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Small businesses are increasing their engagement with equipment finance providers, according to new research by East & Partners.
The research firm's Asset & Equipment Finance Report surveyed 1,300 Australian businesses with current equipment and asset financing arrangements in place, and found that equipment financing as a proportion of total borrowing has increased to 27.9 per cent for SMEs since June 2014.
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By comparison, the report found that equipment financing within the institutional segment accounted for less than 10 per cent of total borrowings.
“As SMEs manage working capital constraints, they are increasingly seeking out equipment financing providers to acquire or replace plant and equipment vital to running their business of lifting productive capacity,” East & Partners head of markets analysis, Martin Smith, said.
The report suggested that the two largest equipment finance providers by market share, NAB and GE, struggled to maintain long-running growth trends, while Westpac and CBA achieved significant primary market share growth in 2014/2015.
While many SMEs continue to consider the broker channel based on its “better pricing”, the banks increasingly view equipment finance as a product which can be effectively sold into existing primary lending and transaction banking relationships, the report noted.
Of the respondents, 61.2 per cent nominated their relationship bank as a preferred source for equipment finance solutions, while 35.5 per cent of businesses reported “no preference”.
