Fintechs are filling the gap in SME lending as the big four banks concentrate on the fallout from the royal commission, according to one online lender.
The fintech commercial lending space opened up in around 2013 and since then has reported an annual growth rate of around 79%.
According to chief commercial officer at Moula, Matt Leeburn, part of this growth has been down to fintechs focusing on lending to SMEs, which make up more than 97% of all Australian businesses.
He said that while the space is still “a while off” being a significant threat to the banks, there is a huge opportunity to help the “underserved” SME market.
According to Leeburn, fintechs are best placed to help small businesses due to their quick funding time. He said, “From our perspective, I think it’s our ability to go fast. The platform we’ve built can assess and process a loan within about 13 minutes and the average time is around 24 hours, and that’s including being funded.
“From a commercial broker’s perspective, speed is a big factor. They’ll often see SME clients in need of cash quickly, because there’s an opportunity to buy a large amount of inventory at a discounted rate, or they might have some cash flow needs which require capital to free up operations. They come to us and get an answer without waiting around for weeks. The result is a really happy client that’s going to come back to you, and the benefit for brokers is that one interaction can translate into a continued revenue stream as we have ongoing commissions.”
With the ability to lodge an application and receive funding within 24 hours, Leeburn is aware there comes a concern over responsible lending.
He said “Moula is about backing good business”, and only lending to healthy businesses. He said, “We’re very strong on responsible lending, and transparency is one of our core values. We only lend to businesses when we’re confident that they’ll be able to pay us back. We’re able to do this because of the strength of the technology behind our underwriting.”
“We do more than what a bank does. The banks typically will underwrite based on industry and an overall percentage of how much they can lend to certain industries, and then they’ll have risk categories within that.
“We’ve built our own underwriting platform based on taking a snapshot of a business’ banking and accounting data. We’ve built the technology based on Australian SMEs, and so it’s very much tailored to understanding their unique finance needs. The outcome is that we can look at a scenario without the rigid boxes that traditional lenders use.
“That means we look at a much bigger range of data points than a bank will look at. If any flags come up our team call the broker and work through what has caused those flags.”
