Solving the $60b funding gap for SMEs

Although often labelled the ‘engine room’ of the Australian economy, many small businesses have a difficult time accessing finance, which limits their ability to grow.
Australian small businesses employ about seven million people and generate half a trillion dollars of economic output and yet the funding gap for the country’s SMEs stands at $60 billion, according to estimates. 

Speaking to MPA, Spotcap Australia’s managing director, Lachlan Heussler says alternative finance can help bridge the gap but the awareness around what it can offer is still lacking among small business owners. 

“We think there needs to be a huge change in mind-set here in a sense that there is this industry that’s grown from nothing five years ago to now having some absolute scale about it whereby there are options outside of the banks,” says Heussler. 

“These options are often much faster in terms of turn-around times; they offer better products that are more suited to the SMEs funding needs and it doesn’t require the SME owner/director/shareholder to put their personal property assets on the line as collateral against a loan.”

He says SMEs often “can’t be bothered’ because the application process through traditional lenders can be long and tiresome and can “take up to literally a day’s worth of human effort” for a small business owner to collate and submit the necessary information for a loan product.

“To put that in perspective, to apply for up to $250,000 in financing from Spotcap online takes five minutes,” says Heussler. “There’s zero paperwork from our loan application all the way through to loan fulfilment – it’s all completely done online.”

He says unlike a bank which can often can take up to six weeks to process an application, Spotcap aims for 24 hour turnaround times and “often that response is within a few hours if it’s a simple, straightforward application”. 

Spotcap is also working closely with the larger aggregators in Australia. “The broker community is a very important part of the Spotcap operations in Australia.

“We love working with brokers and brokers tend to have quality customers that they have vetted and so our approval rates via the broker channel are often quite high.”

He says what will be important for small business and alternative lenders in the near future is the outcome from the Productivity’s Commission’s investigation into open data, looking at the pros and cons of increasing the availability and use of data, both public and private, by individuals and organisations. 

“Should that be made available, it will have a huge impact into the scalability of the alternative finance industry in Australia,” says Heussler. 

“If there’s favourable policy outcomes suggested from the government then I think that will have a much bigger impact on SMEs’ ability to access finance than anything that they can do in the Budget.”

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