Business growth limited by lack of credit

Can’t get funding to grow your business? You are not alone. A survey shows that small and medium sized businesses (SMEs) in Australia are constrained in their growth because of their inability to access credit readily.

The 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.

That meant most of them had to delay plans for expansion or hold back on hiring extra staff.

Funding came primarily from banks, with 64 per cent sourced from the big institutions, with regional banks providing 13 per cent; credit unions came up with 11 per cent of the overall funds sourced, with business owners turning to other providers such as online or non-bank lenders for 12 per cent of the credit.

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 Osborn.

“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.

Where to go for help in funding? Check some of the options available in the franchising sector here.