Q. What trends is OnDeck Australia seeing from SME borrowers at the moment?
We know small businesses have been facing several challenges this year. Inflation is one, tax obligations is another, with increased pressure from the ATO. There [are] also labour and supply chain challenges as well.
I think the challenges that small businesses [are] facing really are systemic. We’ve looked into the challenges small business[es] face at the moment and it’s not one particular industry. It’s consistent with businesses that have been trading for 20 years as it is for businesses trading for two years.
At the same time, we’re seeing a surge in small businesses looking to non-bank lenders. And this is a real sea change for the economic challenges, which force small businesses to rethink their game. We’re now seeing borrowing for hiring of staff, for stock purchases, and for working capital.
The last financial year was really strong for small-business lending. I think total credit outstanding to SMEs at the end of the last financial year at 30 June 2023 reached $588 billion, which is a 28 per cent increase from the year prior. So, brokers who offer commercial lending have certainly benefited from small-business lending demand.
Q. Have you seen any changes in brokers writing SME loans?
We know through our own research that small businesses have considerable trust in their brokers and they’re simply too time-poor to explore different commercial financial options.
We’re seeing it through a fresh wave of brokers partnering with OnDeck, especially as the housing market becomes less affordable. Historically, we’ve seen brokers across the residential and commercial space use OnDeck and SME lending as an add-on, but we’re now seeing both of those sectors use us as one of their core products.
Q. Why do you think brokers are increasingly using OnDeck? Brokers are always interested in a few things:
A simple loan application process that doesn’t prove to be a time thief for the broker or for their small-business client.
A rapid approval process (because no broker wants to leave a business client waiting in limbo).
Fast delivery of funds. This not only seals the deal sooner for brokers, but it also satisfies the needs of small-business clients.
In 2021, we launched Lightning Loans, which allows small businesses to access funding up to $175,000 and doesn’t require manual underwriting intervention because it is technology and data-enabled.
About 80 per cent of the applications that come through the broker channel don’t actually touch an underwriter!
Our approval times and time to outcome have come down significantly over the last 12 months. At the moment we’re looking at a processing time of around 30 minutes and funds in a customer’s bank account within two hours!
OnDeck Australia recognises the value of the broker channel as part of our business. So we go out of our way to make sure that we support brokers through a relatively straightforward accreditation process (which I did the other day myself and only took one minute and 40 seconds!).
Q. What do you think the future trends in SME finance will be?
As we come up to the festive period, particularly in Q4, we expect to see demand increase again. The [savvier] brokers are the ones that get in early – around November – and actually take advantage of the promotions that we usually run to help their clients prepare for the festive season.
