Fintech small business lenders support research survey

New research will aim to establish current trends and best practice in the growing fintech lending market to small and medium-size enterprises (SME).

Fintech small business lenders will be surveyed as part of a collaborative research project by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) with industry organisation FinTech Australia and independent SME finance expert Neil Slonim from theBankDoctor.org.

Fintech lenders are an emerging alternative to banks for small business loans, often through seamless and highly automated online application, assessment and decision processes.

Ombudsman Kate Carnell said fintech lenders have potential to fill the gap left by traditional bank lenders in the marketplace, particularly as awareness, trust and confidence in alternative lending grows.

Ms Carnell commended the sector for being proactive to ensure best practice and transparency.

“But with rapid growth in the number of lenders and the variation of fintech products, it becomes more difficult for SMEs to make informed decisions about which products and lenders best suit their circumstances,” Ms Carnell said.

“The survey will collect information from fintech lenders that can shed light on some of these issues.

“Results will be published in a report to identify industry best practice and help SMEs to better understand their fintech borrowing options.

“The survey results will also inform fintech lenders how they can help SMEs by improving the transparency of their lending products and by clearly communicating the rates, costs, terms and conditions of their products.”

FinTech Australia CEO Danielle Szetho said FinTech Australia was pleased to work with the ASBFEO and theBankDoctor.org.

“This work will help us to understand how the industry is currently servicing SMEs and steps we might take as an industry to improve the SME community’s awareness and understanding of alternative lending products,” she said.

“What is clear is that banks have not been adequately servicing the SME community’s needs and fintechs have stepped in with new loan products to help fill that gap.

“This is proving to be a very beneficial and cost-effective source of funding for SMEs. This research will help even more SMEs to invest in their growth and benefit from alternative lending products.”

Neil Slonim from theBankDoctor.org said “it is not easy for small business owners to assess whether borrowing from a fintech lender is the best option for them, and if so, which lender they should choose.

“There are around 30 fintech small business lenders now operating and their websites, through which they engage with their customers, all appear to be much the same.

“As a not-for-profit SME advocate we are pleased to be working with the ASBFEO and FinTech Australia to raise understanding and transparency in a sector which is becoming increasingly relevant to small business owners.”

Awareness Proving The Toughest Hurdle For Aussie Alt-Lenders

 From Pymnts.com

Australia’s market for small- and medium-sized enterprises (SME) is by no means easy. The nation is grappling with a late supplier payments problem and with regulators looking to accelerate corporate payments to SMEs, though with limited expectation for the efforts to work.

But that presents an opportunity for alt lending, analysts say, as do tighter restrictions on traditional banks that may guide SMEs toward alt-fin, as they look to ease their cash crunches.

It seems an ideal climate for the alternative lending industry, but news of an analysis from Moula and Digital Finance Analytics this week finds awareness of these options is lacking among small business owners.

In their Disruption Index report, released quarterly, Moula and Digital Finance Analytics (DFA) scored Q1 2017 at 38.39, a 6.1 percent increase from Q1 2016. But the report said this represents only “gradual change” among small businesses in terms of their awareness of alternative lending options.

“There is still a certain air of skepticism about non-traditional forms of lending,” said DFA Principal Martin North in an interview with Australian Broker. “So SMEs who need to borrow tend to still go to the normal suspects. They’ll look to the banks or put it on their credit cards.”

He added that this means the alternative finance industry has to work harder to boost awareness and promote education.

“I think the FinTech sector has a terrific opportunity to lend to the SME sector, but they haven’t yet cracked the right level of brand awareness,” North continued. “Perhaps they need to think about how they use online tools, particularly advertising to re-energize the message that’s out there.”

There certainly is a market for alternative lenders to fill in the funding gap for small businesses.

Earlier this year, Australia’s Small Business and Family Enterprise Ombudsman Kate Carnell began naming some of the worse offenders of late supplier payments, including Kellogg’s and Mars, likening their delayed invoice payment practices to “extortion.” With the Council of Small Business Australia, regulators began to take a harsher stance on late payments, and in May, the voluntary Supplier Payment Code, which sees companies vowing to pay suppliers on time, came into effect.

As regulators consider whether to create fair supplier payment practice legislation, small businesses in the country continue to struggle: Research from American Express Australia and Xero released in April found nearly a third of the invoices in the cloud accounting platform can’t be reconciled every month because they’re waiting to be paid.

Meanwhile, Australian Broker reported, regulators are imposing stricter rules on traditional banks that may see them back even further away from small business borrowers. Plus, Moula and DFA’s report found, small business demands on their financial service providers are on the rise. According to their report, SMEs say a loan application should take, on average, less than five days to see final approval. Alternative lenders take an average of 36 hours, the report found.

The data suggests alt lending can meet some of the demands among SMEs for working capital and faster lending services.

“FinTechs like Moula are at the quick end, but a lot of the traditional lenders such as the major banks take a lot longer,” North continued. “What this is saying is that if the expectations of SMEs point to quick approval times and if the major players aren’t able to do that because of their internal systems and processes, then there is an interesting opportunity for the FinTechs who can do it quicker. They can actually disrupt [the industry].”

According to North in a statement found within the report itself, awareness levels among SMEs are gradually rising.

“In the last three months, we have seen a significant shift in attitudes among SMEs as they become more familiar with alternative credit options and migrate to digital channels,” he said. “The attraction of online application, swift assessment and credit availability for suitable businesses highlights the disruption which is underway. There is demand for new services and supply from new and emerging players to the SME sector.”

Indeed, while awareness is on the rise, it’s still relatively low. In Q4 of 2016, Moula found that just 14.1 percent of SMEs surveyed said they are familiar with their alternative finance options.

“So, what’s the barrier to growth?” North reflected to Australian Broker. “It’s not technology or demand from the SME sector. The barrier to growth is awareness and the willingness of SMEs to commit to this particular new business model.”

Awareness key barrier to SME lending growth

From Australian Broker.

While tighter banking restrictions have forced more small and medium enterprise (SME) borrowers towards non-bank lenders, a lack of awareness is still hindering real growth within the sector.


The Disruption Index, which has been jointly developed by small business lender Moula and research and consulting firm Digital Finance Analytics (DFA), puts the score for Q1 2017 at 38.39, which is 6.1% higher than the score of 36.18 recorded in the same time period a year ago.

Despite this, only gradual change has been made to grow awareness amongst SMEs about these alternatives. Looking at evidence on small business knowledge about non-bank lending – such as payments received to non-bank lenders, credit enquiries at credit bureaus, etc – 11% of all data sets reviewed showed use of these lending options. This is the first time the level has risen above 10% since the index was started.

“There is still a certain air of scepticism about non-traditional forms of lending, Martin North, principal of DFA, told Australian Broker. “So SMEs who need to borrow tend to still go to the normal suspects. They’ll look to the banks or put it on their credit cards.”

Because of this, the fintech sector still has a significant job to do in raising awareness about different viable alternative funding options that exist especially since this is a fairly new sector, he said.

“It’s a new type of lender so it takes time to build brand awareness. The other thing is that the approach of applying online and fulfilling online for the SME sector is also quite new and different.”

“I think the fintech sector has a terrific opportunity to lend to the SME sector but they haven’t yet cracked the right level of brand awareness. Perhaps they need to think about how they use online tools particularly advertising to re-energise the message that’s out there.”

The data also showed SMEs are becoming more demanding of the financial services providers, with the expectation that loan applications should take an average of 4.8 days to the final approval.

It seems fintechs are coping with this added demand however, with the Index recording an average loan time of 36 hours. This is slightly longer than the previous quarter’s findings due to added public holidays and school holidays in April.

“Fintechs like Moula are at the quick end but a lot of the traditional lenders such as the major banks take a lot longer,” North said. “What this is saying is that if the expectations of SMEs point to quick approval times and if the major players aren’t able to do that because of their internal systems and processes, then there is an interesting opportunity for the fintechs who can do it quicker. They can actually disrupt.”

Maintaining the status quo was not an option for the major financial institutions because of this added expectation, he added.

“SMEs are looking for quicker, faster responses and there are players out there who can actually deliver.”

“So what’s the barrier to growth? It’s not technology or demand from the SME sector. The barrier to growth is awareness and the willingness of SMEs to commit to this particular new business model.”

The Disruption Index itself examines a number of elements, some of which come from DFA’s survey data of SMEs and others which come from Moula’s analysis of their own experience lending to the small business sector.

“We score each of those elements and essentially we run an algorithm. Each of them has a score between the various elements that’s not weighted individually. We then add them up and that give us a total score. What this is trying to do is put a finger on the pulse of what SMEs are up to and to what extent SMEs are actually aware of fintechs as an alternative funding source,” North said.

The Financial Challenges of Small Businesses

From “On The Economy Blog”

More than 60 percent of small businesses faced financial challenges in the past year, according to the USA 2016 Small Business Credit Survey.

The survey, which was a collaboration of all 12 Federal Reserve banks, provides an in-depth look at small business performance and debt. This report focuses on employer firms, or those with at least one full- or part-time employee.1 When looking at the financial challenges of small businesses, the report covered the second half of 2015 through the second half of 2016.

Financial Challenges and How They Were Addressed

Among all firms, 61 percent reported facing financial challenges over this time period. Financial challenges included:

  • Credit availability or securing funds for expansion
  • Paying operating expenses
  • Making payments on debt
  • Purchasing inventory or supplies to fulfill contracts

Firms with smaller annual revenue were more likely to experience financial challenges. Of firms with $1 million or less, 67 percent reported facing financial challenges, compared to only 47 percent of firms with more than $1 million.

The figure below shows the breakdown of which financial challenges were most prevalent among small businesses.

financial challenges

The survey also asked small businesses how they addressed these issues. Their responses are captured in the figure below. (It should be noted that respondents could also answer “unsure” and “other,” and those responses are not captured below.)

small business actions

Notes and References

1 This does not include self-employed or firms where the owner is the only employee.

NAB Ventures backs Canadian fintech Company Wave

NAB’s venture capital fund, NAB Ventures, has led a US$24 million (AU$32 million) Series D funding round in Toronto-based cloud fintech company, Wave.

Wave delivers cloud-based financial management software including accounting, invoicing, and payroll with seamlessly integrated financial services such as credit card processing and lending.

Hear from NAB Ventures’ Melissa Widner and Wave CEO and Co-Founder Kirk Simpson talking about the new relationship here (8.34min)

Targeting entrepreneurs with fewer than 10 employees, Wave has over two and a half million small business customers in more than 200 countries around the world, including more than 35,000 active users in Australia.

The Series D funding round also includes funding from Royal Bank of Canada (RBC), Silicon Valley venture firms CRV and Social Capital, global funds OurCrowd and Harbourvest, as well as Canadian investors OMERS Ventures, BDC IT Venture Fund, BDC Capital and Portag3.

Commenting on the equity investment, General Partner NAB Ventures, Melissa Widner, said: “We’re looking forward to working with Wave, which has developed an interesting approach to cloud software and financial services aimed at small businesses with under 10 employees.

“We were impressed with how Wave’s offering gives entrepreneurs the tools they need to be successful, along with the fact their invoicing and accounting software are free with customers able to purchase additional financial services to suit their requirements as needed.

“As the largest business bank in Australia with over 450,000 small and medium business customers, we are interested in any emerging technologies in this space that provide customers with a connected experience.”

NAB Ventures has the right to appoint an observer to the Wave board.

Wave Co-Founder and CEO, Kirk Simpson, said: “At Wave we believe that the way to help small businesses succeed is with powerfully integrated financial services and software. By helping business owners manage their cash flow, prepare for tax time and gain actionable business insights, Wave covers the spectrum of a small business owner’s financial life, and helps their businesses grow and thrive.

“We all know that small businesses power the global economy, and nobody understands Australian small businesses better than NAB. We look forward to exploring together how to serve those business owners better.

“We also believe that innovative partnerships between technology companies and world-class banks will lead to transformative solutions in the market. In NAB and RBC, Wave has forward-looking, innovative bank partners on two continents, opening the door to those transformations,” he said.

For more information on Wave, visit www.waveapps.com.

-About Wave-

Wave is changing the way small businesses make money, spend money and track money.  Wave delivers cloud-based financial management software with seamlessly integrated financial services to business owners around the world. Over 2.5 million business owners around the world have used Wave to help manage their finances, and over 60,000 new businesses join the Wave ecosystem every month. For more information, visit www.waveapps.com.

Businesses warned of a malicious NAB email scam

From Smart Company.

A simple email phishing attack impersonating big four bank NAB was reportedly sent to thousands of Australians yesterday, notifying them their account was disabled in an attempt to steal users’ banking details.

Mailguard reports the email was sent around on Thursday afternoon, stemming from a legitimate looking email address,”discharge.authority@nab.com.au”.

The subject line included just the word “Notification” with the email itself being nothing more than a four line message telling customers their account had been “disabled”.

The malicious email then directed users to a website with a realistic-looking NAB login screen, inviting users to enter their NAB ID and password. The website included links to register for a NAB account and “forgotten password” prompts to boost the appearance of legitimacy.

The purpose of a phishing scam is to steal an unsuspecting users’ login details or personal data by posing as a legitimate company. Examples in the past have included emails appearing to be from Australia Post, Amazon, and Twitter.

In response, Fairfax reports NAB had successfully issued a takedown notice for the fake website, with a spokesperson saying “we remind customers, NAB will never ask you to confirm, update or disclose personal or banking information via email or text”.

On the bank’s website, it advises customers to forward any malicious emails to spoof[at]nab.com.au and then delete the email.


Source: Mailguard

Many recent phishing emails have relied on well-crafted and apparently legitimate websites to fool customers, and founder of IT services company Combo David Markus told SmartCompany this morning that setting one of these fake sites up is a matter of “a few hours work” for a cyber criminal.

“Once it’s created, a cyber criminal can create multiple copies of multiple different web servers and run the phishing attack over and over again,” he says.

“Phishing attacks have become a numbers game, with hackers looking for the cheapest and most efficient way to get dollars out of our bank accounts, and it’s all about the number of people they catch.

“If they make $100, that’s a good day.”

Markus says the scammers have chosen to pose as a big bank like NAB in hopes of increasing the number of users duped by the attack, saying people are more likely to click on something they’re familiar with. However, on the spectrum of cyber attacks, Markus call this one “relatively unsophisticated”.

“I would say these days it’s a relatively unsophisticated attack, but unfortunately there are enough unsophisticated recipients they’re going to keep catching enough people out to make it worthwhile,” he says.

Markus’ advice is to avoid clicking on any links in emails like these ones and instead using traditional channels to check the status of your bank account.

“If someone sends you something that you click on and it wants you to enter your password, don’t,” he says.

“Go via the company’s homepage or however you would usually check your account. Never follow any links in emails that ask for your username or password.”

SmartCompany contacted NAB but was not provided with a statement prior to publication

ASIC and ASBFEO hold banks to account on unfair contract terms

ASIC says following intervention by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and the Australian Securities and Investments Commission (ASIC), the big four banks are taking action to protect small businesses from unfair terms in loan contracts.

Following a round table hosted by ASBFEO and ASIC, the big four banks have committed to a series of comprehensive changes to ensure all small business loans entered into or renewed from 12 November 2016 will be protected from unfair contract terms.

ASBFEO and ASIC have publicly raised concerns that lenders, including the big four banks, needed to lift their game in meeting the unfair contract terms legislation.

The big four banks have committed to:

  • Removing ‘entire agreement clauses’ from small business contracts. These are concerning terms that absolve the lender from responsibility for conduct, statements or representations they make to borrowers outside of the contract.
  • Removing financial indicator covenants from many applicable small business contracts. For example, loan-to-valuation ratio covenants that give lenders the power to call a default when the value of secured property falls, even where a small business customer has met financial repayments, will be removed.
  • Removing material adverse event clauses from all small business contracts. These are concerning terms that give lenders the power to call a default for an unspecified negative change in the circumstances of the small business customer.
  • Significantly limiting the operation of indemnification clauses. These are concerning terms that aim to broadly protect the lender against losses, costs, liabilities and expenses that arise even outside the control of the small business borrower.
  • Significantly limiting the operation of unilateral variation clauses. In addition to providing applicable small business customers with a minimum of 30 days notice for any contract changes, banks will clearly limit the circumstances in which unilateral variations can be made.

The banks have agreed to contact all small business customers who entered into or renewed a loan from 12 November 2016, about the changes to their loans. In many cases, banks have agreed to implement the changes so that they apply to all existing applicable small business customers.

The banks have agreed to significantly limit the operation of potentially concerning contract clauses (such as financial indicator covenants) to loan products where such clauses are essential to the operation of the product (such as margin lending contracts). Where such clauses continue to exist, banks will re-draft them to ensure that they are clear, transparent and limited to the appropriate circumstances.

ASBFEO and ASIC have made it clear to the banks that simply including the word ‘reasonable’ in contracts does not go far enough.

The ASBFEO, Kate Carnell, said that her role was to consider the interests of small business and to ensure that the unfair contract term legislation was working across all industries. She said it was clear what “unfair” means – to protect the interests of the advantaged party, in this case it is the banks, against the interests of small business.

Ms Carnell said: “The banks have been given every opportunity, including a one-year transition period from November 2015, to eliminate unfair contract terms from their loan agreements and their response has been unsatisfactory.”

ASIC Deputy Chairman Peter Kell said: “We made it clear that lenders had to significantly improve their lending agreements to small business to ensure they meet the new rules.”

“It is important that the banks have committed to improving
their small business loan contracts. ASIC will be following up with the big four banks – and other lenders – to ensure that small business contracts do not contain unfair terms.”

Background

From 12 November 2016, the unfair contract terms legislation was extended to cover standard form small business contracts with the same protections consumers are afforded. In the context of small business loans, this means that loans of up to $1 million that are provided in standard form contracts to small businesses employing fewer than 20 staff are covered by the legal protections.

In March 2017, ASBFEO and ASIC completed a review of small business standard form contracts and called on lenders across Australia to take immediate steps to ensure their standard form loan agreements comply with the law (refer: 17-056MR).

ASIC has released Information Sheet 211 Unfair contract term protections for small businesses (INFO 211) which gives guidance to assist small businesses understand how the law deals with unfair terms in small business contracts for financial products and services, and the protections that are available for small businesses.

Majors move towards simplified SME lending

From Australian Broker.

A key issue raised by Small Business and Family Enterprise Ombudsman Kate Carnell in her Small Business Loan Inquiry has caused the major banks to amend their SME loan contracts.

During the inquiry, Carnell spoke of her concern around non-monetary default clauses such as financial indicator covenants which linked defaults to aspects such as loan-to-valuation ratios.

For loans below $5m, banks must not default a loan if the small business customer has complied with loan payment requirements and has acted lawfully, she said. She also pressed banks to remove conditions that allowed them to invoke financial covenants or catch-all ‘material adverse change’ clauses. These changes would have to be made by 1 July.

Commonwealth Bank of Australia

The Commonwealth Bank of Australia (CBA) has said it will amend its small business lending contracts to address the issues raised by Carnell.

“We are simplifying our small business loan terms and conditions to make it easier for our customers. For almost all of our small business loans, financial indicator covenants will no longer be included in loan contracts and therefore will no longer be a possible cause of default,” said CBA business and private banking group executive, Adam Bennett.

“Even though we very rarely used these covenants as a reason to foreclose a loan, this means that we will be removing all references to them in our small business loan contracts where our exposure to the customer is below a value of $3m. We are doing this for all new and existing qualifying customers to provide greater transparency and certainty for small business.”

These changes will affect 95% of CBA’s small business customers and will advise all affected existing customers of the amended contracts.

Australia & New Zealand Banking Group

The Australia & New Zealand Banking Group (ANZ) has also reaffirmed its commitment to these changes especially around small business lending contracts.

“As we outlined before the Parliamentary Committee last month, ANZ will implement all 11 banking recommendations. This includes simplified contracts for new loans to small business customers being those with total business lending of less than $3m,” said ANZ general manager of small business banking Kate Gibson.

There will be no more financial indicator covenants for over 95% of the bank’s small business customers, she said. These conditions will remain in place for borrowers seeking complex business lending products.

“We are simplifying the contracts for our small business customers to make it easier for them to understand their loan terms, so they can be clear up front about their obligations for the life of their loan. We are working to implement all these changes by the end of the year.”

ANZ’s new contracts will also remove all general material adverse clauses while clearly outlining the reduced number of specific event clauses which could result in bank enforcement action if a breach occurs.

National Australia Bank

National Australia Bank (NAB) has also stepped up to say it will follow Carnell’s recommendations around SME lending.

The bank will remove all non-monetary covenants on loans for new and existing small business customers with total lending of less than $3m. This will improve transparency for 98% of all the bank’s customers.

NAB has also promised to rewrite its small business contracts in plain English by the end of the year.

“We’ve been working constructively with the industry to address concerns raised in the Small Business and Family Enterprise Ombudsman Kate Carnell’s Small Business Loans Inquiry report. We are proud to be helping lead the charge on this – including taking measures beyond the Ombudsman’s recommendation, by applying the measures to all new and existing loans,” said NAB executive manager of business direct and small business Leigh O’Neill.

The threshold of $3m is just right as it benefits the vast major of the bank’s business customers, she added, as loans above this amount are more complex and require a greater level of management.

Cash Flow A Barrier To SME Growth

From Australian Business Review.

Cashflow issues are costing SMEs a potential $200 billion in lost revenue each year.

East & Partners has based these revenue estimates on ABS data that total revenue for the A$1 – 20m SME segment is A$1.3 trillion, and given 1150 of 1250 SME survey respondents indicated that better cashflow could have improved their revenue by an average of 18.7 percent, this has been extrapolated to indicate $222.5 billion additional revenue.

Three-quarters of SMEs who identify as being in growth phase say better cashflow would have produced revenue growth of 10 to 50 percent in 2016, Scottish Pacific CEO Peter Langham said.

Since September 2014 Scottish Pacific, Australia’s largest specialist working capital finance provider, has engaged specialist research firm East & Partners to conduct six monthly polls of more than 1200 small to medium enterprise leaders across all states and key industries, to test SME sentiment and concerns.

The Scottish Pacific SME Growth Index out today shows a record percentage of businesses plan to use non-bank financing (22 percent, doubling from 11 percent in Round One, September 2014). This contrasts with declining bank borrowing intention (29 percent, significantly down from 38 percent in Round One).

As well as the growing intention to fund business by using non-banks, just under 95 percent of SMEs indicated they planned to use their own funds to support their business, and once again respondents cited access to and conditions of credit in their top three barriers to business growth.

“It seems the day is approaching when non-banks will match or pass the banks as the first port of call for small to medium business funding,” Langham said.

“With interest rates at record lows, SME access to credit should not be a problem. And yet SME owners and leaders indicate that their full credit appetite is not being fulfilled.

“In light of ASBFEO’s Small Business Loans Enquiry which highlighted the need for a fast solution for small businesses at loggerheads with their banks over access to finance, it’s important for SMEs and their advisers to be across the full range of finance options available to them,” he said.

Only 8.5 percent of all SMEs reported that they were satisfied with their cashflow (just 5 percent of growth SMEs were satisfied). Seven out of ten, whether growth, consolidating or declining SMEs, said better cashflow would have improved 2016 revenues by more than 5 percent.

Seven out of ten growth SMEs indicated improved cashflow would have produced at least 10 percent revenue growth, with almost a quarter saying they could have achieved 25-50 percent revenue growth.

“Regardless of whether an SME had a growth or negative growth forecast, this clearly indicates the significant impact improved cashflow would have on revenue growth,” Langham said.

“The smaller the business, the greater the impact of improved cashflow, with strong indications that improving cashflow early in the life of a business has a major long-term impact on revenue growth.”

96 percent of $1-5 million revenue businesses agreed that better cashflow would have increased their 2016 revenue (with an average improvement of 23 percent); 85.5 percent of $15-20m businesses agreed, with an average revenue increase of 11 percent.

Mr Langham said the stark reality for CFOs and corporate treasurers in the SME sector was that nine out of ten firms say they could have better cashflow management.

“The unhappiness around cashflow is higher for growth businesses, as opposed to those with steady or declining revenue. It is cited as a major growth barrier by 56 percent of growth SMEs, but only by 20 percent of SMEs in a consolidation or declining growth cycle,” he said.

Langham said that in this round of the Scottish Pacific SME Growth Index, Australia’s SME owners seem to have bounced back from the pessimism they voiced in the previous round, September 2016.

“SME business confidence is on the rise, but fragile. Trend analysis shows just over 49 percent of SMEs are expecting revenue increases in the first half of 2017, a drop from 63 percent in our first round in late 2014. Since 2014, average positive revenue forecasts for growth SMEs have remained at around 4 percent, yet the average revenue drop predicted by negative growth SMEs has blown out from 5 percent to 8 percent.”

SMEs listed their top three barriers to growth as high or multiple taxes (71 percent), credit conditions (65 percent) and credit availability (61 percent). Key growth drivers are core customers (41 percent), strong staff (38 percent) – and more concerning, good luck (31 percent) and ‘just following our nose’ (37 percent).

“We’ve seen an increase in the number of SMEs citing credit conditions as a growth barrier, from just over 50 percent in 2014 to now above 60 percent,” Langham concluded.

SME Cash Flow Under Continued Pressure

We have updated our rolling SME survey, ahead of the next edition of the SME report, out soon. The previous version is still available on request. SME’s are under significant cash flow pressure. Today we walk though some of our findings.

We look at businesses up to $5m turnover, although most of the 2 million plus businesses are much smaller.

The average age of the owner is more likely to be 45-55 years, as often they have moved on to second careers, or decided to set up on their own.

Nearly half are less than 4 years old, and indeed more than half started are likely to fail in the first 3 years.

Construction and Real Estate services make up a large proportion of the total, and the SME sector overall is heavily relent on the property sector more broadly.

Around 60% of businesses are seeking to borrow, and most are looking for working capital support.

The main driver within working capital is delayed payments (especially from large private sector companies and some government agencies).

The average debtor days is more than 50 days and rising. It varies by state.

Our risk analysis metric shows that businesses in the other services and construction sectors are most risky when it comes to finance. Health care businesses are the lowest risk.

Next time we will look further at SME finances and their channel usage.