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One-third of businesses that sought finance in 2015–16 reported maintaining short-term cash flow or liquidity as the main reason for the loan, the Australian Bureau of Statistics has revealed.
According to the 2015–16 Business Characteristics Survey (BCS) by the Australian Bureau of Statistics (ABS), short-term cash flow or liquidity was listed as the main reason for financing by 36 per cent of businesses seeking finance in the year to 30 June 2016.
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In 2015–16, 15 per cent of businesses sought debt or equity finance, and of these, 90 per cent got approved.
The second most common reason listed was finance needed to replace equipment or machinery, at 28.5 per cent of businesses.
The ABS noted that a lack of access to additional funds was the most commonly reported (17 per cent) barrier to development or the introduction of new or significantly improved goods, services, processes or methods for businesses.
In a stark statistic, 26.1 per cent of businesses listed “ensure survival of business” as the reason, and within that, 27.7 per cent of businesses with up to four employees listed this as their main reason.
Twenty-two per cent of businesses seeking finances listed expanding their business as the reason.
Breaking it down by industry, the mining sector had the greatest proportion (29 per cent) of businesses seeking finance, while 25 per cent of manufacturing sector businesses reported that a lack of access to additional funds as a barrier to the introduction of new goods, services, processes or methods.
The ABS noted that health care and social assistance businesses had the highest proportion (22 per cent) of businesses to receive government funding. Further, 12 per cent of businesses in this sector reported receiving grants, 7 per cent received ongoing funding, 6 per cent were granted tax concessions and 4 per cent reported receiving subsidies.
Administrative and support services were most likely to turn to a finance company (57.5 per cent), while rental, hiring and real estate services reported turning to a bank the most (85.7 per cent).
For all industry sectors, a new loan with a term of more than one year was the most common (37 per cent) type of finance businesses sought, and new capital/finance lease or hire purchase agreement followed (36 per cent).
Banks were approached 71.7 per cent of the time for finance, followed by finance companies (27.6 per cent), existing owners (11 per cent), friends or family (6.6 per cent), other businesses (3 per cent) and other individuals (2.7 per cent).
[Related: RBA signals positive business sector outlook]
