Small to medium enterprises ditch big banks for their financing

The Australian, September 20, 2016:

More small and medium-sized businesses are planning to walk away from the big four banks, with new research showing one in five SMEs eyeing specialist non-bank lenders to finance their growth.

The latest SME survey from recently listed debtor finance group Scottish Pacific showed 20 per cent of small businesses were looking to get finance from a specialist non-bank lender, an almost 30 per cent rise compared with the same time last year.

Scottish Pacific chief executive Peter Langham said even though there was competition in the financing market, small businesses needed further education to increase awareness of better deals outside the major banks.

The September update to companies’ twice-yearly survey found the big four banks still dominated the market for business lending: the major lenders account for more than 75 per cent of SME lending. This figure rises to 87 per cent when big four subsidiaries are included.

However, one in five SMEs is planning to fund growth through a non-bank lender where it is likely to get a better deal than through the banks, up from 15 per cent of companies a year earlier.

While residential mortgage rates changes attract a lot of attention, business lending rates are often hiked quietly by the big four banks. Also, rather than hiking their market share, several smaller lenders have opted to follow the big banks in raising the rates to boost margins as cred­it growth remains sluggish.

The Scottish Pacific SME Growth Index, which polled 1200 SMEs, also showed business confidence remained soft.