EY’s latest Global Growth Barometer found that 24 per cent of Australian middle-market companies nominated access to credit as the key external risk to their growth in 2018, up from just six per cent last year.
EY Oceania growth markets leader Rob Dalton believes the findings demonstrate a clear correlation between the ongoing Royal Commission in Misconduct in the Banking, Superannuation and Financial Services Industry and the heightened concern.
“This data demonstrates that there’s a real perception among our medium-sized businesses that banks have started a pre-emptive lending crackdown that is increasing the cost and reducing the accessibility of direct financing,” said Mr Dalton.
“Companies are exploring their options and alternative forms of finance beyond bank lending. There’s a huge amount of private capital out there looking for a home and middle-market businesses are looking to access this to fund their growth.”
Speaking to Accountants Daily, the Institute of Public Accountants general manager of technical policy Tony Greco said that while cash flow has always been “make or break” for business clients, the increased spotlight on the banks from the royal commission is causing the issue to worsen.
“The smaller sectors always have issues with funding and expansion because they lack the brick and mortar and the banks have not always been flexible in that regard and that’s why a lot of the new fintechs are able to seize on that opportunity but it comes at an added cost but there are more options available,” said Mr Greco.
“Once upon a time it was either the banks or the banks but in the last five years there are a plethora of fintechs out there who can provide funding and relatively quicker than a bank.
“The best tip is to plan when the cash is required so you're not doing it at the last minute, you’re doing it ahead of the crunch and that’s where accountants can play a role in providing cash flow forecasts. At the end of the day if you know it’s coming, it gives you the ability to go out there and secure funding before crunch time.”
The tougher borrowing market has seen a rise in specialist brokers and lenders such as Standard Integrated Lending Solutions, which focuses on sourcing financing options for accounting and financial planning firms.
“We’re finding our clients, who are pretty safe operators, are happy to explore new options for their clients, like low-doc options or structures which can cut out mortgage insurance,” partner at Standard Integrated Lending Solutions Tony Caine, told Accountants Daily earlier.
“For the accountants we work with, there’s fee pressure out there, and clients are pushing back on their fees. More and more, we’re seeing an appetite for options they might not have considered in the past.”
However, earlier research from Scottish Pacific has suggested that banks remain the firm favourite for accountants and their clients.
“There’s no question that [alternative lending] is more popular than it was five years ago, but it still makes up the minority as a proportion,” said Sky Accountants chief technical officer Ashley Carmichael.
“The reality is most SMEs approach banks for their financing and a lot of the time it’s the traditional method where property is provided as security.”