Small business accounts for 97 per cent of our business community and while the needs of every business is unique, broadly speaking business finance requirements will be determined by how much capital is required to fund business activities and the stages of a business lifecycle. Business finance needs will generally fall into these 3 areas;
- Working capital requirements — the money needed to operate the business daily such as wages, raw materials and stock.
- Fixed capital requirements — the acquisition of a business or items that will be used in the business for more than one year such as premises, plant and equipment.
- Finance for start up.
Recent ABS research has drilled down further into these areas and revealed the most common reasons for business finance in Australia. In doing so gives us some insight into some of the opportunities and challenges they face.
Top business finance reasons revealed – ABS statistics
Barrier to growth
The ABS data revealed that the biggest barrier to business development, growth and improvements such as new or significantly improved goods, services, processes or methods was the lack of access to additional funding. Additionally only 22% of businesses were in fact seeking finances for these business expansion purposes.
Types of business finance
The most common type of business finance sought, across all industry sectors was new loans with a term of more than one year at 37% , while new capital/finance lease or hire purchase agreements followed at 36%.
A full snapshot of this data can be found on the ABS website here and you can read more on SME financing here.
Anthony Landahl | Equilibria Finance | September 2017
Note: This is for general information purposes only and does not constitute advice. With all of these options there are a number of considerations outside the scope of what is covered in this article that you need to understand to ensure your personal circumstances are taken into consideration.