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Brokers will likely be busy in the coming months as more small businesses look to take out finance, according to new data from Lumi.
Small and medium-sized enterprises are optimistic about growth in 2025, with rising costs and cash flow challenges prompting 60 per cent to seek funding within the year, according to new data from SME lender Lumi.
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According to the non-bank’s latest Market Pulse survey, which surveyed 486 SMEs across various industries to understand their funding trends, challenges, and future priorities, 83 per cent of small businesses are optimistic about their growth prospects over the next six months.
Indeed, the report found that 53 per cent were ‘very optimistic’ about growth, with the remaining 30 per cent being ‘somewhat optimistic’ about growth in the next six months.
Only 3 per cent expressed any pessimism, showing confidence as businesses look to the future.
This comes as many businesses have experienced a recovery in the past year. Three-quarters of SMEs responding to the Lumi survey said they had seen financial gains over the last year, 37 per cent of which were strong gains. Moreover, 78 per cent of businesses said they had seen strong demand for their products and services.
To help prepare for growth, many small-business owners will be looking to take out new loans.
The Lumi survey found that 60 per cent of SMEs are planning to access external funding in the next year, with 21 per cent doing so in the next six months.
Around a fifth (18 per cent) will look to access finance in the next three months, the Market Pulse survey showed.
What kind of finance do SMEs want?
Business expansion was the primary driver for seeking finance (54 per cent), followed by bolstering working capital (41 per cent).
Debt consolidation and asset purchases were also found to be key motivations, at around 21 per cent each.
Seasonal demand and staffing costs both ranked lower, which Lumi said reflected the sector’s strong focus on long-term investment over short-term needs.
Among the funding options, a line of credit was the preferred choice of finance, with two-thirds of SMEs saying this was their preference, followed by term loans (32 per cent) and asset finance (22 per cent).
Brokers well placed to offer support
However, the high cost of funding was flagged as the top challenge for SMEs accessing financing, affecting 48 per cent of respondents.
Understanding loan options and lacking eligibility were also found to be significant hurdles, with around a third of businesses facing these issues.
Navigating application processes and collateral requirements were also flagged as obstacles.
However, the majority of respondents said that brokers, financial advisers, and consultants were their most trusted source of information when it came to considering lending options (at 55 per cent).
Online reviews and colleague recommendations followed closely behind (at 42 and 41 per cent, respectively).
Noting the findings, John Clifford, the head of broker at Lumi, said: “Our survey really shines a light on what’s top of mind for SMEs as they plan for growth in 2025.
“Brokers play a crucial role in helping businesses navigate the challenges and opportunities ahead and it’s clear that demand for flexible, accessible funding solutions is high.
“At Lumi, we’re committed to supporting brokers in providing fast, fair and flexible funding options to help SMEs thrive and reach their full potential.”
Anna Hawter, deputy CEO at Lumi, said: “This survey underscores the resilience and determination of Australian small businesses. As we move toward 2025, Lumi is dedicated to helping these businesses succeed by providing tailored funding solutions that address their unique needs.”
The Lumi survey comes as more data showed that confidence in market conditions is on the rise. National Australia Bank’s (NAB) Monthly Business Survey for October 2024 recently revealed a “sharp rise” in business confidence, for example, marking the index’s return to its highest level since early 2023, while consumer sentiment reached a 2.5-year high last week, with the Westpac-Melbourne Institute Consumer Sentiment Index rising to 94.6 points in November as Australians become more confident the rate-hiking cycle may have ended.
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