New lending options boost small business and the economy

There are 2.4 million SMEs in Australia employing more than 7.4 million Australians and Productivity Commissioner Catherine de Fontenay said they are vital as Australia recovers from the COVID-19 pandemic.

“Every year, one in six small and medium enterprises (SMEs) seeks finance to fund and grow their business. Traditional SME loans are usually secured by property. But spurred by new technology and new data, lenders now have more capacity and confidence to lend to SMEs using other forms of collateral or even lending unsecured,” Ms de Fontenay said.

The Small business access to finance: The evolving lending market report points to a significant evolution in the lending market for SMEs over the last decade, driven by technology and new business models.

While SMEs still mainly obtain their finance from the major banks, there is now a much broader range of products available from traditional and new lenders.

Productivity Commissioner Malcolm Roberts said a broader range of products can provide SMEs with finance more quickly and flexibly, allowing them to seize opportunities while some SMEs may even be able to borrow for the first time.

SMEs may not be aware of all their lending options and may not feel confident about new options. Brokers can help match them with appropriate lending options.

The report found the finance market is increasingly competitive, which will drive further improvements in access to finance for SMEs.

The full report on Small business access to finance: The evolving lending market can be found at www.pc.gov.au