Major banks have historically played a bigger role in supporting small businesses, but for the first time Aussie business owners are turning away in search of something different.
This is according to the latest SME Growth Index by East & Partners on behalf of Scottish Pacific, which revealed that a low 18% of small businesses would opt to borrow from a major bank to fund their growth compared to 38% back in 2014.
While small business loan approvals from banks are at 94%, according to the Australian Banking Association the amount of small business loan applications to banks has plunged by one third over the last 5 years.
Over that time a bunch of alternative lenders have come into the SME sector, many of them offering more efficient application processes, credit decisions that reflect the strength of a business (rather than relying on mortgage underwriting), great customer service and above all competitive lending products.
But Scottish Pacific CEO Peter Langham says that while it’s great that business owners are aware of the options out there, they still haven’t fully grasped the advantages of the alternatives available to them, as 83% still end up using their own hard earned cash instead of taking out a business loan.
“Some business owners remain unaware of funding alternatives. There’s a much larger group of SME owners who are aware of non-bank funding but don’t fully understand how it works,” he said.
“They are too busy to research it, so put this in the “too hard” basket. When they can’t secure bank funding, they just tip their own money in to fund growth.”
So if you’re unsure about where to turn for a business loan, say hello to a few lenders that could be your perfect fit and help you kick your 2019 business goals before the year draws to a close.