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Are business loans failing Australia’s small business owners?


small business

New research finds business owners are struggling to get capital and most startup founders aren't even bothering to try.

Small business finance has undergone a huge transformation in the past five years with the rise of alternative fintech lenders. However, new research from Xero shows that there is still a way to go.

Xero's State of Lending Report found that for one in five small business owners (22%), access to capital is the greatest pain point or perceived threat to their aspirations for long-term growth.

A missed opportunity

This funding gap creates a huge missed opportunity for Australia's economy. When asked how much they would borrow if they could be sure of getting funding, small business owners surveyed by Xero said they would consider borrowing an average of $85,562 in the next 12 months. Nearly one third (31%) said the funding would be used to hire more staff.

“Accessing finance can be incredibly stressful for small business owners, with it often having significant implications for their future and the future of their workforce," said Ian Boyd, Financial Industry Director at Xero Australia.

"Getting the right support at these times is critical, and we strongly echo ASBFEO recommendations for small businesses to work closely with bookkeepers and accountants to get their business finance-ready."

The difficulty of accessing capital to start a business is also evident for startup founders. According to Xero's research, only 9% of small businesses took out a loan to start their business. The majority (71%) relied on their own savings while others (16%) re-mortgaged their homes and/or took out extra credit cards.

Better tech the way forward

So how can business loans be improved?

For one, less documentation. 80% of small business owners said the documentation required to apply for a business loan was onerous and of those that had applied with a lender, 42% said getting financials to a lender was difficult.

Many newer fintech business lenders allow businesses to plugin their accounting software as part of the application, providing a smoother and more automated application process. Xero's research supports the view that technology such as this is the way forward.

The majority of respondents (71%) said they would be interested in applying for business funding if there was an electronic process to facilitate it and create the documentation on their behalf.

Finding better loans

Boyd said the "responsibility to fix this funding gap doesn’t sit squarely with one group" and that "Government, financial services firms and the accounting sector all have a part to play in helping small businesses understand the options for financing."

If you are a small business owner looking for finance, Boyd says working closely with your accountant and bookkeeper to ensure your financials are in order will put you in the best possible position before starting your application.

"This will not only help them understand the lending options available to them but also ensure they are keeping orderly books so as to boost their chances of loan approval.”

You can start a comparison of your lending options below.

1 - 3 of 3
Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
ebroker Business Loan
1 month to 30 years
$0 application fee
Small business loans available between $5,000 and $5,000,000. Get access to 70+ non-bank lenders on this independent platform.
Valiant Finance Business Loan Broker
3 months to 5 years
$0 application fee
A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 70 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.
Prospa Business Loan
3 months to 3 years
3.5% origination fee
Small business loans are available from $5,000 - $500,000 on terms of up to 3 years. At least six months trading history and a monthly turnover from $5,000 is necessary.

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