship status with traditional banking would have to be: It’s complicated.

The H1 2018 Scottish Pacific SME Growth Index reveals the ongoing knotty state of the association between small business and their main financial partners.

While the cost of credit is low, small business owners seem frustrated at the process required to tap into those cheap sources of finance.

For SMEs with plans to invest in expansion over the next 6 months, 24% of them report they will fund that growth by borrowing from their main relationship bank – continuing a downward trend, and well short of the high of 38% who nominated this option to fund growth in the first round of the Index in September 2014.

21.7% of SMEs say they plan to use non-bank lenders to fund upcoming growth (with 90.8% planning to use their own funds).

Non-bank lending intentions have trended upwards since the first Index, closing the gap between bank and non-bank lending intentions. Despite these intentions, more than 91% of SMEs responded in H1 2018 that in the previous 12 months they had not accessed any non-bank lending options to provide working capital for their business.

So while SMEs seem unsatisfied with traditional banks, they are not yet fully accessing opportunities available to them in the non-banking sector.

SMEs are predominantly funding business growth from their own funds: nine out of 10 SMEs that plan to invest in their business in the next 6 months say they will use their own finances. This outcome continues a trend of self-financing reported since the first SME Growth Index in 2014.

There are questions as to whether self-funding is the most productive use of scarce cash.

A shift in SME thinking? Both the Productivity Commission and the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) are advocating for SMEs to have better and more equitable access to business funding. The Productivity Commission’s draft report into the Australian financial system found the most uncompetitive markets included small business credit and stated that non-banks should have better access to this market.

The latest SME Growth Index highlights that around one in 10 SMEs used alternative lending options in 2017. Of those accessing working capital from outside their usual bank, the clear majority (77%) utilised debtor financing.

Almost half of SMEs (47.6%) said they would consider non-bank lending options and 43.5% neither used nor considered non-bank lending options in 2017.

This indicates there is a disparity between SME intentions to use alternative lending, and their actions – is it for reasons of lack of time, level of difficulty or competing priorities that SME owners place moving lenders into the too-hard basket?

Growth SMEs were five times more likely to use alternative lending options than declining growth SMEs, perhaps an indicator of business necessity moving owners from beyond intention into taking action.

Like to know more? To download the latest copy of our SME Growth Index here.