Small business access to finance: The evolving lending market

Commission research paper

This research paper was released on 30 September 2021. It examines how small and medium enterprises (SMEs) access debt finance in Australia.

The paper finds that the recent emergence of new products and lenders, enabled by a supportive regulatory environment and innovative use of data and technology, has expanded the lending options available to SMEs.

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Skip to text version of the infographic below Small Business Access to Finance infographic (PDF - 4878 Kb) Text version of the infographic Small business access to finance: The evolving lending market Small and medium-sized enterprises (SMEs) are a vital part of the Australian economy. As at June 2020, there are 2.4 million SMEs in Australia, they employ more than 7.4 million Australians and generate more than $700 billion of the economy’s output. SMEs need finance to fund and grow their business 15% of SMEs applied for debt finance in 2018-19 for these reasons: 47% Maintain cash flow 41% Replace or upgrade existing capital 32% New capital purchase 31% General business growth 27% Ensure survival. SMEs still mainly obtain finance from banks Banks issued up to 91% of SME debt. In 2018-19 SMEs sought debt finance from: 69% Bank 33% Finance company 4% Other institutions 8% Friends, family and others 14% Existing owners of the business. Lenders are not just banks — a broader range of lenders and products are available to SMEs neobanks fintech lenders finance companies private credit providers. Rapid market changes have been spurred by new technology and new data. Products include not just property-secured lending but also borrowing with alternative collateral such as vehicles, machinery and invoices, and some loans are unsecured. There are significant potential benefits for SMEs Better access to finance allows SMEs to seize opportunities Some SMEs may be able to borrow for the first time. More SME awareness of new lending options will boost small business and the economy. Read the report at pc.gov.au