Small Business Financing Trends: What’s Going Up and What’s Losing Steam?
April 7, 2016
The first quarter of the year has gone, and a number of developments have happened in the SME financing industry.
First, Australia has become the biggest financial technology (FinTech) market in Asia and small business lending developments are leading the way. Businesses are driving it as they look for better and faster access to funds and innovative business models.
A new study found that Australia has become the third largest online alternative finance market in Asia-Pacific posting a 320% growth from last year. The survey polled more than 500 alternative finance companies in the region and was conducted by the Cambridge Centre for Alternative Finance, the Sydney University’s Business School, and the Tsinghua University Graduate School, in collaboration with KPMG.
When it comes to all types of businesses, China is still the biggest market in the region with a worth amounting to US$101.7 billion. Japan comes in second with US$360 million. Australia, however, has had a strong showing. According to Ian Pollari, KPMG’s global co-lead for fintech, the country is “punching above its weight” and banking on a strong, sophisticated financial services sector.
“Australian online alternative finance platforms have been able to adapt operational models and underwriting systems from overseas operators, as well as from local banks,” the study notes.
The Path Forward
From these and other industry news, we can tell that small business lending has turned a corner. SMEs have more options now when it comes to getting funding and working capital than they did before.
Here, we take a look at what’s driving these changes and how you can take advantage of these drivers to grow your own business.
Businesses will Focus on Grow Financially
Businesses shouldn’t just be about maximising profits, but also improving money management and boosting capital. After a few years of uncertain business confidence, companies are now more proactive about planning expanding their operations.
It’s crucial for businesses to find new opportunities and it’s all tied to their financial situation. Business owners will likely seek to grow their capital and check their books to figure out whether or not they can make such investments.
Online Lenders Will Up their Game
Australia saw a rapid growth of online business lenders in 2015, and we expect the competition will be tighter this year. This also means alternative lenders will likely provide better products and services to stand out among the other providers, both traditional and alternative.
Here at Capify, we’re constantly looking for ways to make funding easier and more convenient for small and medium business owners. We can provide unsecured funding up to $400,000 to give your business the boost it needs to move forward. Our application is also made easy; you get pre-approval online and our free application can be done in as quick as 60 seconds. We offer loan products that others don’t, and our repayment and renewal terms are flexible.
These more-convenient loan options for SMEs is a good thing since lenders will work to offer the best financing options to borrowers.
Banks will Try to Woo Back Small Business Borrowers
As discussed in a previous post, banks and traditional lenders are not really in direct competition with each other. Rather, they’re working together to serve the whole SME sector.
This 2016, we can expect to see traditional banks easing into lower-dollar lending thanks in part to the threat presented by the growing FinTech industry. Banks will likely move to improve their services, including online automation and even forming partnerships with alternative lenders.
Anything traditional and alternative lenders do to make funding easier to SMEs is good news for everyone.
P2P’s Calculated Rise
Peer-to-peer (P2P) lending has reached Australia, but it’s been slow to develop. That said, P2P lending has already helped a number of SMEs, with their pricing often being better than among traditional lenders.
This sector needs both better consumer acceptance and a broad investor appetite to fully grow into a strong competitor. While it’s still preparing to take off, P2P lending will make a meaningful mark once it gets off the ground.
Multinational financial services firm and investment bank Morgan Stanley estimates that the value of loans approved through P2P lending in Australia will soar to $22billion in the next five years. It says that by 2020, P2P lending in the country will surge to $10.4billion and will make up 6% of Australia’s consumer lending sector.
For now, we’ll just have to wait and see how these platforms will fare across different economic times.
Businesses for Sale
A large chunk of Australia’s workforce (the baby boomers) are entering their golden years. And it is possible that when they will likely sell their companies.
For SME business owners looking to sell, financing will be a big factor. Improving capital and revenue, and minimising costs early can ensure you get a price that meets your personal savings goals for your retirement.
For those not planning to sell, there’ll be plenty of opportunities for growth in this area. The more businesses being sold, the more potential acquisitions there are for your enterprise.
Financing these acquisitions will require SME owners to have huge capital and a strong balance sheet.
Hopefully, knowing these trends can steer your business in the right direction. If you need funding to take on any of these opportunities, Capify is the name to trust. We provide a number of loan products, including business loans and merchant cash advance.
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