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Scottish Pacific Says Alt Lenders Rise In Aussie SMBs' Ranks

For the first time since East & Partners began surveying Australian small businesses about their future growth plans, researchers have found that entrepreneurs are more likely to turn to an alternative lender than a traditional bank for capital.

Reports in Dynamic Business this week said East & Partners has released the September 2019 SME Growth Index on behalf of Scottish Pacific. The report surveyed more than 1,000 small and medium-sized businesses (SMBs) in Australia and found that, for the first time in the report's five-year history, small businesses are more interested in capital from non-bank players.

Between 2014 and 2019, the percentage of SMB owners planning to use their traditional bank as their main source of funding halved from 38 percent to 18.3 percent, reports said.

Meanwhile, plans to use non-banks reached the highest level yet, with 18.7 percent planning to work with such providers.

Only 2.6 percent of SMBs said they would not consider a non-bank lender, down from 4 percent a year ago.

Though the data suggests small businesses may be more likely to see capital from a non-bank lender than a traditional bank, analysts warn that on a broader level, the data could reflect decreasing appetite for financing in general. Reports noted that recent analysis from the Australian Banking Association found that small businesses' bank loan applications have dropped by one-third since 2014.

“While it's pleasing that business owners are increasingly aware of options outside a property-secured bank loan, the SME sector still has a long way to go in taking advantage of the alternatives available to them,” said Scottish Pacific CEO Peter Langham in a statement.

He pointed to the report's finding that 83 percent of businesses say they plan to finance their future growth by digging into their own coffers.

“Some business owners remain unaware of funding alternatives,” Langham continued. “There's a much larger group of SME owners who are aware of non-bank funding but don't fully understand how it works. 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.”

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NEW PYMNTS STUDY: LEVERAGING THE DIGITAL BANKING SHIFT – SEPTEMBER 2020  

The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

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