THE SMALL BUSINESS FINANCE ENVIRONMENT IN 2023

Despite enduring the impact of the COVID-19 pandemic globally, many small businesses have still managed to survive since 2021. Business loans have also continued to be very popular over the last couple of years.

However, the economic climate remains challenging and uncertain, and interest rates on small business loans for SMEs are steadily increasing.

An article in the BULLETIN from September 2022 (The Current Climate for Small Business Finance - by Madeleine McCowage and Laura Nunn) states: “Small businesses continue to report that accessing funding through banks is a challenge, although new lenders and products are providing alternative sources of finance”.

During the pandemic, a variety of government support measures were introduced to assist SMEs with maintaining their cash flow. This assistance came in the form of things like JobKeeper. Cash Flow Boosters for businesses and temporary increases in asset write-offs/small business concession ceilings.

Due to the government assistance provided, combined with improvements in operations, small businesses were able to hold onto cash reserves. As a result, over the last 2 years there appeared to be less need for some businesses to borrow money.

Additional assistance came in the form of the Australian Government’s SME loan guarantee schemes, which ended in June 2022.

Despite the government’s efforts in helping small business in recent year, according to the BULLETIN article “The Current Climate for Small Business Finance” (September 2022), panelists from the Small Business Finance Advisory Panel “reported that they find it difficult to access finance through traditional lenders with terms that suit their needs”.

The article suggests “SMEs that can provide residential property as collateral are typically able to receive lower interest rates and can secure larger loans than otherwise, although these loans may still not be sufficient to meet the needs of an expanding business”.

It is the boutique, specialist lenders that appear to be making life somewhat easier for small and medium enterprises (SMEs) as they try to claw their way out of the pandemic and deal with an everincreasing interest rate burden.

The loan approval process can be difficult and can be costly for SMEs that don’t have access to the finance teams of larger businesses. The BULLETIN reported that “as a result, some small businesses on the panel reported that they had given up on seeking finance from banks.

Several banks are implementing digital lending platforms with a view to simplifying and speeding up the loan application process for SME clients.

The maximum loan amount that can be “automatically” determined for SME customers using these electronic platforms is usually about $200,000. The platforms rely on the SME’s accounting and historical information throughout the automated decision-making process.

It was noted in the BULLETIN article of September 2022 (The Current Climate for Small Business Finance) that “many panelists reported turning to non-traditional sources of finance over the past year, such as private equity and non-bank finance.

SMEs for an integral part of the Australian economic landscape. Alth