January brings cashflow challenges to SMEs at a time when business owners may be nursing a spending hangover of their own.
- 58% of Australia’s 2.3 million SMEs are likely to have experienced disruption over the Christmas/New Year period, potentially increasing the need for additional funding, with catastrophic bushfires and crippling droughts aggravating business interruptions
- One in four of Australian SMEs have been rejected for finance by a bank. Of these, 33% will go cap in hand to family members seeking business finance, 32% will use their personal credit card as a source of SME finance
- January is traditionally a period when personal finances are thinly stretched. Australians spent an estimated $28 billion on credit cards in December, leaving many SME owners with fewer back-up resources to support their SME’s working capital needs.
SYDNEY (21 January 2020): Leading online SME lender OnDeck is urging small business owners not to pin their hopes on the support of family members or turn to personal credit cards this January to meet the cashflow needs of their small business.
Personal finances can be thinly stretched in the New Year, and business owners are advised to explore the opportunities offered by SME lenders, who can provide fast access to finance while maintaining a clear distinction between personal and business finances.
Research by OnDeck confirms that 58% of Australia’s 2.3 million SMEs may have experienced disruption as a result of the Christmas/New Year holiday period. After investing heavily in pre-Christmas stock, January can see SMEs juggling increased staff leave costs coupled with quieter trading conditions especially as the recent bushfires and prolonged drought are having a negative impact on consumer confidence.
However, small business owners planning to rely on bank finance to navigate a January cash squeeze could be disappointed.
OnDeck research shows that almost one in four SMEs that have applied for business finance with a bank have been rejected. Of these, one in three (33%) have reached out to family and friends for funding, and a further 32% have resorted to their personal credit card to fund business needs.
Mr Cameron Poolman, CEO of OnDeck Australia, said, “We know that many small business owners turn to family and friends or personal credit cards when they’re rejected for finance by mainstream banks.”
“However, they may find that both avenues are fruitless at this time of year. For many Australians, the New Year sees a tighter focus on their personal finances as they recover from higher spending throughout the festive season.”
Australians spent an estimated $28 billion on credit cards in December, and 37% of cardholders, equivalent to 7.2 million people, expect to still be repaying their Christmas debt through 2020.
Alternative funding options are available. OnDeck’s research confirms that one in three (33%) SME owners believe the lending options available to small businesses are expanding. One in five (22%) would consider using an online SME lender such as OnDeck.
“We know that access to capital is the single biggest factor holding small business back in Australia. SME owners who partner with online lenders such as OnDeck may be able to source the funds they need to take advantage of timely opportunities for business growth. This also helps to preserve the important line between business assets and liabilities, and personal financial resources,” concluded Mr Poolman.
OnDeck (NYSE: ONDK) is the proven leader in transparent and responsible online lending to small business. Founded in 2006, the company pioneered the use of data analytics and digital technology to make real-time lending decisions and deliver capital rapidly to small businesses online. Today, OnDeck offers a wide range of term loans and lines of credit customized for the needs of small business owners. OnDeck has provided over $12 billion in loans to customers in 700 different industries across the United States, Canada and Australia. In Australia, OnDeck is backed by leading accounting software provider MYOB and has a 5-star rating from Trust Pilot. For more information, visit www.ondeck.com.au
About the research
AltFi research was conducted online in April 2019 by Honeycomb Strategy across 430 SME owners Australia-wide. The survey included SMEs with less than 50 employees, annual turnover of $50,000-$5 million, and in operation for at least 12 months.
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