New research indicates that the changes to lending markets over the last decade have provided a wider range of finance options available for small businesses, wherein they no longer require property as loan collateral. The Small business access to finance: The evolving lending market report, released recently by the Productivity Commission, reveals that technology and new business models that have been introduced in recent years have contributed to the significant evolution in the lending market for SMEs.
“Every year, one in six SMEs seeks finance to fund and grow their business,” Productivity Commissioner Catherine de Fontenay said. “Traditional SME loans are usually secured by property. But spurred by new technology and new data, lenders now have more capacity and confidence to lend to SMEs using other forms of collateral or even lending unsecured,
“These businesses are the engine room of the Australian economy and a healthy small business sector is vital to the economy, especially as we recover from the COVID pandemic,” de Fontenay added.
The report also found the finance market is increasingly competitive, which can help drive further improvements in access to finance for SMEs. While many SMEs still mainly obtain their finance from the major banks, there is now a much broader range of products available from traditional and new lenders.
“A broader range of products can provide SMEs with finance more quickly and flexibly, allowing them to seize opportunities. Some SMEs may even be able to borrow for the first time,” Productivity Commissioner Malcolm Roberts said.
The Productivity Commission warn that SMEs may not be aware of all their lending options and may not feel confident about new options, pointing out that brokers can help match them with appropriate lending options.
“Finding the right product may be challenging, but the benefits can be significant,” Roberts said.