Australian SMEs Favor Alternate Lending to Fund Business

22. March 2018.

Australian small and medium size enterprises (SMEs) are turning to non-banks to secure funding for their business. The latest issue of the Scottish Pacific SME Growth Index revealed that, between 2014 and 2018, the proportion of SMEs intending to use banks for funding has dropped from 38% to 24%. It also found that non-bank funding is now the first option for 22% of SMEs, up from 11% in 2014.

Peter Langham, CEO of Scottish Pacific said: “Alternative lending options, including debtor finance and P2P lending, offer SMEs the chance to fund growth without using property as security. Business owners need to know they have a credible choice when they are looking for funding.”

Moreover the report noted that 47.6% of SMEs, who have not used any non-banking lending options in the last 12 months, would be interested in using these options in the future.

“Fintech lending and finance firms are increasingly providing the capital that these businesses need to invest and grow, through a focus on innovation and customer needs,” said Fintech Australia chair Stuart Stoyan.

“Fintech offerings include creating seamless online loan applications and software that analyses business financial data to deliver the best possible deal. Some are also applying innovative new finance business models, directly linking investors and borrowers, or helping businesses to unlock the value of their unpaid invoices. In doing this, Fintechs are providing new options for businesses.”

There is an estimate 2.1 million SME businesses in Australia employing more than 7.3 million people or about 68% of Australia’s overall workforce.

Figure 1: Fintech Australia member ecosystem map

Fintech Australia member ecosystem map

Source: Fintech Australia 2017

Alistair Lamond, Co-Founder of Skippr said: “Generally what sets Fintechs apart from the banks, is how they use data to improve customer experience and manage risk. We have only scratched the surface in terms of capabilities. The true winners are building trust through continuous engagement tackling bigger problems than just lending.”

Charlotte Petris, CEO of Timelio said: “We have seen a 300% growth in demand for funding to SMEs in the last 12 months, driven by an increase in awareness of flexible funding alternatives that support their expansion plans.”

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