Are your SME clients missing out on growth opportunities?

New data shows business lending is increasingly tough to come by

Are your SME clients missing out on growth opportunities?

Pent up demand for small business lending is an opportunity for advisers to help out struggling businesses, according to specialist lender Prospa, which says that many SMEs are still unaware of their options outside of the main banks.

Prospa’s New Zealand general manager Adrienne Church says that for many small businesses, COVID-19 has actually thrown up significant growth opportunities - however, due to a lack of available funding, businesses have often ended up missing out.

She believes alternative lenders often don’t have the ‘red tape’ around their borrowing process in the same way as traditional banks, and urged advisers to talk to clients in need of a funding boost about potentially accessing cash from a non-bank.

Read more: Increased business confidence drives capital demand

“It’s always been tough to get business lending, and that’s really why our business exists,” Church told NZ Adviser.

“In our recent survey, six out of 10 business owners said that it’s become even harder to get funding post-COVID than it was before. When you’ve got someone trying to run their business in these conditions and an opportunity comes up, they often don’t want to have to wait three weeks for a response and to do all of the paperwork, as that results in missed opportunities. It’s definitely gotten tougher.”

According to the survey, the biggest issues around getting funding from main banks are long waiting times, large amounts of paperwork and the need for security - which many businesses do not have. Church says this has often resulted in business owners using personal funds, family support and personal credit cards to support their business.

“I hear these issues reflected every day when I’m talking to customers and advisers - you have to jump through a lot of hoops to be able to get anywhere with lending,” Church said.

Read more: Prospa offers eight week no repayment loans

“The key difference with us is that our whole process has been designed for small businesses, and it’s all electronic. We don’t make them fill out massive forms or come into our branch, and our credit decision engine has all of the data points in there - so we can assess a loan very quickly, and they can usually get their funding that same day.”

“I’ve seen our applications increasing, and often when they come in in the morning, the customer has the funds in their account that afternoon,” she explained.

“A lot of businesses have had opportunities coming out of COVID, but they need money to fund those and they need it quick - they can’t wait three weeks. Our business has been built to cater to them, and we don’t mix their personal assets with their business.”