The majority of businesses is shying away from seeking finance despite the Australian Banking Association claiming that 94 per cent of all SME loans are being approved by banks, in research that also explored business survival rates.
ABA chief and former Queensland Premier Anna Bligh said that banks and lenders have plenty of appetite to lend to small and medium business, with 94 per cent of SME loan applications approved by lenders.
This, combined with an environment of record low interest rates, she suggested, provides an opportunity for SMEs to raise capital to fund new growth opportunities.
“Despite this, small business loan applications have declined by a third (33 per cent) since the 2014 calendar year. Encouragingly, there has been a lift in the June quarter. It’s early days, but we hope that it will continue,” Ms Bligh said.
“There could be many reasons for the downturn, including believing that they won’t get a loan, thinking it takes too long, deeming the application process too complex or they’re simply borrowing money from other sources.”
Ms Bligh’s comments came on the same day that the ABA released its SME lending in Australia economic report, which suggested that almost a third of Australians (9 million) have dreamed about starting their own business, but that money and access to it is the top restraint on this ambition.
Most businesses not applying for finance
As already noted, Ms Bligh acknowledged a fall in loan application volumes.
The ABA’s report found that in the 2018 financial year, only 12 per cent of micro businesses (those with zero to four employees) had sought business finance.
This progressively increased with the size of the business, although larger companies with over 200 staff — while having the largest proportion of finance seekers — still had only 34 per cent applying for finance.
Business survival rates
Among the report’s other findings was a breakdown of the survival rates of businesses between June 2014 and June 2018.
Perhaps unsurprisingly, survival rates increased with the size of the business.
Of the 1,273,769 businesses with zero employees in 2014, only 60 per cent (758,922) were still operating four years later.
Among companies with one to four employees, the survival rate jumped to 70 per cent, with 395,953 of 2014’s 571,206 firms still trading.
Of the remaining 199,965 small businesses (those with five to 19 employees), 78 per cent or 155,270 were still in operation.
Businesses that had 20 or more employees in 2014 had an 82 per cent survival rate of the four years, decreasing in volume from 55,222 to 45,492.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.