Home Accountant SME lending options on the rise, awareness lags: Productivity Commission

SME lending options on the rise, awareness lags: Productivity Commission

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A new report from the Productivity Commission has found that access to finance is now easier than ever, with the emergence of new and established non-bank lenders no longer requiring property security as collateral.

The report found that extensive accounting and banking data now provides lenders with richer and more reliable information about potential borrowers, allowing more creditworthy companies to access finance at lower cost or on better terms.

“Each year, one in six small and medium-sized businesses seeks funding to finance and develop their business,” said Catherine de Fontenay, Productivity Commissioner.

“Traditional SME loans are generally secured by real estate. But spurred on by new technologies and new data, lenders now have more capacity and confidence to lend to SMEs using other forms of collateral or even unsecured loans.

However, despite the wider range of lending options in the market, 91% of the $ 423 billion in total SME loans outstanding continued to be issued by banks.

The report believes that the imbalance stems from a lack of knowledge of new lenders and products and a lack of confidence.

“Given the historical dominance of banks in the Australian market, some other lenders have stated that” the low awareness of SMEs [and a] Lack of confidence “are major challenges in lending to these clients,” the Productivity Commission report said.

“Even though they are aware of the variety of lending options available in the market, SME borrowers should have confidence in a particular lender and a particular product before applying for financing. “

The Productivity Commission believes that brokers and other referral channels, such as accountants, can play a greater role in educating SME borrowers about the wide range of lenders and products in the market.

“Finding the right product can be difficult, but the benefits can be significant,” said Productivity Commissioner Malcolm Roberts.

“A wider range of products can provide SMEs with faster and more flexible financing, enabling them to seize opportunities. Some SMEs may even be able to borrow for the first time.

SME lending options on the rise, awareness lags: Productivity Commission

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Last updated: 01 October 2021

Posted: 04 October 2021

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