Why are SMBs struggling to access funding?

Small businesses across Australia are currently being squandered by a number of moving variables with a lack of access to funding being one of them.

It’s no secret that Aussie small businesses are up against some tumultuous conditions. As recently reported on HR Leader, many SMBs feel burdened by just IR reforms alone, with one-quarter (24 per cent) stating that IR reforms have made it harder for their company to grow, while a similar proportion (23 per cent) felt that the reforms have made it harder to remove toxic or underperforming employees.

One in five respondents said the IR changes have made it harder for the business to downsize during difficult times (21 per cent), adapt to change in the marketplace or economy (20 per cent), and even afford employees at all (20 per cent).

Now, Andrew Toon, the general manager of payments and product at PayPal Australia, has explained some of the reasoning behind another issue arising for Aussie SMBs: the lack of access to funding.

During an interview with HR Leader’s sister brand, Broker Daily, he said: “Despite the vital role small and medium businesses (SMBs) play in Australia’s economy, many still face hurdles accessing the capital they need to thrive.”

“Traditional loans can involve lengthy applications, extensive credit checks, and strict eligibility criteria that may be unsuitable for time-poor business owners or those without long financial histories.”

“Traditional financing often isn’t geared towards smaller loans – we know from our latest eCommerce Index research that 67 per cent of Australian SMBs have missed out on revenue due to a lack of working capital.”

According to Toon, a number of issues form when SMBs are unable to access funding – which includes investing in business improvements.

“When SMBs struggle to secure funding, it directly impacts their ability to maintain healthy cash flow, stock up on inventory, hire or retain staff, or invest in business improvements, which ultimately hinders innovation and business growth.

“In our latest research, Australian SMBs told us the average amount of revenue they’ve missed out on due to insufficient capital is $22,000 – which illustrates just how critical timely funding can be. Accessible financing allows entrepreneurs to focus on innovation and expansion rather than worrying about how to cover the next round of expenses,” Toon said.

“It is also vital in ensuring businesses can keep up with evolving consumer needs and stay relevant in a competitive market.”