SME Demand for Non-Bank Lending Rise Post-COVID

16/02/2023

More business owners looking for private finance options following pandemic

The COVID-19 pandemic has had a devastating impact on the global economy, with Australia being no exception. The Australian government responded to the crisis by introducing a range of stimulus programs to help businesses and individuals weather the storm. These programs have been successful in providing much-needed relief. But now that they have come to an end, businesses need to look elsewhere to help them meet their finance requirements, and as such, the demand for non-bank lending is increasing.

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More business owners looking for private finance options According to a ScotPac report, roughly a quarter of SMEs in Australia sought non-bank financing when government stimulus programs came to an end. This figure is more than double the number of SME’s that applied for non-bank financing in 2021.

This trend is due to a number of factors, including the fact that many businesses and individuals have been unable to access traditional bank loans due to changing business conditions caused by the pandemic.

The end of the stimulus programs has also meant that businesses and individuals have had to find alternative sources of financing.

The demand for non-bank lending was also driven by the financial hardship experienced as a result of the lockdowns hampering businesses across the country. This led to an increased demand for shorter-term loans, as businesses and individuals look for ways to bridge the gap between during this turbulent time.

Non-bank lending: by the numbers

The SME Growth Index has revealed that 39% of SMEs are looking to increase borrowings and the number of SMEs looking to borrow from non-bank institutions have doubled to 31% in the last four years, with much of the spike happening post-COVID.

Data from CreditorWatch also revealed that external administration increased by 26% from October 2022 – November 2022 when the ATO recommended a return to standard debt collection activities after it had followed more lenient guidelines during the height of the COVID19 pandemic.

Benefits of Non-bank lending

Benefits of Non-Bank Lending Alternative finance options are beneficial to businesses who are unable to access traditional bank loans due to their credit history or lack of serviceability. Non-bank lenders for businesses provide a range of products, including bridging loans, ATO debt loans, equipment purchase loans, development finance and construction loans among others.

Non-bank lenders offer a number of advantages over traditional banks.

They are often more flexible when it comes to who they will lend to. This is because unlike traditional lending institutions where serviceability and credit history take precedence in determining whether the borrower can indeed pay back a loan, non-bank lenders for businesses focus on the exit strategy of a borrower.

This makes them an attractive option for businesses looking for financing but are unable to access traditional bank loans. Private lenders can also move a lot quicker than a traditional bank, often being able to settle a loan within days rather than months like most banks. This is especially appealing for businesses that need funds quickly for time-sensitive activities like paying wages of employees or paying taxes.

About PMA

Private Mortgages Australia offers short-term, flexible loans to business clients and property developers.

Our credit team is readily available to accommodate brokers and borrowers alike. We pride ourselves on our quick response time.

We also provide generous referrer fees within 24 hours of a loan settling with no clawbacks!

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