THE fallout of the Global Financial Crisis (GFC) and the uncertainty surrounding world markets is also leading major banks in Australia to move away from providing funding to the SME market, according to research by Mullins Law.
“Unless the facilities can be supported with real property to a maximum lend of 50 percent of the value, they are not interested,” Mullins Law partner David Williams said.
“There is currently a vacuum developing within the marketplace and opportunity for investors to enter this market. In the construction market for apartments and other commercial activity there has already developed mezzanine funding alternatives to rescue the developers.
“For the SME market, it is not a question of what interest rate the SME market may pay, but more the availability of funding in the first place as it is not otherwise available.”
Mr Williams said the SME market was also now witnessing the emergence of the high-net-worth family businesses that are seriously looking at filling the gap in providing funding to the SME market.
Another factor was the successful listing of ‘factoring’ – now known as debtor finance – specialists Scottish Pacific in July, on the back of several successful acquisitions such as former rival Bibby.
“In any event, there are already new entrants in the funding market that are emerging which need to be seriously looked at by the SME market,” Mr Williams said. “The major banks may, in the future, rue the day that they did not seriously engage in looking after the SME market.
“Institutional private equity is concentrating at the big end of the market where they are looking at takeovers of underperforming public companies, therefore there is an enormous gap in the true private equity model that is built upon family business wealth.
“This opportunity may become a major contributor to the Australian capital markets in the near future,” Mr Williams said.