Small and medium enterprises (SMEs) are the backbone of the Australian economy. They employ about 4.8 million Australians and have contributed more than $417 billion to Australia’s total Gross Domestic Product (GDP) in 2018-19 (Australian Government, 2020). Although they may make up over 97 per cent of Australia’s businesses, one of the biggest obstacles for an SME is finding funds or capital that is needed for expansion.
When it comes to scaling up, small to mid-sized companies have more options than ever. Whether they choose equity or debt, there is an entire range of lending routes — from borrowing from the usual loan from the bank, using business credit cards, or crowdfunding.
What is SME Finance?
SME Finance covers a range of products formulated to assist businesses. These products allow for a business to access funding to allow for start-up or growth of the business without affecting cash flow.
There are six main types of SME Finance offered by Platform Finance that can assist businesses with their cash flow.
Business Loans
Business loans are ideal for a variety of large one-off business expenses to spread the cost over a longer-term. It also allows for capitalising on opportunities that are not budgeted for. Can be both secured or unsecured.
Line of Credit
Ideal for recurring short-term and smaller business expenses. A line of credit allows for access to extra funds in proportions as needed and only pay interest for funds borrowed (not revolving). Suitable for cash flow and working capital purposes.
Invoice Finance
Invoice finance is a line of credit against unpaid invoices. The facility enables the business to use unpaid invoices to pay suppliers and staff, as well as invest in growth measures, such as buying equipment, making bulk purchases, and so forth.
Trade Finance
Trade finance covers a range of products designed to help facilitate trade between businesses. It makes it possible for companies to access funds to buy and sell goods while helping to mitigate the risks involved with trade transactions.
Overdrafts
An overdraft is a loan that allows a business to pay for bills and other expenses when their account has an insufficient balance. With a revolving credit limit, it allows the company to draw money as needed, up to the set limit and only pay interest on funds used.
Sale and Leaseback
A sale and leaseback is a unique type of equipment financing. If a business needs to increase cash flow quickly, they can sell existing equipment to a financier who then immediately leases this equipment back to the business.
How can funds help to grow a business?
SME finance can help to increase liquidity and reduce the risks of any cash flow interruptions i.e., funding gap on short notice, or provide a response to an unforeseen situation or emergency. Businesses can pay off the running costs and have the confidence to continue to take and place new orders. SME finance allows for a boost in the capital that is needed to increase the turnover of goods, secure deals, allowing for the ability to scale revenues to maximise profitability.
SME Finance can help fund new equipment needed to improve productivity. Items like machinery, vehicles or IT equipment can be purchased via a business loan where the item’s expenses can be paid off over a longer-term term. If a business wants to move into new markets or launch a new product or service; borrowing could help fund the research and development, and the marketing that is needed to promote it.
Benefits for Brokers moving into SME Finance
• Opportunity to develop a new income stream through your existing Platform Finance asset finance accreditation
• Leverage existing relationships with commercial clients to become a one-stop-shop for all their business finance needs
• Option to place referral deals with our expert Processing Team if you are unsure about SME product intricacies
• SMEs are no longer going to the big banks, as they are being turned away. They are turning to brokers for advice and support (The Adviser, 2021)
• There is an entire catalogue of finance solutions for SMEs, which allows for a broker to access a whole new market, catering to the needs of any SME.
In Summary…
At Platform Finance, we offer a powerful CRM tool, which allows our brokers to access a large variety of financial solutions including SME Finance. In an environment where 97 per cent of Australian businesses are SMEs, it is a great opportunity for brokers to diversify themselves into the SME lending market to expand their customer base.
