Boosting Your SME’s Cashflow: Exploring Finance Options for Small Businesses

Small and medium-sized enterprises (SMEs) are the backbone of many economies, yet they often struggle to secure traditional bank loans. As a result, many are turning to non-traditional bank lending options for cashflow finance. This trend is gaining momentum as SMEs seek alternative ways to fund their businesses. In this blog, we’ll explore why SMEs are turning to non-traditional bank lending as they rebound or restructure their finances to make cashflow easier.

Government stimulus packages over recent years have come to an end and SMEs now need to raise equity. Current stats indicate that around 40% of small business are borrowing while around 33% are actively assessing their finance needs.

Not Getting Enough from Bank Loans

It’s clear based on the current economic landscape that demand for commercial and business finance is on the rise. Unfortunately, many SMEs are unable to qualify for traditional back loans.

According to Scotpac’s latest bi-annual SME Growth Index Survey (conducted September 2022) non-bank borrowing demand has again increased to a record high of 33 per cent ‘market wide’, up 14 per cent year-on-year – more than doubling since September 2018.

The Adviser – November 2022

This increase in demand for SME finance shouldn’t come as a surprise. In a survey of West Australian SMEs, 87% projected positive revenue growth for the next 6 months.  However, only 15% of Victorian businesses were matching projections, with 62% now expecting a negative decline.

In the same West Australian SME survey, 3.4% of SMEs indicated that they do not know how to finance their next business investment. In another survey conducted by the cloud banking platform Mambu, as much as 50% of respondents claim that they are unable to get sufficient funding for their business.

Application Requirements are a Barrier to Funding

As is usually the case, traditional finance institutions like banks follow strict serviceability requirements before approving a loan. The reason for this is simple: banks need to make sure that the borrower can afford to pay the loan.

Unfortunately, this ‘one-size-fits-all’ approach in screening tends to alienate many in the business sector.

Many small businesses have seasonal revenue due to the nature of their industry (e.g. resorts boom during the summer season when locals and foreigners look to head to the beach). Banks tend to score lower points for businesses that have considerable lean months. Not to mention, assessing serviceability is a lengthy process.

Small businesses, on the other hand, typically need access to fast financing, especially for needs such as working capital, payroll and the like.

If a business needs to roll out their employees’ salaries soon, then getting stuck in the loan approval process isn’t the most ideal situation to be in.

While traditional bank finance is where most small business owners go to first, the unfortunate reality is that quite a number of small businesses are unable to qualify for bank loans.

However, their finance needs will still be there, and they still have the problem of figuring out how to cover their financial obligations.

At Style Finance Group, we can help you access alternative lending options and are in a prime position to help SMEs quickly source debt funding.

Access to numerous lenders including banks, non-banks and private lenders

At Style Finance Group we have access to many different lenders that can offer more solutions in particular if you are growing rapidly or facing difficulty qualifying for traditional bank financing. Why would you use an alternatives to bank lending?

  • Tailored Solutions – Unlike traditional bank loans that rely on a standardised checklist for loan applications, the terms of non bank/private lending solutions can be tailored depending on the situation of the borrower. This allows for more flexibility in the loan, which in turn helps improve your chances of getting approved.
  • Faster Application Process – An advantage of not having standard requirements is that the loan application is also much faster. When looking to pay salaries or purchase important equipment for operations, access to fast finance is crucial. This can be settled within days at times.
  • Shorter Loan Terms (6 months – 2 years) – Aside from faster access to finance, SMEs will also benefit from not having to tie themselves to long loan terms that leave them in debt for a significant amount of time. And because the loan term is shorter, the overall interest cost is usually less than traditional bank finance where loans can last for more than 10 years.

What business needs can non-bank or private lenders service?

We can find solutions for the following business needs:

  • Bridging/Working Capital Loans
  • Business Purchase/Establishment Finance
  • Business Equipment Purchase Loans
  • Equity Release (1st/2nd Mortgage)
  • Refinance/Debt Consolidation
  • ATO Tax Debt Loans
  • Land/Property Finance
  • Land Subdivision Finance
  • Renovation/Flip Finance
  • Development/Construction Finance
  • Construction Completion Finance
  • Mezzanine Finance
  • Residual Stock Loans

With so many options available to them, it’s easy to see why small and medium-sized enterprises are increasingly turning to non-traditional bank lending options for their cash flow financing needs. This trend is driven by a desire for quicker access to funds, more flexible terms, and a more personalized approach to lending. While traditional banks remain an important source of funding, SMEs are taking advantage of the many alternative options available to them. As the lending landscape continues to evolve, it will be interesting to see how SMEs adapt and take advantage of the opportunities that non-traditional lending provides.

There’s no denying that SME’s can benefit from non-traditional bank lending to address cashflow challenges. However, navigating the complex landscape of alternative financing can be daunting. That’s where Style Finance Group comes in. With our extensive expertise and experience, SMEs can get the support and guidance they need to make informed financing decisions. Don’t hesitate to contact us for support with your cashflow finance so you can get back to doing what you do best – growing your business!

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