SMEs looking for more financial support for growth and COVID recovery

New research sheds light on the struggles of small businesses affected by the COVID-19 pandemic. The report, commissioned by Apricity Finance and conducted by YouGov, found that only 12 per cent of SME owners applied for finance from the outset of the pandemic in March 2020 until April this year. This figure is a concern considering over three times as many SME owners surveyed – 39 per cent – said that they had either sought finance in the past year or are planning to in the next two years.

Only 38 per cent say that they are confident they would be able to secure additional funding for their immediate needs, and 22 per cent were not aware of any alternative finance sources – such as smaller banks, credit unions, and building societies – to the “big four” banks.

“We asked about SMEs’ experiences to gain a clear picture of the growth and funding outlook for this vital sector, which we see as a gauge of overall economic trends,” Apricity Finance CEO, Linden Toll, said. “Small business is the essential driver and engine room of the Australian economy, so assessing where these businesses can best use support, whether from the Budget and government policy or through alternative funding options, is key to enabling their growth and good health.

“The ability to access a secure stream of funding to support the current vital stage in business resurgence is key to achieving a stable recovery,” Toll added.

The research also asked SMEs to identify their top two preferred government measures as part of a “Budget wishlist”. The answers were greater stimulus across the whole economy as distinct from sector-specific initiatives (48 per cent), and more tax relief (46 per cent).

“The boost in stimulus for the infrastructure sector, and the extension of the asset write off is good news for many SMEs,” Toll said. “There was a lot of initial excitement about the infrastructure stimulus in last year’s Budget, but the very high surety bonds and bank guarantees required to participate in most projects formed an instant barrier to entry. This issue needs to be addressed if the SME sector is going to benefit from these new infrastructure projects.”

The research also noted that 63 per cent of SME owners have used, or would be willing to use, their own properties (family or private home) as security as means to secure funding.

“It’s our view that these findings show a continued perception that accessing home equity is the easiest way to secure finance,” Toll said. “Couple this with new rules enabling access to higher amounts of super for home ownership and we may be looking at a situation where Australian small-business owners are putting both their present and future personal security on the line to fund their business, despite this being far from the only option.

“We were interested to see that awareness of alternative finance is higher among experienced businesses, suggesting a knowledge gap among newer players who may be missing out on opportunities,” Toll added. “Ensuring small business is made aware of the options could be a game-changer, especially for those who continue to struggle with funding for growth.”