Small business owners could be most impacted once the final report of the Royal Commission is released later today.
According to Scottish Pacific CEO Peter Langham, the impact of the Royal Commission will be far and wide and there are growing fears that small businesses will find it even harder to access funding.
“From where I’m sitting, it is still possible for most SMEs to get funding, just perhaps not at the rates or conditions that they are comfortable with,” he said.
“What has changed, as a consequence of the Royal Commission, is the banks themselves will have more rigor and more hurdles to jump over.
“This means that business owners need to seek out alternative financiers to the banks, and there are plenty of these (mostly funded by the banks).”
According to Scottish Pacific’s most recent SME Growth Index findings, 96 per cent of SMEs were drawn to alternative lenders because of fast credit approval and reduced compliance.
However, Mr Langham warns SMEs to ensure they find the right terms and the right security that suits their business.
“The best way for SMEs to get suitable advice on funding options is via trusted business advisers, such as accountants and commercial finance brokers,” he said.
“These advisers, with a day to day understanding of their clients’ businesses, can help SME clients find their best funding option by making them aware of how the different products work and what the risks and benefits are, especially when it comes to some of the newer market entrants.”
Mr Langham also advises SMEs to look beyond using property as security.
“Australia’s cooling property market, along with more stringent lending conditions, will definitely have an effect on SME owners who need to use their home as security for their business loan and the credit squeeze will be on for any business unwilling to look beyond property security,” he said.
“With many viable alternatives out there, I find it hard to understand why any business owner would risk their home to secure a business finance line of credit.
“It’s important to note that, along with the property downturn, Australian home ownership rates are falling. With increasing numbers renting rather buying, business owners will have to find funders willing to lend them money secured against assets other than property.”
As Australasia’s largest business finance specialist, Scottish Pacific has more than 30 years experience in lending to small, medium and large businesses.