SME Compass report 2021

24 May 2021

Australian SMEs have come out of a horror year feeling positive about the road ahead, with almost 7 in 10 expecting an increase in revenue over the next 12 months, and a similar number looking to borrow to drive growth, according to new research released today by Banjo Loans.

The Banjo SME Compass Report is based on a commissioned survey of a broad cross-section of SMEs (small to medium enterprises) across Australia by Honeycomb Strategies in March this year.

With close to 1 in 3 SMEs having let staff go during the pandemic, employment prospects are set for growth with 46% intending to increase their headcount in 2021.

“In the next 12 months, nearly two-thirds of SMEs intend to leverage funding to drive their growth,” said Guy Callaghan, CEO of Banjo Loans

With approximately 1.2 million SMEs in Australia, this means approximately 750-800,000 SMEs are planning to borrow to boost their business.

“At average borrowing of $7500, the sector had $146 billion of funding lines in June 2020, which declined during the pandemic to $141 billion in March 2021,”

“Based on our research, and the upswing we’re seeing in demand, we forecast lending to the SME sector will increase by $5 billion between now and the end of 2021.”

But some lenders, particularly those who require property or assets as security, are seen as a hindrance. A significant proportion (59%) of SMEs experience challenges when looking to secure funding. Onerous lender requirements and lengthy loan approval times are the two chief frustrations.

After interest rate, ease of application is seen as a lender’s most attractive feature.

“Responsible lending definitely does not have to mean a drawn-out approval process,” said Guy Callaghan. “Lenders with the right technology can give a small business owner an answer either way, within 24 hours.”

“There’s a lot less tolerance among SMEs for waiting weeks for an answer from a traditional bank.”

In an interesting twist, female business owners are much less likely than their male counterparts to borrow to fund growth, preferring to self-fund from operations. This is in large part because they are more averse to providing personal assets as security – regardless of how large or small their business is. There is also the question of where to turn for funding.

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