Non-bank funding replaces COVID-19 stimulus measures for SMEs

According to the latest round of ScotPac’s biannual SMW Growth report, around one in five SMEs plan to divest or merge operations and a quarter added non-bank funding facilities in 2022 — more than double the 12 per cent recorded in 2021.

The findings coincided with the Australian Tax Office (ATO) recommencing standard debt collection activities in mid-2022 following two years of ‘lighter touch compliance.’

According to CreditorWatch, external administrations leapt 26 per cent from October to November 2022 and were up 24 per cent year-on-year.

The report found that almost 30 per cent of SMEs said they accessed JobKeeper or some other form of pandemic-related government stimulus and since the end of stimulus payments, they have been replaced by funding strategies including raising equity (45 per cent), increasing borrowings (39 per cent), and reassessing funding methods (33 per cent).

Craig Michie, ScotPac group executive, client acquisition and asset finance, said 2023 was shaping up as a year for SMEs to sit down with their advisers and thoroughly re-evaluate their financial positions and options.

“For many SMEs, the support they received from Government during the pandemic period was their first experience of external finance,” Mr Michie said.

“It opened the eyes of business owners to the power of working capital, and that has prompted a lot of SME owners and operators to investigate the potential to leverage finance options as part of their strategic planning for 2023.”

He said small-business owners should speak with their brokers and other advisers this year about appropriate finance solutions for their situations, whether that is funding an asset or acquisition, taking on new employees, or repaying the Tax Office.