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SME exporters say finance still the greatest challenge

SME exporters say finance still the greatest challenge article image

The number of Australian SMEs expecting access to finance to become more difficult over the next 12 months has doubled since the beginning of last year, according to new research.

A report by Efic, Australia’s export finance agency, found that despite these finance concerns, SMEs are generally feeling more optimistic about international sales.

About 38 percent expect an increase over the next 12 months – up from 36 percent in February last year.

The research, which surveyed 859 SME exporters, is the fourth of a regular quarterly series conducted by Efic to provide key insights into the outlook of Australian SME exporters.

The number of Australian SMEs expecting access to finance to become more difficult over the next 12 months has more than doubled from 22 per cent to 57 per cent since February last year.

This strain is felt more keenly in businesses with a turnover of less than $1 million, with 88 per cent of those in this category expecting access to finance to become more difficult over the year ahead.

Half of respondents indicated this concern was based on their recent experiences with a financial institution, a finding that has remained consistent across the last two quarters.

Significant assets required as security

This perception may be related to SME exporters’ funding requirements typically not matching the standard lending criteria of financial institutions such as banks, which often require significant assets as security.

Efic Executive Director, SME, Andrew Watson, said this re-enforces why Efic has a role to play in assisting SME exporters who are unable to secure finance.Andrew-Watson_Efic

“Efic works very closely with all the banks, Mr Watson said. “We want SMEs to know that Efic is there to assist them in raising the finance required.

“Efic provides simple, but effective financial solutions to help Australian companies grow their business internationally and achieve export success.”

Alternative sources of funding

The research also looked into alternative sources of funding used by SMEs to support export and international business growth.

Of 33 percent of exporting SMEs that engaged unsecured lending, nearly one in four relied on a business credit card and 9 percent leant on family and friends for this support.

Surprisingly, 84 per cent of SME exporters with a turnover of less than $1 million reported that they used some form of unsecured lending, such as credit cards or personal loans, to support their export growth.

Increased sales driving confidence

Stronger overseas demand and improved sales strategies appear to be the key drivers in more SME exporters feeling optimistic about the year ahead, with 45 per cent of respondents citing these as the main reason for an expectation of increased international sales.

It also appears exporting is becoming a larger part of SMEs’ broader business strategies, with the proportion of revenue attributed to export sales reaching 15 per cent, an increase of 21 per cent since the beginning of 2014.

SME exporters also felt that growth in export costs will slow over the next 12 months.

A shift east

In terms of the most important export markets for SMEs, the number of respondents who pointed to China as their most important export market increased by 7 percent since February 2014 to 26 per cent.

This increase may be linked to SMEs’ perceptions of increased opportunities in China flowing from the Free Trade Agreement signed in November 2014.

India continues to emerge as a key export market, selected as the most important export market by 11 percent of all respondents, the highest percentage since the index started at the beginning of 2014.

Mr Watson said the depreciating Australian dollar should encourage Australian companies to look for off-shore opportunities.

“This (the weakening dollar) should give them an even greater sense of optimism of the profits they can generate off-shore.”

Mr Watson strongly encourages those businesses that are unable to secure finance with their bank to consider other opportunities available.

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