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Two-thirds of Australian small businesses believe their banks have room for improvement, new research shows.

A report by financial data analytics firm FICO has found small and medium-sized enterprises (SMEs) aren’t happy with the services provided by traditional banks, with speed and ease of access to lines of credit a key point of contention for many.

In Australia, FICO found that 38% of SMEs are now considering ditching the banks.

Positive sentiment towards alternative financing is even stronger overseas, the report showed, with 39% of New Zealand’s SMEs, 42% of India’s small businesses and 44% of those in Indonesia now considering the switch.

FICO noted that while banks aren’t guaranteed to lose these borrowers to newer, more innovative players, it does represent a potentially “worrying trend” for the incumbent lenders.

The report found that 15% of Australian SMEs expect to take out new lending products this year. With the country’s total outstanding SME loan book sitting at roughly $423 billion, as much as $63.5 billion could be up for grabs.

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Michael Davidson, CEO of SME Finance Platform Propell, said he expects much of that money will ultimately be sourced from non-bank lenders.

“The banks have been pretty slow to roll out new options for SMEs and for many small business owners, the older processes and systems the banks use could jeopardise the future of their entire operation,” he said.

“If you think about the pressures on someone running a construction company, for example, when they take on a new job they need to source capital to spend on equipment, on staff and subcontractors and all the rest.

“They can’t afford to wait two weeks after making a loan application with a bank, especially when there’s no guarantee that lender will ultimately approve them. That delay can mean the difference between growing their business, or shuttering permanently.”

In the past year, Mr Davidson has seen an upswing in demand for Propell’s services as SMEs look for new ways to finance their business. The company’s client base has been growing at more than 30% a quarter, surpassing 1,700 customers in March 2022, and is expected to hit more than 3,400 by December 2022.

Click here for an opportunity to hear directly from Propell CEO Michael Davidson in a live investor briefing on Friday, 13th May, at 12pm (AEST).

Mr Davidson expects that figure will double again by the end of the year and added that the average loan size taken by these businesses has also grown, from $6,000 to greater than $17,000.

“With the economy reopening and retail spending at record highs, businesses of all sorts are dealing with renewed demand for their goods and services, and in many cases, they need the support of a lender to meet that demand,” he said.

“That’s been really positive for us as a company – we’ve seen a massive influx of customers in the past few months while the average loan amount has grown, which has translated into much stronger revenues.”

The company – which offers lending and a slew of other services, including payments and business insights through its digital platform – is now targeting 100,000 clients on its books within the next five years.

Mr Davidson said Propell’s partnerships with payment platforms Square, Stripe and Zip should help the company acquire more clients and do so at a lower cost.

Join the live investor briefing with Propell CEO Michael Davidson on Friday, 13th May, at 12pm (AEST). Click here to book your spot.

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