The current interest rate in Australia is 1.5%. It has been that way for 16 months +, as the Australian central bank pursues an accommodative monetary policy to facilitate growth and recovery. Unfortunately, the tough times post global crisis meant that Australian banks and financial institutions were a lot more stringent about who they approved for credit facilities. The Sydney Morning Herald ran a story recently about consumer advocates attempting to require banks to issue credit cards with limits that customers can afford to repay in a timely fashion such as 3 years. In Australia, credit facilities like Visa and MasterCard have replaced fiat currency as the preferred payment option. This is telling.
As Australian reliance on lines of credit increases, Australian SMEs (Small and Medium Enterprises) are looking for easier access to credit facilities. Traditional financial institutions in Australia have not stopped lending to clients – they have increased lending facilities per capita, but clients are required to jump through all sorts of hoops for compliance purposes. These regulatory constraints at traditional Australian banks are hampering progress for small and medium-sized businesses, and for entrepreneurial prospects down under.
Fortunately, there are many viable options available in the form of quick funding via small business loans in the FinTech arena and the non-bank sector. It is important to carefully evaluate the quality of these companies, given that they are not all cut from the same cloth. Various small business loans providers now pepper the Australian landscape, including the following lenders: Prospa, Capify, Sail, and Spotcap. These companies offer funding for business loans in the region of AU$5000 up to AU$250,000 (depending on the provider), but it’s the eligibility criteria that make them inherently attractive.
Each lender has specific rules and regulations regarding who qualifies, based on minimum turnover requirements, credit profiles, and other eligibility criteria. The fact that these non-bank lenders have entered the markets and succeeded is testament to the need for these financial services. The ‘unbanked’ and ‘underbanked’ components of the Australian economy have created a secondary market that is now flourishing. However, there are certain concerns that need to be addressed with non-bank lenders in the quick cash financing arena.
Australian Business Owners Urged to Read the Fine Print
Most of these non-bank lenders will provide approval within 60 seconds, and if the financial provider agrees to transfer money this will be conducted within 24 hours. As with all quick cash providers, it is important to read the terms and conditions associated with the loans and the repayments. The short-term loans are often associated with higher interest rates than traditional bank loans.
Payday loans and instant cash loans are offered as a convenient service to clients, and they come at a premium. Fortunately, the overall repayments in nominal terms will be less than a 10-year loan, or a 30-year loan, given that you’re usually making the repayments within weeks or months. The bureaucratic red tape in these types of loan applications is absent – you simply apply online. Once you are approved, the money will be deposited into your bank account in short order.
Government oversight is needed to ensure that the industry does not bait customers with easy cash and extortionary interest rates. When it comes to applying for business loans, it is important to use aggregator comparative sites such as SmallBusinessLoansAustralia to get the down low on each provider. Some of the factors to consider include:
- The minimum and maximum loan amounts
- The interest rate and the repayment term
- The types of businesses that qualify for loans
- How quickly the loan will be provided
- The quality and attentiveness of customer support
The best way to evaluate the quality of these small business loans providers is through clients’ reviews. Fortunately, the public has taken to these non-bank lenders and they are gaining credibility as a viable means of accessing credit in the financial markets. There is a need for greater consumer awareness of these companies that issue lines of credit to businesses. Many more independent review sites are needed to gauge the efficacy, quality and credibility of these loan providers. Clients can benefit from more information, since banks no longer have a monopoly over credit issuance and SME funding. The government should play an active part in licensing and regulating the activities of these non-bank lenders, but only as far as capping the limits on interest rates and requiring that these companies have a customer-centric approach to business operations.