SME lending options are on the rise, but how do you access them?

 While many SME owners worry about their access to finance, a surge of new lenders and products is rapidly expanding the options available. And brokers have an important role to play for businesses, says the Productivity Commission.

Changes to lending markets over the past decade mean there’s now a wide range of business finance options that don’t require property as security, according to a new report by the Productivity Commission.

However, a lack of awareness of these new finance options is one of the biggest hurdles preventing SME owners from accessing them.

This is where a broker with up-to-date market knowledge can play an important role for your business, explains the Productivity Commission.

“SMEs may not be aware of all their lending options and may not feel confident about new options. Brokers can help match them with appropriate lending options,” the Productivity Commission says.

“These options include borrowing against alternative collateral – such as vehicles, machinery and intangible assets (for example, invoices and other expected receipts) – and unsecured lending.”

Changes to prudential rules have made lending to SMEs less attractive for the major banks, but at the same time, created opportunities for new and established non-bank lenders, says the Productivity Commission.

This has resulted in a broader range of lending options beyond traditional property-secured loans for SMEs, especially with the emergence of fintechs and more accessible borrower data.

“Combining new data sources with innovative analytical tools (such as artificial intelligence and machine learning) has given many lenders the information and confidence to lend to SMEs without the security of property,” adds the report.

However, while most SMEs are aware of banks as a source of finance, awareness of the newer options is more limited.