Our predictions for what will emerge as key changes for business lending in the year ahead.

Tough times increase the need for better business finance

Over the years the Australian economy has grown and evolved, and so has the financial needs of businesses.

Businesses are the first to feel the pinch when the economy goes awry, and traditional lenders pull in the purse strings.

One key area that is well overdue for an upgrade is Australia’s approach to business lending.

Businesses need to be able to access finance quickly to respond to market conditions and to fund their ongoing operations.

Working capital solutions offer Australian businesses an effective and efficient way to manage their finances.

In the last year, there’s been at least a 10% lift in businesses moving towards more diverse funding arrangements that include working capital solutions.

We predict that within the next year the percentage of businesses actively using their working capital as a key funding mechanism will grow by more than three times that.

Why? One is necessity. We’ve seen how important it’s for businesses to be able to access the finance that they need.

But another powerful reason is to keep up with the competition. The advantages that businesses get from effectively using their working capital gives them significant advantages over their competitors. But on the flipside, when these more innovative forms of finance become commonplace, it’s really a win-win for everybody.

Australia will play catch up to Europe and the UK

With Europe and the UK expanding their digital services and putting an emphasis on the use of new technologies, it’s no surprise that many are curious about the state of Australia’s financial sector and our high dependency on traditional lending as the go-to source for business finance.

Australia’s financial sector is certainly no stranger to innovation and has already made some significant advancements in recent years. And while in the consumer lending space, households have readily embraced these innovations, the commercial lending space and businesses have been more reticent.

Thanks to new technology, pure need, and a growing understanding that there are better ways to fund businesses — we predict 2023 will be a watershed year, seeing more Australian businesses embracing more fit for purpose finance.

Smarter business finance options

Data sources, connected devices and online marketplaces will combine in powerful ways that improve the way that businesses access and manage their finances.

Australian businesses that want to improve their footing in a rapidly changing global market, then they will need to shift their thinking and embrace more innovative, smarter business finance methods.

2023 will be the year that technology empowers businesses to make use of their greatest assets by enabling them to harness the power of sophisticated financial management.

Platforms like Fifopay, will see stronger businesses emerge thanks to better financial management and greater intelligence around their own performance as well as suppliers.

Digital wallets will also rise in prominence. Making it easier for businesses to access capital, as well as providing them with increased security and convenience. This technology allows businesses to store, manage, and transfer funds without relying on traditional banks.

This rise of more sophisticated business lending

We predict that 2023 will see a significant shift towards the use of alternative finance and working capital solutions.

A systemic overdependence on business loans will finally come unstuck as we see a shift in the way SME businesses approach finance.

Business owners will embrace the many benefits that come from more sophisticated forms of business finance — like supply chain, trade and invoice finance methods — which can all be used in various combinations to enable business to access recurring funds, establish better terms and utilise buy now, pay later finance options to increase their orders and their profits.

Platforms like Fifopay, will enable lenders to make more informed decisions when assessing the creditworthiness of potential borrowers. In addition, the use of fintech solutions is likely to become increasingly commonplace. These solutions offer businesses access to innovative technologies, such as machine learning and artificial intelligence (AI) to automate the loan application process. This could make the process of obtaining a loan easier and faster for businesses, allowing them to access capital quickly and without relying on traditional lenders. And gone will be the days that businesses rely on bank loans as their standalone finance option.

The takeaway

Overall, it seems clear that the Australian business finance sector is set to make some rapid progress in 2023. At the core of this transformation will be a focus on embracing new technologies and providing businesses with access to efficient and convenient financing solutions.