May 13th, 2019
The challenge of securing bank finance is affecting a growing number of small and medium enterprises (SMEs), says one of our leading Connective Asset Finance online lenders, OnDeck.
According to the expert OnDeck team, this is a great opportunity for asset finance brokers looking to boost their profits before the EOFY. Your SME customers need help more than ever because:
OnDeck helps you provide a better alternative
Research by OnDeck highlights the problems that small businesses face trying to secure finance.
Two out of five SMEs have sought finance in the past. However, almost one in four (23%) have been knocked back by their bank.
Rejection rates rise to 37% among businesses that have been in operation for less than five years.
Noah Breslow, Global CEO of OnDeck, says, “What is particularly concerning, is that one in three SMEs rejected for bank finance have had to reach out to family or friends for funding, or have simply resorted to using a credit card.”
Lengthy finance approvals hurt SME operations
Federal Treasurer, Josh Frydenberg may have described Australia’s small business sector as the “engine-room of our economy”1. But OnDeck’s study confirms that bank finance can be a time-consuming source of funding for SMEs, often bringing with it the burden of a lengthy application and approval process.
Close to one-third (30%) of SMEs that have applied for bank finance say their business was negatively impacted by the experience. The chief impacts reported by SMEs include:
Mr Breslow says, “For SMEs time is money, and the number of hoops that SMEs need to jump through to secure bank finance is clearly adding to the cost and stress, of gaining much-needed funds.
“As an online lender, OnDeck streamlines the finance process for SMEs, requesting far less information, and expediting the application and approval process by allowing key documents such as bank statements, to be uploaded directly to OnDeck online.”
One in four SMEs will seek finance in the future
One in four (25%) SMEs plan to seek additional business finance in the future, a figure that rises to 39% of SMEs with 6-10 employees, and 56% of those with 11-49 employees.
“Clearly, there is strong demand for finance among the SME community. This offers a strong business opportunity for asset finance brokers and mortgage brokers looking to diversify their revenue base by expanding into SME lending,” noted Mr Breslow.
Growing numbers of SMEs turn to online lenders
Among those SMEs needing finance for their business in the future, 65% would still try their luck with a bank, while 27% would dip into their personal funds.
There is growing awareness of online lenders as a source of finance, especially among those businesses that have had a poor experience with mainstream banks.
One in five (22%) SME owners would consider an online lender, with the level of interest in online lenders rising to 42% for SMEs that have previously had an application for finance rejected by a bank.
Commenting on the findings, Mr Breslow notes, “Large numbers of Australians SMEs may not be reaching their full potential either because they cannot secure bank finance, or because an inefficient and lengthy lending process is adding to the cost burden. It is important for SME owners to realise that more efficient funding options are available through online lenders.
“I encourage the broking profession to engage with online lenders and diversify their revenue base to include SME lending. By helping SMEs access the finance they need, this would be a win-win for brokers and the small business community,” concluded Mr Breslow.
First launched in Australia in 2015, OnDeck Australia is part of the US-based OnDeck Group. Over the last decade, OnDeck Group has loaned over US$10 billion to 100,000 small businesses.
OnDeck Australia offers unsecured loans from $10,000 – $250,000 with terms up to 24 months, and equipment loans from $5,000 – $100,000 with terms up to 48 months.
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About the research
Research was conducted online in April 2019 by Honeycomb Strategy on behalf of OnDeck across 430 SME owners Australia-wide. SMEs with less than 50 employees, annual turnover of $50,000-$5 million, and in operation for at least 12 months.