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RAISING FINANCE STILL A CHALLENGE FOR SME EXPORTERS

24-02-2015
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The number of Australian SMEs expecting access to finance to become more difficult over the next 12 months has doubled since the beginning of last year, according to new research by Efic, Australia’s export finance agency.

Despite these concerns over access to finance, SMEs are generally feeling more optimistic about international sales, with 38 per cent expecting an increase over the next 12 months, up from 36 per cent in February last year.

The research, which surveyed 859 SME exporters, is the fourth of a regular quarterly series conducted by Efic to provide key insights into the outlook of Australian SME exporters.

The number of Australian SMEs expecting access to finance to become more difficult over the next 12 months has more than doubled from 22 per cent to 57 per cent since February 2014.

This strain is felt more keenly in businesses with a turnover of less than $1 million, with 88 per cent of those in this category expecting access to finance to become more difficult over the year ahead.

Half of respondents indicated this concern was based on their recent experiences with a financial institution, a finding that has remained consistent across the last two quarters.

This perception may be related to SME exporters’ funding requirements typically not matching the standard lending criteria of financial institutions such as banks, which often require significant assets as security.

The research also looked into alternative sources of funding used by SMEs to support export and international business growth.

Of 33 per cent of exporting SMEs that engaged unsecured lending, nearly one in four relied on a business credit card and 9 per cent leant on family and friends for this support.

And 84 per cent of SME exporters with a turnover of less than $1 million reported that they used some form of unsecured lending, such as credit cards or personal loans, to support their export growth.

Stronger overseas demand and improved sales strategies appear to be the key drivers in more SME exporters feeling optimistic about the year ahead, with 45 per cent of respondents citing these as the main reason for an expectation of increased international sales.

It also appears exporting is becoming a larger part of SMEs’ broader business strategies, with the proportion of revenue attributed to export sales reaching 15 per cent, an increase of 21 per cent since the beginning of 2014.

SME exporters also felt that growth in export costs will slow over the next 12 months.

In terms of the most important export markets for SMEs, the number of respondents who pointed to China as their most important export market increased by 7 per cent since February 2014 to 26 per cent.

This increase may be linked to SMEs’ perceptions of increased opportunities in China flowing from the Free Trade Agreement signed in November 2014.

India continues to emerge as a key export market, selected as the most important export market by 11 per cent of all respondents, the highest percentage since the index started at the beginning of 2014.

Efic Executive Director, SME, Andrew Watson, said concerns over access to finance re-enforces why Efic has a key role to play in assisting SME manufacturers.

“Efic provides simple, but effective financial solutions to help Australian manufacturers to grow their business internationally and achieve export success,” he said.

Mr Watson encouraged manufacturers that are unable to secure finance with their bank to consider other opportunities available.

“Efic works closely with the banks and we deal with manufacturers day in and day out to assist them in securing the necessary finance.”

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