What online finance can give you that the Big Four can’t

With dissatisfaction among the big banks continuing to rise, more Australian SMEs are attempting to figure out how they can use alternative lenders to grow their businesses.

But that’s easier said than done. With so many alternative lenders arriving in Australia, it can be difficult for SMEs to figure out which is going to best suit their needs for unsecured business loans.

How can they start?

According to the recent SmartCompany SME survey, which questioned hundreds of SMEs around Australia, 25% of readers said they wanted to get a business loan in two years. Of those, 51% said they would approach one of the big four banks, and 31% would go to another large bank.

That still leaves a larger number looking for other sources, and the huge number of alternative financiers in Australia is proof: last year saw $656 million invested across 25 different fintech deals, according to KPMG.

There are dozens of alternative lenders on the market now, and the growth is huge. Frost & Sullivan say the fintech market will reach $1 billion by 2020. One 2016 KPMG study found alternative finance grew by 320% in 2015 to $460 million.

The East & Partners Business Banking Index also found in 2016 found 39% of SMEs are considering alternatives. And why? One of the main reasons given was approval times. Alternative lenders are much faster than the big four, often providing finance within days whereas traditional lenders can take weeks or months.

One report from Digital Finance Analytics found loans only take an average of 36 hours for approval from alternative lenders. That’s a good result considering 24% of SmartCompany readers say cash flow is one of the reasons they seek extra finance.

Other reasons for seeking alternative finance can include a much higher likelihood for approval due to more sophisticated algorithms, as opposed to banks which may only have a limited amount of data. These rejections could then hurt an SME’s credit rating.

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Source: What online finance can give you that the Big Four can’t – SmartCompany