Small Business Credit


“Standing at the limit of an endless ocean Stranded like a runaway, lost at sea”

Maximising Australia’s isolation proved to be a successful COVID-19 containment strategy with only 35 deaths / million (NZ and Singapore were five deaths per million) The Government and the RBA have also pump primed the economy such that the recession was brief, but the recovery has been uneven. This discrepancy can be seen in SME lending data published by the RBA highlighting the industry dispersion

** Highly affected industries are education and training, arts and recreation, information media and telecoms.

As the economy transitions to its new normal, will SME funding choices change? Will the new normal for SME investors be more of the same, or a new normal? Data released by the RBA demonstrates the bulk of borrowing by SMEs is secured. For small business, 50% of the time this means mortgaging residential property.

Source: APRA, RBA

Lower rates help reduce funding costs but the sell-off in the bond market is forcing the RBA into a battle with the bond “vigilantes” (a term describing the bonds markets search for inflation). This battle will play out over time, but the longer rates stay high the more likely the bond market will win. RBA Governor Lowe was at pains to point out that rates will stay lower for several years, but circumstances change and the strong recovery in the Australian economy combined with the low level of rates implies the next move in rates will be higher.

  • Small business loans secured by residential property can have fixed or variable interest rate terms. Source: APRA, RBA

Australian 10-year rates

Source Refinitiv

SMEs invest in innovation as demonstrated by Governor Lowe from his speech last week. Small firms on average invest much more relative to their output, between 2002-2017 small firms accounted for 32% of investment but only 17% of output.

“This investment drives innovation, generates new ideas, stimulates competition and supports employment”. (RBA Governor Lowe 10 March 2021)

Source RBA, ABS

*Small firms have output less than A$2m, medium firms annual output is between A$2 and A$50million and large firms output is greater than A$50million. Firms with outputs less than A$10,000 are excluded

The bulk of SME funding is by secured borrowing, making it difficult for investors to gain exposure to this innovative sector. SMEs are tough to source and expensive to take through a due diligence process.

Beckon Capital provides the opportunity for investors to inject equity capital into the SME sector.

“I hear the sound of the stranger's voices I see their hungry eyes, their hungry eyes Great Southern Land, Great Southern Land” (Great Southern Land by Icehouse)

David (Bushy) Nolan Beckon Capital Pty Limited (ABN 49 628 013 678), authorised representative No. 001280538 of Fundhost Limited (ABN 69 092 517 087, AFSL No. 233045) (“Beckon”)


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