New lending options boost small business and the economy; changes to lending markets over the last decade means there are now a wide range of finance options available for small businesses that don’t require property as security, according to a new report by the Productivity Commission.
“Every year, one in six small and medium enterprises (SMEs) seeks finance to fund and grow their business. Traditional SME loans are usually secured by property. But spurred by new technology and new data, lenders now have more capacity and confidence to lend to SMEs using other forms of collateral or even lending unsecured,” Productivity Commissioner Catherine de Fontenay said.
There are 2.4 million SMEs in Australia employing more than 7.4 million Australians. “These businesses are the engine room of the Australian economy and a healthy small business sector is vital to the economy, especially as we recover from the COVID pandemic,” Commissioner de Fontenay said.
The report points to a significant evolution in the lending market for SMEs over the last decade, driven by technology and new business models.
While SMEs still mainly obtain their finance from the major banks, there is now a much broader range of products available from traditional and new lenders.
“A broader range of products can provide SMEs with finance more quickly and flexibly, allowing them to seize opportunities. Some SMEs may even be able to borrow for the first time,” Productivity Commissioner Malcolm Roberts said.
SMEs may not be aware of all their lending options and may not feel confident about new options. Brokers can help match them with appropriate lending options.
“Finding the right product may be challenging, but the benefits can be significant,” Commissioner Roberts said.
The report found the finance market is increasingly competitive, which will drive further improvements in access to finance for SMEs.