SMEs are not taking enough advantage of alternative lenders
More SMEs are looking for funding and seeking financial advice than half a year ago, but they are still finding it tough to access funding, according to a new Prospa survey.
The six-monthly survey conducted by RFI and the SME Banking Council showed the high-inflation, high-interest-rate macro-economic environment was driving SMEs to seek professional advice about their finances, with around a quarter of the 500 businesses polled saying they had sought, or would seek professional advice about their business finances.
SMEs that had sought funding had not always been successful, with only 18% of the 37% of businesses that applied for a loan receiving the full amount they asked for, compared to 30% in November last year. A further 14% only received a portion of what they applied for, down from 18% in the last survey.
Despite this, most SMEs expected they would need more financing the next 12 months, with purchasing equipment (41%), maintaining cash flow (41%) and business expansion (32%) cited as the key reasons for seeking funding.
Around 65% of SMEs were planning to apply for funding in the next six months. Top of the list for SMEs when seeking a loan was competitive rates (48%) and the ability to bank online (34%). Other things they consider include flexible repayment methods, the ease of the application process, and good customer service.
Not taking enough advantage of non-banks
Of the 65% of SMEs planning to seek funding in the next six months, just two out of three were aware of alternative lenders, and just one in three would consider taking out a loan with one.
Of those SMEs that did not choose an alternative lender, 29% said it was due to the ability to access funds quickly, 26% said it was because of the lower fees, and a further 24% said it was because of the quality of the advice received.
Those who considered applying to access funds via an alternative lender said it was because non-banks were more willing to listen to the business’ specific needs (35%), and because they had more flexible repayment options (28%). Trust was an important factor for 27% of SMEs, who said they felt safer and trusted the alternative lender to a greater degree with their financial information.
Most SMEs that would not consider approaching an alternative lender for funding said they simply had not thought about it (27%), while others said it was because alternative lenders were less trustworthy (18%) or because they had higher fees (17%), the Prospa survey showed.
Adrienne Begbie (pictured above), Prospa NZ managing director, said there’s a huge opportunity for brokers to diversify into small business lending.
“We know over half of small business owners expect to need funding in the next six months and the chances are only a handful will actually get the full amount they apply for,” Begbie said. “Now is the perfect time for brokers to educate their small business clients about the benefits of alternative lenders and bust any myths that may be preventing them from considering its services.”
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