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The 2024 Banjo SME Compass reveals changing attitudes among SMEs on sources of funding; and why a finance broker can be a key member of Team My-Business.
While no-one would be surprised to learn that in 2024, SMEs continue to be frustrated with the strict lending criteria and glacial-pace processing times of the major banks, what may raise eyebrows is that they’re actually voting with their feet. In the latest findings of the 2024 Banjo SME Compass, SMEs’ use of bank loans has again decreased and is now below one-third of respondents, while use of non-bank commercial lenders continues to climb, now to 12%.
There’s pretty exciting potential for this groundswell to grow further, with more than 1 in 3 SMEs saying they would be open to borrowing from non-bank lenders in future.
There are some solid borrowing intentions for this year, with 50% of SMEs overall planning to leverage funding to power their growth. Victorian SMEs are significantly higher, with 62% being hot to trot for funding.
Business loan sizes in general are getting higher, and SME owners becoming increasingly time poor, making it the perfect storm for some reliable external advice.
When it comes to choosing a broker to help them acquire business funding, the majority of SMEs (85%) who decide to work with a broker carry out some form of due diligence, gathering recommendations from trusted sources like accountants, family, and friends. Trust and credibility are cornerstones of broker-SME relationships, and this finding underscores the importance of informal networks and good connections.
Just under a quarter of those surveyed checked online reviews of brokers.
Help in getting a suitable interest rate is the primary reason SMEs turn to a broker, but that reason ranked only slightly above several other factors. These included finding the most appropriate lender, and the best product for their needs. Help in making the process seamless, and guidance on the right types of finance available were also popular reasons.
Whether it’s filling in the gaps in your knowledge of the best options available or clarifying the merits of working capital vs asset finance, there’s no doubt many SMEs feel they need a bit of broker expertise to navigate the funding process. Almost a quarter are planning to use a broker to help them secure finance this year.
SMEs in the Financial and Insurance Services industry were the most likely to be currently using a broker as part of their trusted external advisory team, closely followed by Hospitality, then Professional, Scientific and Technical Services.
Those SMEs who said they didn’t use a broker either felt they had enough knowledge themselves or had a colleague internally who could handle the borrowing process. A little under 20% said they dealt directly with the bank. It’s possible these respondents may not be aware of all the benefits of using a broker. An opportunity undoubtedly exists for SMEs to explore what a broker can bring to their business, particularly in securing the best interest rates.
Finally, while many see inflation as a barrier to growth in 2024, a majority of Aussie SMEs are cautiously confident about their business in the medium-to-long term. This no doubt reflects the generally positive, can-do attitude of this hard-working sector.
Where do the opportunities lie in this more subdued business climate? The majority of SMEs who said they reached or exceeded their revenue targets last year, largely did so by investing in new technology or developing existing products, in that order. In 2024, they plan to focus on the same things, and increase their investment in marketing. Banjo Business Loans or Asset Finance to the rescue!
The Banjo SME Compass Report 2024 is the result of a survey of over 1000 SMEs across Australia, and can be found here.
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