Credit scorer shows where SME loan apps fall over

Recent studies show over half of Australia’s SMEs aren’t being funded, but a new credit information provider wants to change that.

According to the first quarterly Online Small Business Lending Index by online scoring tool SME Credit Score, 59.3 per cent of all Australian SMEs are being refused loans.

The most common reasons for loan refusals are cash flow issues and poor credit history, which accounted for three-quarters of all rejected loans, according to SME Credit Score co-founder James Watson.

“Some small businesses, especially in trades and retail industries, transact primarily in cash, and if this money never enters a bank account, it cannot be verified and can lead to a healthy business being rejected for a loan,” he said.

The index covers small businesses that have been operating for at least 12 months, with annual revenue of between $200,000 and $5 million.

Launched earlier this month, Sydney-based CreditSME, another SME credit information provider, aims to help SMEs improve their loan prospects by working with lenders and borrowers.

“[It’s] important for borrowers to understand what is being offered and how their credit profile will be assessed by the different lenders,” said Adam Welsh, founder and managing director of CreditSME.

“Rather than trying to take market share from the banks, we are forming partnerships that should help the banks improve their operating efficiency whilst also streamlining the process for SMEs and helping them source financing from the most suitable lender.”

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