Small business stymied by inability to access credit

A survey released yesterday shows that the growth of SMEs in Australia is being significantly restricted by their inability to access credit readily.

The Businessloans.com.au Small Business Credit survey, conducted by ACA Research, found that more than 60 per cent of Australian SMEs who applied for credit last year did not receive what they were looking for. For the majority, that meant delaying plans for expansion or not hiring additional staff.

Australia’s small-business sector contributes more than $340 billion to GDP and employs almost half of our workforce.

The survey showed that around three quarters of SMEs who applied for finance in 2015-16 spent more than six hours in the process with 15 per cent spending more than 20 hours. Almost half needed to use brokers for support.

Jamie Osborn, CEO of GetCapital, said the survey highlighted the significant time spent by SMEs in the search for credit, but also a concerning lack of knowledge about where to look or what was involved.

“It’s clear from this survey that gaining access to credit is still an enormous challenge for Australian SMEs, with many spending significant time seeking out credit and then often not getting the right outcomes for their business. This has a dampening impact on the growth of the SME sector and the Australian economy,” said Jamie.

“A big part of the problem for SMEs is not knowing where to look. Businesses surveyed indicated that they rely heavily on existing bank relationships to source credit. This means many SMEs approach only one part of the market and in doing so, make false assumptions about credit availability and eligibility requirements. For example, 34 per cent of businesses surveyed didn’t apply for credit because they thought they would be unable to get it without collateral – yet there are good unsecured options in the market.”

The survey also highlighted the important role that brokers and advisers play in the SME finance market, with around half of the businesses saying they used an intermediary to help find finance for their business. “Brokers and advisers play an important role in the market and can help SMEs better navigate their financing options,” said Osborn.

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