The need for alternative funding models for small businesses: An Australian context

One of the things that drew me to the world of bitcoin and projects that share its philosophy is the notion of banking the unbanked, or giving financial access and empowerment to people that were left out in the cold. I always looked at this on an individual level but until recently didn’t realise it applies naturally businesses.

In Australia, financial lending has become increasing concentrated in our four main banks. At the same time, government and monetary policy has lead to a prioritisation of funding property investment and acquisition over business enterprise. This approach over several decades has made it for difficult for small businesses to gain the necessary financing to launch, grow or sustain their businesses. At the same time that interest rates in Australia (following a global trend) have been going down, the lending to small and medium enterprises (SMEs) has been declining.

SMEs play a major role in our economy. According to the Australian Bureau of Statistics (ABS) SMEs account for 99.8 per cent of all enterprises in Australia, and employ more than 7.6 million people (around a quarter of the population). This equates to about 68 per cent of the entire workforce. Despite this, SMEs are finding it more difficult to access finance through the banking system, with borrowing rates ranging at historical lows for several years. This has stifled and led to a fleeing of innovation, which has reduced opportunity for young entrepreneurs and local businesses. At a macro level, it has hollowed out our economy and made it more vulnerable to souring debt and credit supply restraints.

The experience of SMEs accessing financing is not encouraging. Some reports have shown that only 2 in 10 SMEs that apply for bank funding are successful, and only 6 percent of those rejected applicants turn to non-bank forms of lending. For borrowers that are successful, they are often required to put up their property as security. Overall, the process that they must undergo is complex and time consuming.

In this environment and based on the results of surveys, alternative financial instruments have become very popular. Initiatives such as equity crowdfunding, peer to peer lending, and invoice and balance sheet lending are now emerging in the discourse, and governments are trying to meet this need through bringing in appropriate regulatory framework.

Although alternative funding systems are necessary and meet a huge gap in financing, the reality on the ground reveals a reluctance among some businesses to utilise these options. One report in Australia showed around 83 per cent of small businesses surveyed stated that they planned on using their own funds to fuel revenue growth. This is despite those that have used alternative funding models indicating a positive experience.

The conclusion appears to be that while there is a desperate need for SMEs to have alternative financing options, there is a lack of understanding and confidence in the trustworthiness, viability and compliance qualities of these alternative models.

Innovative and decentralised options like Centrifuge would be an amazing addition to the SME funding landscape (in appropriate cases) in Australia (and I’m sure many other places) but the challenge I guess is how adoption can be strategised and how people outside of this technological space can learn to understand the benefits of this structure. I know this is something that impacts any new technology or product, and I’m sure Centrifuge already has amazing partnerships and pilots underway, but I think it’s something worth investing time in.


any ideas @Elias how to kick it off for Aussie SMEs?

Great question, Martin. I assume you mean how Centrifuge could find traction in Australia?

I think when it comes to a project like Centrifuge in Australia (or anywhere else in all likelihood) having representatives or “ambassadors” for the project, that have an understanding of how it works and who and to what extent it serves to benefit would be very beneficial.

This responsibility might involve articulating clearly the limitations that exist for SMEs in accessing capital under current conditions, and explaining how a project like Centrifuge can help facilitate more opportunity in a way that benefits the various participants. Any campaign of this nature will take time of course - but activities might involve meet up sessions, presentations, interactive workshops, case-studies, interviews, publications, videos, social media or other forms of raising awareness in the relevant communities.

I think these types of activities would allow not only the audience to learn more about Centrifuge, but also give the Centrifuge team and community better insight into particular markets, and continue to evolve to better meet the growing needs of the end users. I do think that having a feel for the regulatory environment is particularly important in a specific country though, so maybe this process of promoting Centrifuge for example would involve working closely with government at the appropriate level, or at least forming an understanding how regulators may respond to a new player in the space.

What’s hopeful though is that there is great discontent with how current financial supply systems operate in Australia (unless you’re a large corporation). So there is likely to be a very receptive audience to the concept of something that levels the playing field. At the same time, building trust and confidence in something new and different among those who stand to gain from using these new platforms will require some work, but that’s why people on the ground to promote this new way of doing business can really help. They might also help to establish partnerships with valuable allies in particular industries that are on board with the vision.

I’m probably not answering your question well - would love to know if you have any thoughts on this.


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Centrifuge is at coming at the perfect time in history for SME’s. Covid19 has done a lot of damage and will leave many bankrupt around the world. I think defi will solve the problem. The question is will the big banks use political pressure to force an end to crypto. I surely hope not.

@Elias I made a video on Centrifuge. I would love any feedback. By the way I’ve always wanted to visit Perth I have a friend who is a folk musician from there.

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Hi Brian

That’s great! Do you have a link to the video?

Oh really?..fantastic. Hope you get the chance to visit once a bit of travel normalcy returns in the future…Perth is pretty out of the way…but a nice place overall. :slightly_smiling_face:


Hi Brian

I just watched it. You did an amazing job breaking it down. It’s not an easy project to understand (with all of its various features, financial and technical terms and implications) let alone explain to others, and I thought it was great that you did it with a conversational style. I hope many others get the opportunity to see it as I’m sure it will prove in many years to be forward thinking on your part! Really great job. Contratulations…hope you continue to get subscribers to your channel also :grinning: