A change is happening in the Australian business financing market. Loyalty to traditional banks has been dwindling as small and medium-sized businesses increasingly diversify their finance providers and move towards ‘multi-banking’. 

Finance challenges for smaller businesses

The Reserve Bank of Australia (RBA) reports that smaller businesses have typically found it difficult to access finance through traditional lenders, such as banks, on terms that suit their needs.  

Smaller businesses often must put up personal collateral, such as their homes and face non-price barriers because of their smaller scale, lack of business history and less diversified nature.  

The RBA says the banks’ approval processes are often difficult and can be costly for small businesses that do not have access to the finance teams of larger businesses. 

Strong uptake of non-bank lenders

It’s no surprise that such businesses are embracing new breeds of non-bank lenders, with different risk appetites and approaches to lending. Recent research confirms that 80% of Australian small and medium-sized businesses now have more than one finance provider, despite the potential added costs. 

These extra providers are often non-bank lenders. That means that businesses are retaining their traditional banks because of the wide range of services they offer and the need to have a traditional bank account, but they are supplementing this with non-bank lenders.

Why more businesses are moving away from banks

Business owners are becoming more price-sensitive in the current high-interest rate environment and increasingly digitally savvy. This has made them more willing to look for alternative funding options and this has lessened their loyalty to traditional lenders.

Ease of approval

Research from ScotPac’s latest SME Growth Index found that 67% of SMEs nominated ease of credit approval as the leading factor for choosing a secondary provider.

Customer service

Another attraction was more support from their relationship management teams. Because non-bank lenders are smaller and less bureaucratic than banks, they also offer more personalised and bespoke services to busy and time-poor business owners. 

Proactive mindset

When it comes to the attributes a secondary lender needs to show to win more of their business, more than half of the businesses polled by ScotPac said they were persuaded by a lender’s level of proactivity.


Two-thirds listed the ease of attaining credit facilities as a major reason for their choice. SMEs have traditionally struggled for funding when they have fallen outside the traditional loan criteria of the big banks, which are often seen as set in their ways of evaluating borrowers. 

Non-bank lenders tend to take a wider view of their customers rather than just looking at their credit scores. And they will focus on the exit strategy of a borrower rather than on loan serviceability or credit history. They also tend to be more accommodating to those who are self-employed. Plus, they are more prepared to look at clients with messy paperwork – for example, those without standard documentation such as pay slips or who have yet to lodge their latest tax returns. Added to that, non-bank lenders usually don’t require SMEs to use property or other assets as collateral for their loans.


Many businesses have found that non-bank lenders are generally twice as fast at approving loans than banks. Indeed, the average bank loan approval stretched to 35 days and sometimes beyond 55 days.

Bespoke advice

Another factor behind the diversification of smaller businesses into non-bank lending is that more business owners are turning to brokers for advice. Brokers typically have a wide network of lenders and expertise in what’s available, as well as in-depth knowledge of their clients’ businesses, which can help them to find the right solution faster. 

Contact us for tailored funding solutions for your business.