SME Lending in the Current Climate

The last few years have been tough for many Australian businesses with SMEs being particularly vulnerable. Whether it has been the restrictive environment imposed by Covid or the latest weather events, many SMEs, now more than ever, are feeling the stress of liquidity and cash flow problems.

As the Business Finance Certification teaches, the role of a Finance Broker or Business Finance Professional is to understand the strengths, weaknesses and needs of SME clients and then assist them to maintain momentum and/or prosper and grow.

The knowledge and lending expertise of business finance professionals is becoming highly sought after, as SMEs are finding it increasingly difficult to secure finance and short-term cash during periods when it is critical to success or survival. Times like now!

Historically, banks have been the ‘go-to’ option for business loans and finance. However, in the current climate, over half of small business loan applications are being rejected by the banks, forcing SMEs to consider other options. Without advice, the alternatives are usually restricted to dipping into personal reserves or tapping friends and family on the shoulder.

Those SMEs that are not being turned away by the banks are facing a difficult, prolonged and stressful lending application process. Securing finance through the major banks can be like pulling teeth.

Figures suggest that the SME lending market has the potential to be more than $150 billion a year. This compares to recent years where the annual amounts lent to SMEs is only half this figure, with the vast majority of it coming from banks.

So, with a 75-billion-dollar gap, there is the opportunity for Business Finance Professionals to help SMEs, who fall on the wrong side of the ledger, to secure the lending and finance they need.

One of the ways to do this is to recognise and understand some of the reasons that small business loans are currently being rejected by Australian banks. With an appreciation of the following barriers, the business finance professional can work with their SME clients to increase the chances of finance application success.

Credit History

Bad credit history is often a result of the SME not being diligent or on top of their debt obligations. An unfavourable mark can be made against the SME if it is concluded they are not serious about paying creditors. It could also be a sign that the SME is taking on too much risk and overextending its financial capacity.

A sometimes-overlooked fact is that credit assessments can go beyond that of the business and into the personal history of the small business owners themselves. The result can be an SME, with an impeccable record for paying its bills, being knocked back for a small business loan based on the business owner’s bad credit history.


Insufficient documentation is regularly cited as the reason for an SME loan rejection. There are two common and fundamental documents that applicants struggle with – an adequate business plan and detailed cash flow analysis.

Business plans need to address the critical areas that lenders look for in undertaking their evaluation. The banks are now looking for such things as in-depth competitor analysis and the unique selling propositions of the business. A business plan that is articulate, compelling and empowering is beneficial as part of loan considerations.

Established businesses have years of tax returns and operating figures and are better placed to provide adequate cash flow documentation. Again, how these are presented is important. Newer SMEs and start-ups need to rely more on tabling projections, based on realistic assumptions, to show earnings capacity. And a demonstrated passion for their business can help alleviate the lack of a long-term track record.


When putting up collateral for SME finance, there is often a difference in thinking about the value of an asset. Lenders will usually assign an amount based on a fire-sale value rather than fair market value. The trap SMEs fall into is assuming a higher value than the lender is prepared to use and, therefore, applying for more funding than they can receive.

Whilst attaining finance through the majors has become more difficult, alternative lenders are entering the market. Not only do they offer options for SMEs, but they are also nimble and modern with fast turnaround times, online applications and flexible terms. One of the other features of this new breed of lenders is cash flow-based repayments. All of these provide the business finance professional with a suite of tools to use in assisting their SME clients with their finance needs.

In conjunction with industry experts, elevateB has developed the self-paced, online, interactive Business Finance Certification. A program that provides you with the knowledge and skills required to work with SMEs and specialise as a business finance broker. In addition, it provides business strategies and soft skills to assist you to better market and deliver your existing and new-found client offerings.

To register your interest in the program and for more information go to