SMEs (Small-to-Medium Enterprises) struggles to get a loan application from traditional bank lenders over the years. It is the reason why they go instead to Non-Bank Lenders. A study has shown that SMEs turn their backs away from banks and explore their options for loans to Non-Bank Lenders and their numbers are more likely to increase in the future.
PayPal has recently mandated a research study that has shown 75% of SMEs in Australia believe that the long processing for approval, poor satisfaction and falling loyalty due to a lack of patience with major banks are the reasons for SMEs to go to Non-Bank Lenders. A percentage of 67% also has stated that the delays of approval from the banks are what makes their businesses put into trouble. It is already not surprising considering a large number of SME loans rejected by banks.
According to the research, 1 in 5 SMEs indicated that they have already been rejected by a bank loan in the past. The lack of physical presence and a limited track record are two of the main factors that stop them to secure funds from a bank.
A study from PayPal have found out that 2 in 5 SMEs or 42% has just taken advantage of the fast processing from Non-Bank Lenders, and 39% of them have stated that there is a strong possibility that they will also consider Non-Bank Lenders in the future as compared to just an 18% who said that they still prefer traditional bank loans.
SMEs that have been operating below 5 years are the ones who prefer for Non-Banks as their numbers have already increased to 70%.
The PayPal research has also found out that the majority of business owners are worried about cash flow, with 61% of survey respondents are worried about the cash flow in the current financial year, and 48% are more worried than they were last year about cash flow. However, 28% of SMEs have stated that they are always concerned about cash flow. Followed by their research study, PayPal has also announced that it has exceeded a fund of $500 million given to Australian SMEs through PayPal Working Capital.
Though Non-Bank Lenders nowadays are more preferred because of fast processing, it is always better to be cautious in all our decisions. Always remember that reputable lenders always disclosed their interest rates, credit checks, their application processes are transparent, and in line with their policies, they must always provide you with real-time decisions and of course they must be able to deliver excellent customer service.
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