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Considering loan options to finance growth can be a tricky task for any small and medium sized business owner. Securing small loans from the big four banks is on the decline and there is a growing need for new platforms which will service small businesses.
Over the past five years, Reserve Bank of Australia (RBA) figures have revealed a steady drop off in loans under $500,000. Small loans have decreased by 7.6 percent and yet larger loans over $2 million have ballooned by 35.7 percent. With small businesses making up 96 percent of businesses in Australia and accounting for 70 percent of employment, it is essential that they have money to fund their growth and access to alternative lenders.
Recently launched Australian startup TruePillars has entered the scene as one of the emerging online platforms offering small and medium sized businesses access to small loans. The startup has employed a peer-to-peer lender model which helps investors expand their portfolios while showing their support for local businesses.
The cofounder of TruePillars, John Baini said, “Our platform empowers the investor to make choices and manage their investments according to their values because they can choose where their money goes, rather than into a pool with decisions made by fund managers.”
From a small and young business perspective, the platform offers an important shift in the way founders can repay loans and source investors with the the right knowledge and skills who can aid them in getting financed. Loans stretch from $5000 through to $250,000 and are funded by multiple investors.
“We want small and medium sized businesses to regard TruePillars as a place they can reliably come to get the finance they need to grow,” Baini said.
TruePillars’ team, a savvy team which consists of former bankers, assess loan applications using a real time auction system where investors create a portfolio and invest in as few or many businesses that they want.
The streamlined process allows businesses to apply online in under 30 minutes and a risk assessment is completed in just a few days. Businesses are listed on the platform if the TruePillars’ team believes the business can afford the loan. The platform provides an information summary on each business so investors can weigh up which business fits best with their portfolio. As investors bid, businesses can watch on in real-time as the system delivers a completely transparent process.
Unlike the shorter loans conventionally offered to small businesses by other lenders, the platforms offer loan terms for up to five years, which gives businesses the opportunity to repay investors in a significantly more manageable and realistic timeframe.
Over the next year, Baini hopes to complete enough loans for people and show that they can complete against the traditional big lenders.