Data shows more SMEs relied on non-banks during COVID

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    ScotPac’s latest SME Growth Index has revealed an increase in the number of small businesses turning to non-bank lenders to fund their growth. According to the findings, about 28% of small businesses currently rely on non-banks, up 8% from 12 months ago. CEO Jon Sutton told MPA, “This shows us that more SMEs turned to non-bank lenders to help them with their cashflow and working capital needs to get through the pandemic and beyond.

    Read more: Non-banks rising after loan origination milestones

    “At the start of 2020, 52% of small businesses in the SME Growth Index were forecasting revenue growth, with 22% anticipating negative growth and 26% believing revenues would remain stable.

    “Now, 12 months down the track, only 48% are forecasting revenue growth, 25% expect their revenue to decline and 27% believe revenue will remain stable. While this shows the impact of the pandemic, the good news is that these revenue forecasts are a lot more optimistic than six months ago.”

    This paints a positive picture, he said, affirming that “the small business sector is heading in the right direction.”

    “It is proof that small business owners are hardy folk who find ways to get on with it and make a go of their business,” he added.

    Brokers play a central role in the country’s economic recovery because they understand the importance of cashflow and can point their SME clients towards the best funding solutions, he said.

    Read more: Helping SME clients navigate the recovery

    The growth index showed while almost half of small businesses were optimistic about revenue growth, about 36% were worried they would have to close or sell if market conditions didn’t improve. Sutton said both of these types of business relied on adequate funding.

    “In the first case, they’ll need funding that will allow a business to take advantage of opportunities they’ve seen in the market as the economy recovers,” he said. “In the second example, they’ll rely on funding that will provide steady cashflow if they’ve come off JobKeeper support and are eyeing their ATO obligations.”

    In any case, the figures represent excellent opportunities for brokers, Sutton affirming that brokers should discuss the opportunities and risks for the next six months with their small business clients.

    “Our Index results show two-thirds of small businesses are planning to restructure in 2021 to help get through the impact of the pandemic,” he said. “This offers a considerable business opportunity for brokers to help them find the right funding as they restructure.

    “If there are working capital shortfalls, there’s a role for brokers to play in securing new lines of business funding.”

    He added that brokers should also talk to clients who have been impacted by changes in the supply chain finance sector in order to reassure them there are alternative working capital solutions that could help them deal with cashflow challenges, such as invoice finance – a type of funding that ScotPac specialises in.

    “It’s also worth noting that many businesses will be looking at merger and acquisition opportunities in 2021 as they hunt for ways to unlock additional capital,” he said.

    Kate McIntyreKate McIntyre is an online writer for Mortgage Professional Australia. She has a wealth of experience as a storyteller and journalist for a range of leading media outlets, particularly in real estate, property investing and finance. She loves uncovering the heart behind every story and aims to inspire others through the artful simplicity of well-written words.
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