19 May Here Comes The Online Business Lending Stampede

Online business lenders are building up to a stampede, likely bounding through the rear end of 2015. Before you self-serve your own loan, you’ll still need to know what’s the best pick of the herd.

#fintech is fast becoming a popular tag throughout social media and news publications in Australia. We hear a lot about innovation in business lending and it’s all coming to head from the take-up of cloud accounting by small businesses, driven by the competition mainly from Xero and MYOB in Australia to grapple for market share, herding SME’s onto cloud accounts to establish re-occurring revenue models.

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Business owners that have traditionally used offline accounts software from MYOB will be seduced into using cloud accounting driven by their recent IPO . It’s not only because of all the benefits of having accounts in the cloud, automated updates, but mainly the continued wave of add-ons that are available. The latest trend this year is to attract business owners to the cloud by pushing business finance products. If the business owner does not have a cloud account, they won’t get access to new innovative lending products.

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It’s very clear that accountants and bookkeepers are onboard with the wave from a recent interview with Noel Tuifino from MyAccounts, a Sydney based bookkeeping firm, giving us a very strong indication that clients running offline packages will soon be convinced to migrate online to streamline services and get access to add-ons.

What you need to consider & should you care

There’s clear groundswell happening in the business lending space however, don’t be fooled into thinking that the banks are worried. Online business lenders represent a tiny share of a huge banking pool and it’s a very young market, which has not experienced any downturn. Once they weather a downturn and the tide goes out the banks may then take notice of who’s still flapping on the sand.

Business owners need to understand that the lending products are essentially the same as they have always been with the exception of faster, streamlined sign up processes. The only online lending options are fixed term loans with the exception of a new product from Sydney based Waddle, which is spin on an overdraft attached to receivables that is similar to the U.S based Dealstruck’s offering, both are only available to cloud accounting users which demonstrates a clear trend that is coming.

It takes a fair amount of research to figure out the interest rates that are being charged, from fixed repayments, working out APR’s, factor rates and variable interest for line-of-credit products.

With all this choice coming soon, business owners may be tempted to take the easiest options however, may fail to fully understand which loan will work best for their business or decipher how the mechanics of the loan products differ from lender to lender cutting through their marketing jargon, what security is required, how different repayments affect cash flow and most importantly how to qualify for the best rate.

In the next post we are going to breakdown each of the latest entrants into the Australian market, including some that have not gone public at the time of this post.

About Leigh Dunsford

I am a small business finance & lending columnist at Loandesk, teaching entrepreneurs what loan options are available to them in Australia, explaining the differences between each loan type & how to position themselves for the best chance of getting approved for their perfect loan. My thoughts have been published on Startupsmart, CEO Magazine, Smartcompany & more...

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