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OnDeck Australia’s head of sales, Michael Burke, outlines why he believes brokers will continue to be the chosen finance partner for small- to medium-sized enterprises.
Opportunities
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Accessibility and technology
The market is all about accessibility, and technology has been the key enabler to give customers that access. People can now go online for everything that only a few years ago had to be done over the counter.
Access to the internet means people can apply for our loans late at night at the end of their working day. They no longer have to actually set foot in a bank or handle paperwork. Likewise, when it comes to reviewing other documents such as legal contracts, they no longer have to physically sign a document.
Following from this trend, a lot of customer interaction will be based on paperless transactions in the coming year, with the onus on fintechs to make it more seamless and user-friendly.
Challenges
The long cycle time accessing capital remains a significant challenge for SMEs as it can prevent them from being nimble and taking advantage of opportunities when they present themselves. The processes that traditional lenders have in place can hinder SMEs who want to, and need to, access capital quickly.
Online lenders are more flexible and responsive and that allows SMEs to move quickly to secure the capital they need to grow their business or take advantage of the next opportunity.
Traditional funders are more likely to require some form of security from the business owner. This can restrict the amount of capital an SME can access or introduce other complications to the situation — e.g., where a family home is the asset used. This also hinders the separation of business and personal assets, which is often preferable for the smooth running of the business and its cash flow. Online lenders generally don’t require traditional brick-and-mortar security, making the process a lot easier and more straightforward.
The year ahead
We’re very confident about the state of the market in 2018. The key industries that we focus on — including cafes and restaurants, retail/wholesale, tradespeople, professional services and small manufacturing — have been very favourable in the adoption of online lending, and the Australian market also has a very strong association with brokers.
An East & Partners report found that 70 per cent of SMEs access capital via a broker or intermediary.
In 2018, we anticipate brokers to maintain their “trusted adviser” status among SMEs. This status will see brokers researching and adopting alternative funding solutions that best meet the needs of their clients.
As broader economic issues continue to impact the traditional finance providers, such as the Royal Commission into the banking sector, SMEs will increasingly turn to alternative sources of finance, such as online or fintech lenders.
