Professional Advice and its Possible Effect on Small and Medium-sized Enterprises' Access to External Debt Finance in Australia

Introduction Previous research studies (Carey, 2008; Cassar & Holmes, 2003; Lee & McGuiggan, 2008; Shailer, 1999) have investigated the effect of advisory service on a number of SMEs' aspects, such as access to external finance, performance, financial decision-making, financial structures and growth. It has been documented in previous studies (Carey, 2008; Shailer, 1999; Shanmugam, 1988) that accountants played a vital advisory role for the SME sector. Previous research studies overlooked important professional advice services to SMEs offered for instance, by Industry Association/Chamber of Commerce, the Australian Taxation Office, accountants, financial advisors or banks, solicitors and business management consultants. At this stage, no study has emerged that collectively analysed a wide range of professional advice sources for SMEs and the effect they might have on access to external finance in Australia. This research study aims to make a contribution to the existing academic literature and expand previous studies that to some extent analysed advisory services and their impact on SMEs' access to external debt finance. This research study results will benefit not only policy makers dealing with SMEs but also SME owner-managers applying for external debt financing. Literature Review Various characteristics are incorporated in SME definitions across the globe. Criteria to define a small enterprise may include turnover, assets, employment numbers and management characteristics (Lee & McGuiggan, 2008). Generally, qualitative and/or quantitative characteristics are being incorporated in SME definitions across the globe. The definitions of the SME sector in the Asia-Pacific Economic Cooperation (APEC) countries clearly demonstrate both types of definitions, and tend to include number of employees, type of industry, and maximum levels of capital, assets, sales and revenue. According to the World Bank (2010), the most accepted cut-off points for the maximum number of employees concentrate around 50, 100, and a large portion of economies set 250 employees as the maximum cut-off point. Further, it was emphasised that number of employees and sales volume may be regarded as one of the most precise characteristics that define SMEs, but these details are not always available from lenders. The World Bank (2010) also made a recommendation to banks/financial institutions to collect and maintain information on sale volumes and number of employees, as this will assist with more accurate monitoring of SME lending. The aforementioned characteristics, which are adopted in SME definitions around the globe, are all powerful and coherent in their own sense. These characteristics included number of employees, sales/revenue, assets, annual turnover, balance sheet total, legal type, capital/investment and industry sector (APEC, 2010). This research study follows the Australian Bureau of Statistics' (ABS) definition of SME that incorporates one of the most common characteristics in SME definitions around the globe--number of employees. The ABS's (2009) definition of small and medium enterprises, includes: * "non-employing businesses--sole proprietorships and partnerships without employees; * micro businesses--businesses employing less than 5 people, including non-employing businesses; * other small businesses--businesses employing 5 or more people, but less than 20 people; * medium businesses--businesses employing 20 or more people, but less than 200people". Source: www.abs. gov.au However, the ABS definition is complemented by specific management/organisational characteristics attributable to SMEs. These characteristics include independent ownership, and close control and principal decision-making by the owner-manager. In addition, this thesis includes additional information related to SME's management/organisation, performance and financing issues in Australia. …