As we’ve written before, small businesses are vital for the success of the Australian economy. Based on The Australian Small Business and Family Enterprise Ombudsman latest data, small businesses account for about 98% of all businesses, and contribute 32% to Australia’s total GDP. Small businesses also employ over 40% of Australia’s workforce. These are all well-established facts. “Finance is the oxygen of enterprise,” according to Bruce Billson, the Australian Small Business and Family Enterprise Ombudsman. So why is the RBA Assistant Governor, Chris Kent, having to plead with banks to “take a different approach to small business borrowers, given that even under the existing Responsible Lending Laws, banks are not obliged to apply the same serviceability requirements to small businesses that need to be applied to households.”
Perhaps it’s outdated ways of thinking at large institutions, or maybe it’s a lack of ability to evaluate a small business based on anything other than collateral assets. But small businesses continue to suffer because of the many obstacles to funding they encounter.
Below is by no means an exhaustive list, but will be familiar to any business owner that has tried to obtain a business loan from one of the Big Four.
According to Grapple’s Head of Lending, Cameron Finlayson, “acquiring business finance from a specialised provider is quicker, requires less legwork, and gives the business fit-for-purpose funding, as well as benefits such as personal service and market-leading technology.” Cameron has had a long career in the industry, spanning small finance providers as well as large financial institutions, and has seen how business lending is approached on both sides of the spectrum. He continues, “big banks can’t seem to balance adopting new technologies while maintaining a high-level of customer service, and the bureaucratic red-tape makes any progress or forward thinking difficult.” All these aspects make receiving bank funding for SMEs an onerous task, and one that doesn’t always pay off even if approval is given, as banks usually lock their clients into long-term contracts, and charge a multitude of fees.
Invoice finance is a flexible solution, one which can provide the working capital many SMEs require to grow and thrive. The tendency to group all banking services with one provider is slowly trending down as more and more specialised providers come on the scene. Staying with the same old bank may mean your business is being over-charged and not getting the benefits of flexibility and technological advances that many businesses find important to succeed in the current environment.