Australian sellers are going through a difficult period like many others around the world: supply chains are obstructed due to the pandemic, and demand is hit-and-miss. Cash flow is vital to surviving, and the Australian government has tackled this issue.
However, there remains a vast need still for credit. Much of Australia is enduring draconian lockdown measures still, and no amount of Australian government help is papering over all the cracks. Short-term capital loans online are certainly an option, but many are unaware of their existence, or flinch at their higher interest rates.
Australian postal services have been interrupted throughout Coronavirus, as have international air mail and shipping. Whilst things were getting back to normality over the summer, the current second wave has hit and delivery times are getting longer again, making logistics more difficult for Australian Sellers.
In August, COVID-19 restrictions meant that mail service to Australia from Ireland had been an obstruction that caused havoc. Other countries also had measures in place, such as restrictions on the size of items and price increases.
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No help from the Banks
The most difficult pill to swallow isn’t the government’s finite cash reserve, but banks unwillingness to help out. No one is expecting charity from them, but most banks are simply uninterested in lending small businesses money. In fact, this has been the case for years, but Coronavirus has put SMEs in a whole other risk category.
Expectation of an impeccable credit rating is extremely high to combat the cash flow risk that coronavirus has invoked. Banks operate on long-term, low risk loans with collateral. There is just no room for an Australian seller to ask for a small, fast loan that’s either unsecured or doesn’t have a great credit rating.
The only good news here is that lending money laws have been eased to help give the economy a boost. In other words, Australia has decided to make it easier for banks to approve small business loans. This caused a spiked increase in the large lenders’ share prices, and is hoped to be a driving force to get Australia out of its current recession.
The change will change the responsible lending obligations, meaning that banks will now be able to rely on income and outgoings information provided by borrowers, as opposed to the traditional lengthy verification measures. This could potentially cut the verification procedures in half – a much needed change.
The results however are yet to be realized, with this being a new change being put forward. Not only is it too soon to say how much help it has done, there is still a lot of skepticism surrounding the banks’ dogma and aversion to risk.
You got a friend in alternative lenders: Small business loans in Australia
For those looking for instant working capital loans in Australia, time is perhaps better spent researching alternative lenders. Alternative lenders are also known as online lenders, which sums up their approach: online, using a technologically advanced infrastructure, to provide an instantly attainable service.
Small business loan lenders do not bother with meetings, physical branches or administration. They hardly even bother with credit checks. Generally, an online lender will provide small loans of under $250,000 to small businesses with a loan term under 2 years. There are many exceptions to these numbers, but this is the angle they’re going for.
For the Australian business owner, this is a much simpler process. Being completely online, it’s fast to connect to a lender or a lending marketplace, where you can scan countless loans and lenders. Not only does this provide more choice, so you get the best deal, but it’s rapid.
In fact, being an online seller, you can connect your sellers account to the lender/lending marketplace. This means that the lender can use your raw sales and profits from your eBay, Amazon, PayPal, Shopify (etc) account, and get an instant idea of your estimated credit score.
This is a much more meritocratic way of operating, that avoids the conversations, business plans and fluff. Even if you have a bad business credit score with your card, you still may be eligible for a quick loan. Applications are scanned automatically using algorithms, meaning that if you believe that you can make the repayments looking at your numbers, then there’s a good chance the lender will too. You’re punished less for mistakes made in the past.
Approval and funding times
Once a business has decided on a lender, the application itself can take all of half an hour to complete – if that. Uploading your recent financial figures and bank statements – or even faster, connecting your sellers account(s) – is the bulk of the process. From then on, it’s very simple, basic information and that’s it.
Application approval or rejection usually comes within 24 hours, though it depends on the company. Almost no company will take longer than a couple of days. Once approved, the funding will either be instant or another day. This means that it’s possible to receive the loan in your bank within 24 hours of even hearing about the existence of online lenders.
The importance of this resource
It’s not that online lenders are better or worse than bank loans – it’s that they’re different. An alternative. The more choices consumers have, the better, so why not businesses too?
What online lenders allow is realistic adjustments to on-going events. Business comes thick and fast, and situations can go from great to difficult in the matter of days. This is amplified by the pandemic, where one day your business may be open, the next day your store is told to temporarily close, or your supply is heavily delayed.
This is why online lenders in Australia are so useful. You can apply and receive a loan within a day of your situation changing. This is no good will bank loans, where the process takes weeks. This delay can cause mispayments to other lenders, or it may mean that once money is funded, your entire situation has already changed.
It’s also a great option when it’s your only option. It draws comparisons to those who criticise budget airlines. Sure, the service may not be great, but without the choice of them, many wouldn’t be able to travel. Likewise, online lenders are certainly pricier with higher interest rates, but it’s great that there’s an option there if we need it. If we banned them or capped interest at 30%, many sellers who can afford the repayments wouldn’t be able to get a loan because of their risk category. Usually, the price reflects the risk very accurately.
Check The Evolution of Financial Markets
Final Word
Deciding between an online bank, if you’re lucky enough to be eligible for either, is one that comes down to time. If you’re eligible for a bank loan due to an impeccable credit rating and strong sales, then it’s worth the wait for some. However, those needing a short-term loan in the here and now will prefer online lenders, who demand very little application time and let you know the decision right away.
Generally, banks are better for long-term expansion investments and gearing, whilst online lenders are for those in cash flow difficulties or in need of short-term upscaling projects.
