Close to half of SMEs applied for funding in the past six months and, of those, only half were successful in obtaining the full amount of funding they were after, according to new research.
Judo Bank has released the results of a survey of 1750 SMEs nationwide, which was conducted by East & Partners. Its conclusion is that “SMEs remain unable to secure the funding they need for growth”.
The Reserve Bank also released the results of a small business survey in the latest Reserve Bank Bulletin, reporting that access to funding has ebbed and flowed in recent years but a consistent theme is that small businesses find it hard to get access to funding on terms that suit their needs.
The SMEs in the East & Partners survey had turnover of between A$1 million and $50 million, an average of 127 employees and average loan balances of $3.3 million.
Three-quarters (77.2 per cent) of the SMEs surveyed nominated a Big Four bank as their primary lender.
Forty-eight per cent said they applied for credit in the past six months and, of those, 50 per cent were successful in getting the amount of funding they wanted. Twenty-two per cent were partially successful and 27.7 per cent were unable to get any funding.
Borrowing success increases significantly with the size of the business. Twice as many businesses in the $1 million to $10 million turnover range were unsuccessful in their application for funding (36.5 per cent), compared with 15.9 per cent in the $10 million to $50 million turnover category.
One in three of those refused a loan said they had to put plans to employ staff on hold.
Among those who got some or all the funding they were seeking, 48 per cent said they invested in new plant and equipment, and 26 per cent hired staff.
Projected demand for finance in the SME sector is surprisingly strong, with 50 per cent saying they intended to seek new funding or refinance in the next six months.
Judo Bank chief executive Joseph Healy said the survey also showed that businesses at the lower end of the survey range (turnover of $1 million to $10 million) were most exposed to the negative effect of COVID lockdowns.
Thirty per cent of businesses in this category said they were thinking of closing their businesses.
According to the RBA survey, after deteriorating sharply a few years ago, access to finance became less difficult from mid-2020, as various policy measures supported business cash flow and the supply of credit to SMEs
But in the latest survey, respondents reported then access to credit has become more difficult again.
Following a period of soft demand for finance last year demand for business borrowing picked up in the period prior to the latest lockdowns, as investment expectations for the 2021/22 financial year picked up.
The volume of lending to SME picked up in the June quarter, after having been little changed for an extended period of time.
“Notwithstanding limited demand for debt in the current environment, for many years small businesses have reported that they find it difficult to access finance on terms that suit their needs. Data provided by banks show that 95 per cent of SME lending is secured, while only 70 per cent of lending to large businesses is secured,” the RBA report said.