The latest edition of ScotPac’s SME Growth Index reveals that non-bank borrowing demand by Australian SMEs has increased to a record high of 47 per cent, a 50 per cent increase year on year and a threefold increase since September 2018.
The report also notes that SMEs with declining growth are more likely to seek out a non-bank lender with almost 90 per cent looking to turn away from banks. Of those SMEs not considering a non-bank lending solution, 41 per cent cited a lack of familiarity with the business or brand as the major factor.
However, despite the sustained growth in non-bank lending preference, 10 per cent of SMEs said they do not know how they will finance new business investment, which ScotPac notes is an opportunity for further growth for non-bank lending.
ScotPac CEO Jon Sutton said that the non-bank borrowing findings mirrored demand from SMEs for ScotPac’s services.
“The significant growth in these non-bank lending figures are consistent with large increases in ScotPac’s client numbers and total lending over the past five years,” Sutton said. “Many of our new customers have bypassed or transferred their business from banks that are more deeply focused on the residential lending market, rather than fast and flexible business finance.
“Despite slowing economic growth, surging inflation and rising interest rates there is clear evidence that small- and medium-business owners are still looking to invest in their businesses,” he added. “That is great news for our broader economy as SMEs are the biggest employers in the country.”
Sutton noted that the non-bank lending surge provided finance brokers with a golden opportunity to diversify into business lending or expand their existing commercial practices.
“When you couple growing demand for non-bank lending with the time pressures faced by small- and medium-business owners, the role of the business broker has never been more important,” he said.
The report also reveals that 60 per cent of SMEs are planning to invest in their business in the next six months, up from 55 per cent in March 2022. This aligns with recent data from the Australian Bureau of Statistics that found the initial capital expenditure plans of Australian businesses in 2023-24 were 11 per cent higher than for 2022-23.
