YouGov research, conducted on behalf of business finance company Apricity Finance, in the last week of April 2021, found the traditional forms of funding for small businesses have now become too hard for them to access.
The national survey canvassed a representative sample of 503 business owners with fewer than 50 employees.
Apricity Finance CEO, Linden Toll said the research shows of those who sought, or would seek, secured finance, 63% have used or would be willing to use their own properties (family or private home) as security.
“It’s our view that these findings show a continued perception that accessing home equity is the easiest way to secure finance. Couple this with new rules enabling access to higher amounts of super for home ownership and we may be looking at a situation where Australian small business owners are putting both their present and future personal security on the line to fund their business, despite this being far from the only option,” said Mr Toll.
“The research found that established businesses (10 or more years old) with an annual turnover of more than $500,000 are more likely than those with less, to have used, or to be aware of alternative funding sources other than the Big Four banks.
The findings found more than one in five (22%), the equivalent of more than half a million small business owners, are not aware of any alternative sources of financing.
“We were interested to see that awareness of alternative finance is higher among experienced businesses, suggesting a knowledge gap among newer players who may be missing out on opportunities. Ensuring small business is made aware of the options could be a game changer, especially for those who continue to struggle with funding for growth,” said Mr Toll.
The research shows that of small business owners:
- only 12% applied for finance since the outset of the pandemic in March 2020 until April this year
- the 12% figure is from the broader total of 39% who said they had either sought finance in the past year, or are planning to in the next two years
- a similar proportion of businesses who have or intend to seek funding needing it to simply stay afloat (45%), as those who have used or plan to use it to fund growth (44%)
- while the Big Four banks remained the most common source of funding, more than one in five (22% – or nearly half a million businesses) were not aware of any alternative finance sources outside other traditional lenders such as smaller banks, credit unions, and building societies
- less than four in 10 (38%) say they are confident they could secure additional funding for immediate needs; while as many as 15% say they are not at all confident.
“We asked about SME’s experiences to gain a clear picture of the growth and funding outlook for this vital sector, which we see as a gauge of overall economic trends,” said Mr Toll.
“The ability to access a secure stream of funding to support the current vital stage in business resurgence is key to achieving a stable recovery,” Mr Toll said.
Mr Toll’s views are consistent with other insights from the research, which asked SMEs to identify their top two preferred government measures as part of a “Budget wishlist”.
The top-ranking answers were greater stimulus across the whole economy as distinct from sector-specific initiatives (48%), and more tax relief (46%).
“The boost in stimulus for the infrastructure sector, and the extension of the asset write off is good news for many SMEs,” said Mr Toll.
“There was a lot of initial excitement about the infrastructure stimulus in last year’s Budget, but the very high surety bonds and bank guarantees required to participate in most projects formed an instant barrier to entry. This issue needs to be addressed if the SME sector is going to benefit from these new infrastructure projects.”
