Cash flow for SMEs is one of the most important elements of running a successful business, but new research has revealed just how difficult securing finance can be, when the need arises.
Research by leading online SME lender OnDeck has highlighted the extent of the challenge for small and medium businesses, revealing almost one in four (23 per cent) who have sought finance have been rejected by their bank.
Rejection rates rise to 37 per cent among businesses that have been in operation for less than five years, according to the research.
Noah Breslow, Global CEO of OnDeck, says, “What is particularly concerning, is that one in three SMEs rejected for bank finance have had to reach out to family or friends for funding, or have simply resorted to using a credit card.”
OnDeck’s study confirms that sourcing bank finance can be time-consuming for SMEs, often bringing with it the burden of a lengthy application and approval process.
Close to one-third (30%) of SMEs that have applied for bank finance say their business was negatively impacted by the experience.
The chief impacts reported by SMEs include:
- 57% – normal business activities were slowed or halted
- 42% – had to delay the delivery of products/services
- 40% – were forced to delay debt payments
- 39% – had to delay buying new equipment
- 12% – were forced to postpone hiring new staff.
Leading Adelaide finance broker Michael Arbon of KeyLend said by contrast online lenders, such as OnDeck, were filling a gap in the market particularly given their speed at providing finance.
“Sometimes, in a competitive business landscape, an SME may take on a contract that is slightly beyond their financial capabilities. These online lenders allow an SME to take the opportunity with both hands and back up their ability with the finance required to deliver,” he said.
“Operating in the agricultural space, time is money. Equipment regularly breaks down in busy seasons where a crop may be ruined in a matter of days if that piece of equipment is not able to be replaced. A number of the online funders I deal with have been able to deliver finance within 24-48 hours to customers in need of equipment replacement. This has allowed them to minimise the risk associated with time delays and return a better financial result.”
Mr Breslow agreed that for SMEs time is indeed money, “And the number of hoops that SMEs need to jump through to secure bank finance is clearly adding to the cost and stress of gaining much-needed funds.
“Large numbers of Australian SMEs may not be reaching their full potential either because they cannot secure bank finance, or because an inefficient and lengthy lending process is adding to the cost burden. It is important for SME owners to realise that more efficient funding options are available through online lenders.
“I encourage the broking profession to engage with online lenders and diversify their revenue base to include SME lending. By helping SMEs access the finance they need, this would be a win-win for brokers and the small business community,” concluded Mr Breslow.
For more information on SME funding, or to become accredited with OnDeck, visit www.ondeck.com.au/broker
