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Home » Featured » What does the future hold for Australian SMEs?

future of finance in Australia
  • Featured, Small Business

What does the future hold for Australian SMEs?

  • August 9, 2022

With the Australian economy rapidly shifting to brace for the impact of the impending global recession. With a contraction looking inevitable, and many smaller businesses requiring external finance, how can SMEs support their businesses when access to traditional finance becomes harder?

The first half of 2022 has seen significant hammer blows to a global economy still licking its wounds from the devastating Covid-19 pandemic. Soaring inflation, rising prices, stock market volatility and a new era of geopolitical instability have combined to lead many analysts to predict a global recession akin to the financial crash of 2008. 

 

As we saw in the last crash, traditional banks are likely to become even more cautious with their lending in periods of economic uncertainty. This means credit rules will be more restrictive and overdrafts will be pulled or reduced. Applications for debt will become more onerous and thorough. Furthermore, as interest rates rise, fixed rates will be replaced with variable rates.

 

Read our blog Cash rate changes in Australia and the impact on your business to learn more.

 

This presents a significant issue for Australian SMEs, who are likely to be impacted more significantly than their larger counterparts in terms of access to finance. According to an OECD report into the impact of the global financial crash, 50% of Australian SMEs reported that it was harder to secure funds after 2008 than it had been previously. The same report also identifies that the main impact of this reduced funding was felt on SMEs working capital.

Small Business perception of Access to Finance

Small business owners access to finance

There are 2.4 million SMEs in Australia employing around 7.5 million people. These businesses are the engine room of the Australian economy. A buoyant small business sector is vital to the economy and working capital is an essential component of their survival.

 

But it’s not just for alleviating working capital pinch points that SMEs rely on external funding. Recent data from the Australian Bureau of Statistics reveals almost one in five businesses (23%) have planned capital expenditure over the next 3 months. This may cover investments in plant or machinery, software or new product development. Also, our inhouse survey sent out to Australian small business owners revealed that, many SMEs may be looking to invest in the acquisition and retention of personnel against the backdrop of a global talent shortage.

Planned capital expenditure over the next three months
A recent survey of AsisPacific SMEs for analytics provider FICO, revealed that many smaller businesses are turning to alternative finance providers to meet these funding needs. The study, which collected 4,700 responses across the region, revealed that 40% of SMEs intend to borrow money in 2022 and as many as 44% of them would consider alternative funding sources.  

New options. New opportunities.

Since the financial crash of 2008 there has been significant evolution in the lending market for SMEs, driven by technology and new business models.

 

There is now a much broader range of products available from traditional and new lenders, which is good news for SMEs concerned about the tightening of credit from traditional banking sources. According to Productivity Commissioner, Malcolm Roberts, “A broader range of products can provide SMEs with finance more quickly and flexibly, allowing them to seize opportunities. Some SMEs may even be able to borrow for the first time.”

 

Launched in 2008, Capify is one such example of an alternative finance provider that was launched to serve the specialist needs of Australian SMEs 15 years ago.

 

John Rozenbroek, CFO/CCO at Capify, says: “Our company was born from a genuine need we saw in the Australian SME business community to access finance at a time when traditional Banks were tightening their lending.”

He adds “SMEs are the lifeblood of any economy and we are committed to providing easy access to financing options that enables them to navigate challenges and deliver on their growth plans”.

At Capify we offer a range of business loans to help support your business through high and low periods. Check to see if you’re eligible for one of our loans with our online eligibility checker. Or, if you’d prefer to talk to a member of our team, we’d be happy to guide you through the process. Give us a call today on 1300 760 930.

Considering finance but unsure where to start? Give our team a call on 1300 760 930 or click Get Started. We’re here to talk through your needs and help you access funds in as little as 24 hours.

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