Lender support for business investment and growth

Lender support for business investment and growth

Positive Budget measures for businesses

Within the 2024 Federal Budget, there were measures that were positive for the broader business community. There have been positive factors building which are supportive of businesses looking to expand in the coming year.

While the Gross Domestic Product (GDP) levels in Australia are comparatively anaemic, outside of Government spending, business investment and net exports have been by far the largest contributors to growth in the last year, making up around two-thirds of our growth.

Shift from household consumption to business investment

This is a big turnaround from the household consumption-led growth of prior years, with household consumption now flat-lining. This is not surprising given the impacts on household budgets from the rising interest rates and cost of living pressures.

This growth in business investment now forms a larger proportion of GPD than any time in the last five or six years. Capacity utilisation within businesses remains elevated and three points above the long-run average – highlighting the challenges businesses are having with meeting demand.

It is little wonder that the NAB Business Survey showing Business Conditions, remains above its long-run average, despite consumer sentiment being weaker than even in the depths of the COVID-19 pandemic and during the Global Financial Crisis.

New lending opportunities and challenges

This points to what the major banks and non-bank lenders have worked out in the last 12 months – that lending to businesses is becoming far more attractive, especially in comparison to the challenges in pockets of the residential home lending market.

Financiers are looking for more ways to extend credit to businesses.

While lending to large and medium-sized businesses has grown around 50% in the last five years, total lending to small businesses has hardly moved.

While residential real estate (typically the owner’s house) secures almost half of all SME lending, and house price growth has continued strongly in most cities, there has rarely been a time when banks and other lenders are so keen to find good businesses where they can extend further credit.

The one big challenge facing businesses of any size when looking for funding for that next acquisition or expansion is that most major banks continue to have a conservative approach to lending. More often now than ever, this means the solution lies with non-bank lenders such as private credit funds, specialist equipment financiers, and other non-traditional sources of funding. BDO has relationships with over 40 lenders and can help you navigate which one is most suitable for your growth plans.

If you are looking for finance to support your growth, please contact us.