Close to two-thirds of small businesses continue to turn to their banks for finance despite being initially knocked back, a new survey has shown.
A survey commissioned by online lender OnDeck has found that 23 per cent of small to medium businesses have been turned away by their bank in seeking finance.
The rejection rates rise to 37 per cent among businesses that have been in operation for less than five years.
Despite being knocked back, 65 per cent of SMEs would still try their luck with a bank, while just over a quarter would dip into their personal funds.
However, interest in alternative lending has also grown, with 42 per cent of SMEs that have previously had an application for finance rejected by a bank now considering online lending.
The survey results follow professional services firm EY’s FinTech Australia Census which found a median revenue growth of 125 per cent for Australian fintechs amid a lending squeeze.
OnDeck global chief executive Noah Breslow said it was concerning that SMEs were getting pushed back by the banks despite being the “engine room of the economy”.
“Large numbers of Australians SMEs may not be reaching their full potential either because they cannot secure bank finance, or because an inefficient and lengthy lending process is adding to the cost burden,” said Mr Breslow.
“It is important for SME owners to realise that more efficient funding options are available through online lenders. Even SMEs that meet bank lending criteria can benefit from the speed and convenience of an online lender.”
Accountants have noticed the tightening of lending, and have been on the lookout for alternative options for their clients.
“The smaller sectors always have issues with funding and expansion because they lack the brick-and-mortar and the banks have not always been flexible in that regard and that’s why a lot of the new fintechs are able to seize on that opportunity but it comes at an added cost but there are more options available,” the Institute of Public Accountants senior tax adviser Tony Greco previously told sister publication Accountants Daily.
“Once upon a time it was either the banks or the banks but in the last five years there are a plethora of fintechs out there who can provide funding and relatively quicker than a bank.”
Jotham Lian is the news editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals. With a focus on breaking news and exclusive analysis, Jotham keeps Accountants Daily readers up to date with company moves, tax updates and essential business and client strategy.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including The Sydney Morning Herald and Channel NewsAsia.