A business lender’s analysis of its almost $1 billion in loans has revealed the extent to which such finance is being used to keep SMEs open, just as the nation awaits the final report from the banking royal commission.
One in four of the businesses to have borrowed money from Prospa between 2013 and 2018 were uncertain they would have remained afloat without the injection of cash from their loan.
A large proportion had used the funds not for expansion or investment but for everyday operations, in the form of either working capital (32 per cent) or purchasing inventory (12 per cent). A further 12 per cent had used a loan to buy tools and machinery.
The lender also suggested that business financing has a direct benefit to the wider economy, with every $1 million lent effectively creating 57 full-time jobs.
Prospa’s joint CEO Greg Moshal said the findings are evidence of the need for ongoing support of the business lending sector, particularly outside of the major banks.
“Our lending makes a difference and underscores the importance of the federal government’s decision to make available $2 billion in loans for small businesses,” he said.
“These funds are critical to support the engine room of the Australian economy – at a time when large banks are tightening their credit policies.”
Meanwhile another SME lender, Judo Capital, has suggested that a funding gap between what is being lent and what would be utilised if made available to businesses has surpassed $83 billion.
My Business' sister publication The Adviser reported research by Judo as finding the average SME applied to borrow $800,000 last year, but those successfully obtaining finance only secured $600,000 on average.
“[The] research confirms what we understood to be true, namely, that there is a big and growing gap between what the banks currently offer and what SMEs want and need,” it quoted the lender's chief customer officer Chris Bayliss as stating.
Commissioner Kenneth Hayne handed his final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry to the Governor-General on Friday (4 February), which could have major implications for the finance sector, including business lenders.
Observers have suggested it will focus not on more regulation but on better oversight and compliance of existing rules. This is particularly likely in the case of small business lending, given that banks and lenders got off fairly lightly in the dedicated round of hearings in May 2018.
Consumer satisfaction with banks, meanwhile, has shrugged off negative sentiment during the first nine months of 2018, posting consecutive monthly increases in October, November and December, according to Roy Morgan.
Satisfaction levels with the 12 largest banks rose slightly to 78.2 per cent in December, up from 78.1 per cent in November. While still lower than a year earlier, the December result sits above the long-term average of 74.3 per cent, and well above the low point of 58.7 per cent recorded back in January 2001.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.