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Update: The Australian and New Zealand operations of Bibby Financial Services were acquired by Scottish Pacific Business Finance in late 2015 to create Australia’s largest non-bank invoice finance specialist. Welcome to 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 fourth of six key insights found in our September 2018 report:

What attracts SMEs to non-bank funding

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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.

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