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Majority of SMEs opt for dual capital channels as business investment surges

Four in five SMEs now partner with more than one lender for their working capital needs, with specialised services including Invoice Finance, Asset Finance and Trade and Supply Chain Finance, prompting more businesses to look beyond their main relationship bank. 

The preparedness of SMEs to work with multiple lenders contributed to the preference for non-bank lending remaining at an all-time high of 47%, which is double the rate of March 2022. The key findings come as a healthy 61% of SMEs stated they plan invest in their business in the next six months – a 15% jump year-on-year – and the highest level of investment intent recorded since 2019.

The insights are contained in the latest round of the country’s longest running SME pulse check, the bi-annual SME Growth Index by ScotPac, Australia’s leading non-bank business lender.

When asked to expand on their approach to secondary working capital relationships, SME owners and operators provided the following feedback:

67% nominated ease of credit approval as the leading factor for choosing a secondary provider.

37% rated higher credit limits a top three factor when assessing non-bank lenders.

60% of SMEs that do not have a secondary lender said that jumping through the onboarding hoops of a new provider was ‘all too hard’.

Of those SMEs intending to invest for growth in the next six months, a considerable figure of 15% said they were unsure of how to fund new business investment.

ScotPac CEO, Jon Sutton, said the high level of investment intent, combined with the appetite of SME owners to explore the lending market, emphasised the need for businesses to maintain a strong relationship with their broker. 

“Despite the macroeconomic headwinds of rising wages, stubbornly high inflation and uncertainty about interest rates, Australian SMEs are continuing to invest in their businesses at near record levels,” Mr Sutton said. 

“While some of that growth can be attributed to higher input prices, the strength of SME investment intent goes beyond this factor alone. An emerging driver is choice. Non-bank lending has doubled in the past 18 months as SME owners and brokers have become increasingly aware of the opportunity to find fast, flexible and tailored working capital solutions, with easier onboarding than ever.

“With a large number of SMEs intending to self-fund their growth plans, or still unsure of how to fund new investment, there are some great opportunities in the current market for brokers to help thousands more SMEs while growing their own business,” Mr Sutton said.

Mr Sutton said ScotPac has the breadth of products and experience to support more SMEs in more situations than any other non-bank lender, and its technology-enabled platform made it faster and easier than ever for SMEs and brokers to find the right solution.

“Speed, ease and simplicity remain the key decision drivers for business owners when choosing a secondary working capital provider,” Mr Sutton said. “Whether SMEs are looking to invest in assets, inventory or expertise, ScotPac has the tools and the team on hand to quickly deliver a package to match their needs.”

About the SME Growth Index:

Sectors represented in the survey included Manufacturing (14%), Property & Business Services (14%), Retail (11%), Wholesale (12%), Personal and other Services (10%), Construction (10%) and other industries including Transport & Storage, Mining, Agriculture, Media, Hospitality, Finance & Insurance (non-bank) and Electricity.

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