Tuesday, April 16, 2024

Small businesses frustrated over loan conditions

Loan conditions are proving to be a big pain in the … world of small business.

Nine out of 10 Aussie small businesses express frustration about finding and maintaining funding for their enterprises, according to the latest SME Growth Index data.

CEO of ScotPac Jon Sutton says of the 1252 small businesses surveyed, 84% were frustrated about the loan conditions imposed on them.

“Loan conditions have always been the main source of annoyance when we’ve asked SMEs about their funding frustrations, and during the pandemic it has been no different,” says Mr Sutton.

“The research found small businesses with non-banks as their primary funders had significantly fewer concerns about loan conditions, flexibility and ease of dealing with their funder during 2020.”

Top frustrations  

The top three frustrations are:

  • Loan conditions (84%)
  • Having to provide property security (80%)
  • Lack off flexibility (74%)

The SME frustration with the biggest proportional increase this year was that funders were hard to deal with (an issue for 56% of small businesses, compared to 47% 18 months ago), Mr Sutton says.

More than a quarter of small businesses (26.6%) don’t feel secure with their lender, pinpointing the need for clear communication and good ongoing relationships with funders.

“There was also a significant increase during the 2020 pandemic year of SMEs showing frustration that their funders can’t meet all their needs (22%, up from 16%).”

A priority for SMEs throughout 2021 is to pay down their debt.

“2021 is the right time, hopefully with the worst of business shutdowns behind us, for SME owners to make the tough decisions about their business and find better ways to fund their operations.”

Mr Sutton encourages small business owners to have the conversations with their advisors, sooner rather than later.

“Don’t wait until JobKeeper is off the table for you or your suppliers, get on the front foot with finding the right funding and make decisions before it’s forced on you.”

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