Accessing Business Finance With No Property Backing

Accessing Business Finance With No Property Backing

There is no doubt that access to funds has been a major barrier to small business ownership for a long time, and over the fast few years the complex application requirements of the big banks have become more restrictive. Recently, the Australian Bureau of Statistics reported that 1 in 3 Australians don’t own a home. The increasing volatility of the country’s property market means that home ownership is becoming increasingly unattainable, and further those who do own property are struggling as property values fluctuate.

Even though 60% of small business owners are looking for funds to grow their business, the concern of property backing is becoming an increasing challenge. This is where non-bank lenders and alternative finance providers can help. Whilst such lenders have always played an important role in bridging the gap between the offerings of traditional banks and the varied needs of small business owners, their role in Australia’s lending landscape is becoming more important than ever.

Non-bank lenders are experiencing a steep rise in adoption rates. Though many are unable to compete with traditional providers on interest rate, they offer a wealth of other benefits which appeal to small business borrowers. Quicker and simpler application processes, reduced paperwork, flexibility and transparency were among some of the favour characteristics of alternative lenders. However most notably, non-bank lenders willingness to secure against business assets rather than personal property assets has been a key differentiator.

Whilst banks are still resistant to offer business loans which don’t take personal property as security, the flexible funding options of non-bank funders are more aligned with the circumstance of many of Australia’s small business owners. Whilst it is likely that borrows will have to compromise on rate, studies found that this is not a major concern. A recent SME Growth index found that a hopping 91% of SMEs would be willing to pay a higher interest rate to avoid using their home as security. This percentage reflects the impact that Australia’s property market is having on business owners.

The key takeaway is that if you are not a homeowner, or you don’t want to risk your home as security, there are options out there to suit you. Whilst banks and traditional lenders are a staple of Australia’s lending landscape, small business owners should consider non-bank and alternative funding sources that may be a better fit for their business finance needs.

Why We Love Relationship Based Lending

Why We Love Relationship Based Lending

Relationship based lending is not a concept that is new to Australia’s finance industry. But as our small business community saw significant periods of growth, the philosophy at the core of this concept has been somewhat lost by big lenders.

Relationship based lending is built upon the idea that finance providers should take into consideration a broader scope of information than just an applicant’s financial history. Incorporating more factors, both qualitative and quantitative, into the lenders assessment means that the funder gains a more in depth understanding of the applicant and their business. This in turn results in a more educated decision in granting funding, an important consideration under responsible lending practices.

Recent disruptions within Australia’s finance industry have resulted in an even more difficult lending landscape for small business owners, in particular franchisees. Many are finding that the finance solutions offered by traditional lenders and banks aren’t the right fit for their businesses unique and ever-changing needs. In addition to this, many banks are moving away from small business and franchise clients due to the perceived risk of the industry. This is reflected by a Banjo Small Business Finance Survey that found for every 10 SMEs applying for bank funding, only 2 were successful.

Small business owners are now turning to alternative finance providers to gain access to funding. Such providers offer more flexible funding solutions that are a better fit for the needs for an SME, and are removing barriers to finance through simple online applications and faster approval processes. Another key characteristic of many alternative lenders that is appealing to the small business community, is the focus on relationship management.

Alternative finance providers are in a unique position due to the flexibility in their financing options. This allows lenders to place a heavy focus on building and maintaining a relationship with their client, and providing funding with a view to long term sustainability through mutual support.

This is a philosophy that Cashflow It wholeheartedly adopts, with a view to not only further the opportunities available to individual franchisees through finance, but contribute to the growth and success of the franchise networks we work with as a whole. We aim to learn about the challenges faced by each network within the industry and tailor a funding solution to fit the needs of its franchisees. Further to this we actively seek out opportunities to become more involved by attending and supporting annual conferences and brand initiatives.

We hope that by us and other lenders in the industry embracing a relationship based lending model that we are able to better service the businesses we work with and help overcome any barriers to finance facing Australia’s franchisees.