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Small business is big business in Australia, with 99 per cent of Australian businesses considered small and medium-sized enterprises (SMEs), and the sector employing around two thirds of the workforce. But despite accounting for the majority of businesses, the SME sector often experiences significant roadblocks on the path to success.
Barriers to growth for Australian SMEs
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Access to finance is one issue that can hinder growth for SMEs. We recently surveyed 1,000 SME owners globally, including 100 business owners in Australia and New Zealand (ANZ), with the results identifying that as many as half of the ANZ SMEs surveyed had been unable to secure sufficient – or any – funding on at least one occasion over the last five years. Not surprisingly, a whopping 95 per cent of ANZ SMEs surveyed said they’d be willing to switch lenders for improved service or a better offer.
According to the survey, the biggest barriers to securing lending reported by SMEs in Australia were slow lending speeds (32 per cent) and arduous paperwork or admin requirements (25 per cent).
In today’s market, where consumers can easily pay for items with a quick tap of their phone and access personal credit with a few clicks, it is extraordinary that business owners continue to face these administrative barriers to growth.
Many lenders reluctant to embrace digitisation
While the pandemic became the catalyst for many innovations in financial services, including broader uptake of contactless payments and digital identification technologies, the lending industry remained somewhat resistant to transformation, instead relying on the ‘tried and tested’ manual methods of assessing risk and processing loan applications.
This failure to embrace the possibilities that new technologies offer has left many Australian SMEs unable to access the funds they need, when they need them, to bring their growth plans to fruition.
While obviously this has significant implications for each individual business, impacting their ability to hire effectively, upgrade equipment or pay back creditors, it also has far-reaching consequences for the overall economy. When SMEs suffer – and they do – so does our broader economy.
Tech-focused SME lenders leading the way
Technology has been embraced by the Australian financial services industry in a multitude of areas, especially when it comes to things like mobile payments, Buy Now, Pay Later and digital-only bank accounts, but it seems the SME lending industry has remained relatively stagnant, relying on the same old processes and procedures that it always has.
While we are seeing some fantastic innovations in SME lending from digitally focused Australian lenders like Lumi and Prospa, the ‘old school’ mentality of much of the SME lending sector needs a serious reboot.
Tech-enabled lenders can leverage technology like artificial intelligence, machine learning and data analytics to facilitate super-fast loan applications and turnarounds, with rapid application outcomes and loan recipients receiving their funds in as little as 24 hours. With slow lending speeds and too much paperwork the main gripes of Australian SMEs, innovative lenders that embrace technology can all but eliminate these roadblocks from their processes. Tech-enabled lenders also have the safety and security of the cloud behind them.
How brokers can enable SME success
Brokers can offer SMEs a strong value proposition when seeking funding, firstly because they are driven to act in the best interests of the customer, and secondly, because they have in-depth knowledge of the specific loan products on offer from each lender.
It’s important that brokers are aware of the primary pain points experienced by SMEs when seeking funding - that is, slow lending speeds and arduous paperwork and admin - and seek out lenders that leverage technology to address these issues. By delving deeper into the individual offerings of each lender and understanding how they use technology to speed up the application and decisioning processes, brokers can provide superior customer experiences to their clients, resulting in mutual benefit for both parties.
It is imperative that Australian SMEs are supported and nurtured to succeed, and especially that they can secure adequate and timely business funding. Without significant change occurring in the lending industry, the Australian SME sector will continue to suffer. Brokers have a key role to play in promoting the benefits of tech-enabled lending services to SMEs, with the result being a better lending experience for these vital businesses and repeat business for brokers.
About the Author
Paul Apolony is general manager, Australia and New Zealand, at cloud banking platform Mambu.
Mambu’s ‘Small business, big growth’ report surveyed over 1,000 SME owners globally, including 100 business owners from Australia and New Zealand, who had set up their company and applied for a business loan in the last five years.
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