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A falling proportion of SMEs said they would use a broker this year than they did last year, according to a new Banjo survey.
SME lender Banjo has released its SME Compass Report 2024, which surveyed 1,019 small- to medium-sized enterprises (SMEs) between 10 and 20 January 2024 to understand their growth outlook and sentiments.
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The report found that intended broker usage dropped 5 percentage points since last year.
When asked if they were planning to engage finance brokers for securing finance in 2024, 24 per cent of respondents said yes, down from 29 per cent in 2023.
However, Banjo noted that the decrease was off the back of significant growth between 2022 and 2023, when broker usage increased by 10 percentage points.
As such, while the proportion of SMEs intending to use brokers has dropped on last year, it is still higher than in 2022.
When asked why they would not use a broker, 23 per cent of respondents said they “didn’t need to use a broker” as they had enough financial knowledge.
The research also revealed that 20 per cent of SMEs that didn’t use a broker said they would handle their finances personally or “go to someone internally”. This was a 13 percentage point increase from 2023.
A further 18 per cent preferred to go direct, a 2 percentage point decrease from 2023.
Accountants remained the dominant advisory channel for SMEs when seeking finance (at 39 per cent).
Banjo said this therefore “presents an opportunity to enlighten SMEs on the way a broker can help them reach their growth potential”.
The SME Compass Report also found that 13 per cent of SMEs use finance brokers as an external adviser. The most common SME industry to use a broker as an external adviser was financial and insurance services at 23 per cent.
Most SMEs (50 per cent) said they would rely on word of mouth to find a broker and 85 per cent conducted at least “some” research when selecting a broker.
However, almost a third of SMEs (31 per cent) said that they believed brokers could help them find a suitable interest rate. A further 29 per cent of SMEs said brokers could help them find the right lender.
The chief executive of Banjo, Guy Callaghan, told The Adviser: “While there was a slight fall [in broker usage] it is still high when compared to historic levels. It is also important to note that the level does fluctuate from year to year.
“Brokers should take advantage of this historically high level of support and their status as trusted advisers to market their services.”
He commented that non-banks were increasing in popularity due to their ability to “provide tailored products to businesses”.
Callaghan continued: “We spend more time getting to understand the needs of our customers and their challenges and opportunities, which means we’re able to come up with a plan that is shaped around their own unique goals.
“We combine that with innovative products such as asset and equipment finance which enables businesses to replace ageing equipment, consolidate existing debts, and release equity they have in existing assets when they need it. That’s a powerful tool for businesses looking to expand, grow and innovate.”
The SME Compass Report finding cames despite a growing proportion of brokers diversifying into offering SME finance.
According to the latest edition of the Mortgage & Finance Association of Australia’s (MFAA) Industry Intelligence Service Report, the number of mortgage brokers writing commercial loans increased by 8.67 per cent to 5,864, marking the second-highest figure on record.
In addition, the total loan book value of commercial lending for mortgage brokers continued to grow, reaching a record high of $73.11 billion during the October 2022 to March 2023 period.
The commercial loan book value increased by $3.06 billion or 4.36 per cent period on period and year on year; the value increased by $6.41 billion or 9.61 per cent.
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