A new Productivity Commission report has found that non-bank lending is on the rise.
With rising property prices and less young people owning houses, it has meant emerging small business owners are finding it hard borrow.
Around half of all lending to Australian small businesses is secured by property and it causes problems business owners without a property to leverage.
Filling that void are non-bank lenders, a sector that’s growing substantially, which includes private credit providers, finance companies, fintech lenders and neobanks.
“Spurred by new technology and new data, lenders now have more capacity and confidence to lend to SMEs using other forms of collateral or even lending unsecured,” the Productivity Commission’s Catherine de Fontenay told Seven West Media.
Small business can utilize the speed with which non-bank lenders can process loans to capitalize on expansion opportunities, but need to be wary of shady lenders, higher interest rates and of taking on imprudent levels of debt.
The Productivity Commission report, which was released this week, said financial brokers need to be promoting all kinds of lending to their clients and not just be relying on the major players.