Business funding and asset finance are core components of your client’s business stability and success.
Poor cash flow is nominated as the biggest contributor to small business failure in Australia – even more than a lack of sales or other resources.
The big four banks are taking an increasingly smaller role in the asset finance and unsecured business loan markets. Since the Global Financial Crisis, there has a been a 20 per cent decline in bank lending to SMEs owing to lower risk appetites and stricter lending constraints.
However, recent changes in the deductibility of financing leases and the growth of non-banking financing options has evened the playing field for small businesses and their financial advisors.
The growth in alternative lending platforms now means there are more options available than ever before.
‘I’ve always used my bank’
Traditional lending platforms historically have offered some advantages in the finance support of particular SME sectors and individual businesses. In these cases there is usually an existing relationship in place and a rapport which means the lender already understands your clients’ needs and business cash flow cycle.
Traditional lenders are struggling to keep up with changes in a fast-paced world in which new business sectors are emerging and others evolving – particularly in the fields of technology. This poses a risk to traditional lenders – who will lack insight as to the requirements and opportunities these emerging industries and businesses face.
While banks are at the leading the edge of government regulation and influencing policy they often suffer from a limitation on the particular asset class that they lend on which makes them unsuitable as an ongoing lending source for a business’s every need.
Non-Banks have a role
Non-bank specialist financiers, such as financing companies or equipment dealers, have frequently offered an alternative to the major banks, particularly in the arena of asset financing.
Non-bank lenders offer a much stronger focus on small and medium businesses than traditional lenders and are agile and adaptive in determining the risks and values of emerging business sectors. As such, they offer a more personalised approach and can show greater flexibility in the lending criteria they adopt, not only in terms of repayments but in the security that they will accept.
Non-banks are often more willing to provide finance for used assets. They are also able to approve finance at a faster rate than a traditional bank lender.
Marketplace lending is expanding the non-bank offering
Small to medium entities increasingly need to find financing that is specific to their needs, and as a professional advisor you’re always looking for ways to help your clients grow their businesses.
Marketplace lending is on the rise globally and in Australia because it provides an accessible and affordable financing option for business turned away by banks, or that simply want a better way to fund their growth. Current estimates predict that the Australian peer-to-peer market will reach $11.4 billion by 2020. On an international level, the value of peer-to-peer lending is expected to reach almost $1 trillion by 2025.
Fintech players are dramatically changing the lending landscape, offering improved access to capital through streamlined application processes and a more holistic approach to assessing the borrower’s ability to repay a loan.
Where it previously took banks weeks or months to make a decision, peer-to-peer lenders are able to assess applications and provide funds in a much shorter time frame.
Operating solely online and taking advantage of big data capabilities give fintechs an advantage over the big banks and other non-bank lenders. Applications can be completed on a smartphone or tablet, and no longer require in person meetings and extensive paperwork. However, should you need personalised service in investigating your finance options Bigstone is available to offer direct support.
Bigstone Finance can offer fast, flexible loans from $10,000 to $2,000,000 for assets and equipment for your business.