Often rejected by mainstream lenders, small businesses can turn to brokers for help
Six out of ten business operators have said previous major political events, such as elections, have caused a negative impact on their business, giving brokers with small business clients more opportunity to help them access funding.
Thirty percent of them reported revenue decline in these events, according to research conducted by SME lender OnDeck Australia.
“The possibility of a change in Federal government often sees both consumers and businesses put major purchases or projects on hold. This has a direct knock-on effect on the SME community,” OnDeck Australia CEO Cameron Poolman said in a statement.
Think ahead
As opinion polls don’t always accurately capture the sentiments of voters, SMEs are confronted with uncertain future government policies, and only 17% of them claim to be “completely prepared for the Federal election”.
“While an election will change the goal posts, the key for Australian small businesses will be to keep informed, make a plan, and think ahead to create a foundation for success,” Poolman said.
The plan should include addressing cashflow, as 59% of SMEs believe better access to cashflow would help their business endure the disruption of the election. However, OnDeck found that SMEs usually experience a high rejection rate with mainstream lenders.
An attractive solution
With one out of four SMEs seeking funding have been turned down by banks in the past, many business owners resorted to dipping into personal funds or asking friends and relatives for additional working capital.
Based on the research, among the SMEs that had successfully secured a bank finance, 29% experienced a protracted application and approval process, which negatively affected their business activities. In response, one in five SMEs said they were open to using an online lender.
Having a faster and less onerous assessment process, the online lending channel presents an attractive solution to SMEs, even if they’re qualified for bank loans.
SME lending provides brokers significant opportunities as well. According to Poolman, one in four existing home loan clients of a broker is likely an SME owner, and this provides the broker a ready base to offer his or her services in the SME lending space.
“It makes SME lending a win-win for brokers – good for their customers and good for their own business growth,” Poolman said.
