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According to ScotPac’s bi-annual SME Growth Index Report, 49 per cent of small and medium-sized enterprises (SME) have adopted an asset-based lending solution within the past two years, while 26 per cent have done so in the last 12 months.
The data also indicated that this trend will hold momentum, as 28 per cent of SMEs are planning to adopt an asset-based lending solution in the next year.
Overall, asset-backed finance has become part of the fabric of business for most SMEs. Eighty-nine per cent of businesses said they either currently use or would consider using asset-based lending, indicating ample room for growth in the sector.
ScotPac said this trend is led by larger SMEs looking to create “more scalable and flexible” funding structures.
The lender’s chief executive officer, Jon Sutton, said the survey’s findings reflected a shift in how businesses approached and thought about capital management and business resilience, particularly given the current economic context.
“SMEs are increasingly recognising that valuable capital is often sitting idle on their balance sheet, tied up in invoices, equipment, inventory or other assets,” he said.
“Businesses want funding structures that can flex with their operations and grow alongside revenue, while also providing greater cash flow stability during uncertain periods.
“In an environment where businesses are managing rising costs, supply chain challenges and more cautious bank lending conditions, asset-based lending is becoming a core funding strategy rather than a niche product.”
Indeed, many SMEs are facing a series of associated pressures, from rising costs and higher interest rates to hits to cash flow such as Payday Super rising minimum wages.
Brokers are also playing an increasingly important role in the market, with 65 per cent of SMEs now turning to brokers for support with asset-based lending decisions.
Sutton added that this interaction was important, as awareness gaps remained, particularly among micro-SMEs (fewer than 10 employees and an annual turnover of less than $2 million), which was 13 per cent.
“There remains a significant awareness gap, particularly among smaller and micro SMEs that may not fully appreciate how existing business assets can support access to working capital,” he said.
“Brokers who proactively educate clients about balance sheet funding opportunities can play a critical advisory role for SMEs who are currently navigating a complex operating environment.”
[Related: Asset Based Lending appoints new BDM for NSW and ACT]
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