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  • Writer's pictureCOMPASS

Why Small Business Struggle To Get Funding

Updated: Mar 17, 2022

I came across this industry news article today which prompted me to make some additional comments but from the perspective of enabling or positioning SME’s to better access funding, rather than just pointing out the raw statistics as to why they can’t.

Here is the quoted article:-

‘Small businesses in Australia are struggling to secure loans, according to a new study. The Small business, big growth report from cloud banking platform Mambu surveyed more than 1,000 SMEs globally, including businesses in Australia and New Zealand.The study, as reported on the Australian FinTech site, found that half of SMEs in Australia and New Zealand had been unable to secure sufficient, or any, funding on at least one or more occasions over the last five years. More than two thirds of SMEs globally had been unable to secure adequate business financing in that same period. The report showed that significant barriers exist for SMEs seeking business loans, with slow lending speeds (32%) and arduous paperwork or administration requirements (25%) the main roadblocks for SMEs in Australia and New Zealand. It also showed that one in five (21%) SMEs in Australia and New Zealand were launched as a direct result of the founder accessing government assistance programs such JobKeeper during the pandemic. Of the SMEs unable to secure sufficient funding, 39% were unable to launch new products and services, 33% were unable to hire effectively, and 29% struggled to pay back creditors.’

“Australia’s SME sector underpins the entire economy, with over 99% of Australian businesses considered SMEs, and the sector employing around 68% of the Australian workforce,” Mambu APAC managing director Myles Bertrand told Australian FinTech. “However, while many large businesses have managed to profit and thrive throughout the pandemic thanks to various government supports and incentives, SMEs have had it much tougher.

“While government assistance programs like JobKeeper and the SME Recovery Loan Scheme have helped, for some SMEs the red tape, paperwork and admin required puts these initiatives out of reach. It’s no wonder that only half of all SMEs launched in Australia survive longer than four years. ”Bertrand said it was critical for our future economic success that SME lenders address these pain points and modernise their financial offerings to include faster processing times, reduced admin requirements and quicker access to funds.

Whilst I respect Bertrands’ comments, coming at the issue from another angle, here’s how SME’s can prepare themselves to better enable access to funding. Of the 1000 participants in the study how many of them had the following in place:-

  1. A suitable and comprehensive business plan with vision statement, short and long term goals?

  2. Prepared cash flows projected for at least 12 months to 2 years with supporting assumptions?

  3. A marketing plan to determine ‘target’ market , strength of competition, product, pricing etc

  4. Benchmarked their business next to industry standards?

  5. Considered external risk factors relating to Government legislation, environment, etc

The above points are just some of the many critical aspects of starting up a business, or managing a business for the long term. We don’t plan to fail. We fail to plan. SME’s are no different to big business in that sense and business owners must be flexible and agile to be able to pivot their business when needed.

If you are operating a small business and you would like some support with your business planning you can contact Michael on 65832211.

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