Australian businesses and non-bank lenders
The ScotPac SME Growth Index (1) has been a closely watched piece of annual research by the Aura Private Credit investment team, which tracks the adoption of non-bank lenders in the Australian small and medium-sized enterprises (SME) market. The 2024 report has recently been released which marks the 10th anniversary of the annual research. The last decade and particularly last 6 years have displayed a major shift in SMEs adoption of non-bank lenders as their preferred providers of debt capital.
The ScotPac SME Growth Index (1) has been a closely watched piece of annual research by the Aura Private Credit investment team, which tracks the adoption of non-bank lenders in the Australian small and medium-sized enterprises (SME) market. The 2024 report has recently been released which marks the 10th anniversary of the annual research. The last decade and particularly last 6 years have displayed a major shift in SMEs adoption of non-bank lenders as their preferred providers of debt capital.
90 per cent of SMEs declared they would consider using a non-bank lender in today’s market. A stark contrast from only 6 years ago in 2018 when 44 per cent declared they would never consider using a non-bank lender.
Actual intention to use non-banks to fund new investment is now represented across 52 per cent of SMEs. This has increased from 15 per cent in 2018 and only 7 per cent in 2014. More interesting, only 42 per cent of SMEs intend to use banks to fund new investment in 2024.
Ease and speed of transactions remains a key decision point for SME borrowers when selecting a financier, eclipsing single-lender loyalty. Non-bank lenders adoption of technology driven underwriting, credit assessment and on-boarding has supported adoption rates. Moreover, the Aura Private Credit team also sees tailored loan products and acknowledgement of alternate non-property security types as a major driver behind the growth in non-bank lender market share.
The trend implies that a considerable portion of the $645 billion of small and medium sized business loans held on Australian bank’s balance sheets (2) will be up for grabs by non-bank lenders.
With a considerable and demonstrable level of demand, a key bottleneck for the expansion of non-bank lender market share remains to be funding of loan originations. This provides the Aura Private Credit team, which specialise in warehouse finance facilities with Australian non-bank lenders with selectivity and negotiating leverage to secure favourable risk-adjusted returns with enhanced credit risk mitigants and structural controls.
(1) ScotPac SME Growth Index, March 2024
(2) RBA Lending to Business Statistics, May 2024
Brett Craig is responsible for portfolio management and asset origination for the Aura High Yield SME Fund and the Aura Core Income Fund. Prior to joining Aura Group, Brett held a number of roles at Macquarie Group over an 11 year period including Vice President within the Debt Markets business where he focused on originating, structuring and distributing debt products primarily in the Australian market.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
