The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and the theBankDoctor.org have released a guide to provide small business owners with all the info they need to better understand borrowing from alternative finance sources such as fintech organisations.
The Ombudsman Kate Carnell suggested the guide will help SMBs to understand the jargon and receive a clearer picture of any financial transactions they make with an alternative financier.
“This is another step closer to transparency and disclosure for the fintech industry,” Carnell said.
“It provides answers to the questions asked by most potential borrowers: What is a fintech lender and how is it different to a bank? What products do they offer? How much can I borrow and what will that cost me?”
The guide, Borrowing From Fintech Lenders, is a joint project between ASBFEO and independent SME finance expert, Neil Slonim from the BankDoctor.org.
“It also explains lending terminology and provides information on the Online Code of Lending Practice,” added Carnell.
Slonim says the two biggest concerns small business owners have about borrowing from banks is that they generally require property as security for a loan and they can take a long time to make decisions. Fintechs are not hamstrung by the same time constraints and can provide faster approvals and will generally not expect loan collateral such as a family home.
“Quick access and no requirement for property security are attractive benefits, but borrowing from a fintech can be expensive and it can be difficult to work out which fintech product and provider is best suited to your business,” Sionim said
“This independent guide explains the key issues around borrowing from a fintech lender and will enable small business owners make more informed decisions about whether borrowing from a fintech is a good option.”
The Ombudsman points out that SME lending presents a huge opportunity for the fintech industry. However, to build trust with the SME sector, they must show leadership on transparency, disclosure and abide by the Online Code of Lending Practice.
“Borrowing from fintech lenders will provide SME borrowers with the information they need to deal with fintechs and make a well-informed decision,” Ms Carnell said.