SME lending is a valuable source of diversification for brokers says fintech lender OnDeck Australia

The Banking Royal Commission has highlighted the perils of relying on a single revenue stream, and SME lender OnDeck Australia is urging mortgage brokers to think beyond home loans and diversify into SME lending.

Research by commercial lending fintech OnDeck Australia[1] confirms that 25 percent of Australia’s small to medium enterprises plan to seek additional business finance.

Michael Burke, Head of Sales at OnDeck Australia, says, “There is clearly strong demand for SME finance, making this a revenue channel that brokers cannot afford to overlook. Moreover, our discussions with brokers indicate that, on average, one in four of a broker’s existing home loan clients are SME owners, providing a ready base for brokers to market their services in the SME lending space.”

OnDeck’s study found that among those SMEs planning additional finance in the next 12 months, almost half (49%) would consider a specialist financer. “A lot of brokers and SMEs are realising that securing finance with an alternative lender is a way to avoid jumping through the hoops imposed by traditional lenders,” says Mr Burke.

Qualitative research by OnDeck confirms that the constant back and forth between lenders and clients for compliance and information requests is extremely time-consuming for brokers.  

OnDeck streamlines this process, requesting far less information than banks require. In addition, most of the details OnDeck asks for, such as recent bank statements, can be uploaded directly to OnDeck online.

Brokers don’t need experience in the SME channel

Moving into SME lending may take brokers outside their comfort zone. However, it is not necessary to have extensive experience in SME lending practices to successfully grow a revenue stream.

Mr Burke explains, “OnDeck Australia provides extensive support to the broker channel through our highly skilled Business Development (BDM) team.

“OnDeck works closely with brokers during the first steps in the journey, providing training and sharing best practice. If the broker prefers, an OnDeck BDM can speak with customers directly on the broker’s behalf, though at all times the relationship belongs to the broker.”

OnDeck also provides a partner portal giving brokers access to marketing tools that include flyers and template copy. If brokers want to send out an eDM promoting SME lending, OnDeck can provide a ‘send ready’ design complete with the brokerage’s logo and brand colours, with brokers free to choose from several generic or industry specific templates.

Demand for equipment financing likely to rise 

The Reserve Bank of Australia (RBA) has noted a rise in capital expenditure among Australian businesses[2], giving brokers an incentive to expand into SME finance.

OnDeck research from 2018 has shown that one of the main reasons small business borrow from online lenders is to buy equipment.

OnDeck expanded into equipment finance in 2018, and to support brokers navigate this new revenue channel, OnDeck is running Equipment Finance information sessions for brokers in Melbourne and Sydney, hosted by Mr Noah Breslow, Chief Executive Officer of OnDeck Group.

Mr Breslow will be in Australia as a keynote speaker for the AltFi Australasia Summit 2019 in Sydney on 15 April.

[1] OnDeck SME Study of 331 SMEs conducted by YouGov Galaxy 28 February 2018

[2] https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-03-05.html