Small businesses are struggling to get their loan applications approved by traditional bank lenders, so non-bank lenders are stepping in to fill increasing demand. Quickly.
Small businesses are turning away from banks and exploring their options when it comes to borrowing, with 39 per cent actively considering a move to non-bank lenders, according to a recent survey.
The East and Partners March 2016 round of the Business Banking Index shows long approval turnaround times, poor satisfaction and falling loyalty due to “exasperation” with major banks the reasons for small businesses looking to alternative lenders.
And it’s no surprise, considering the large number of small business loans rejected by the major banks. According to an RFI Intelligence Survey conducted in 2011, almost 50 per cent of SMEs that apply for traditional credit are rejected. A lack of physical presence and limited track record are the two main reasons preventing them from accessing funds, making it even more difficult for e-commerce and online businesses.
Enter the non-bank lender. With about 20 established lenders in Australia, it’s a booming industry. While a bank could take weeks to approve funds, often requiring collateral, business plans and forecasts, a non-bank lender can provide working capital quickly for businesses looking to get ahead. It’s this fast turnaround – thanks to data being accessed online through eBay or Xero plugins, for example – and the personal service that’s appealing to small business owners.
In a testimonial on their website, Stephen said non-bank lender Moula was hassle free (with) fast approval. “I spoke to our accountant and she introduced me to Moula … they assisted me and within 24 hours we had a cash injection. It’s good to know that when we get a good business opportunity, we can get support.”
It’s non-bank lenders like Melbourne-based Moula that allow small businesses to access funds so quickly. Users can get approval for a business loan in three steps online – entering their business and personal information, linking business data, and providing the bank account details to deposit funds.
“Small business lending is evolving and the integration of new data sources means that we can continue to disrupt the traditional lending model. In the past, SMEs have felt the pinch as lenders tighten their belts. Businesses now have the opportunity to access funding in real time, knocking down previous barriers to business growth,” said Moula CEO and co-founder Aris Allegos.
And it’s a strategy that’s working, with Moula ramping up its own business growth by raising $30 million last year from investors including Liberty Financial, and recently appointing former Xero managing director, Chris Ridd to its board.
The allure of fast finance still needs to be treated with caution, though. The best lenders will have clearly disclosed interest rates, credit checks, a transparent application process, a platform that can give you a decision in real-time and excellent customer service.