- Traditional banks aren't the only source of business finance. Alternative lenders can offer faster approvals, more flexible lending criteria and a wider range of funding options for SMEs.
- Non-bank lenders often provide streamlined online applications and unsecured finance, making them a good option for growing businesses or those without significant assets.
- Comparing multiple lenders can improve your chances of finding a finance solution that suits your business, particularly if you've previously been declined by a bank.
You may think that going directly to the bank for a business loan is the best choice.
However, traditional banks are becoming stricter with their lending criteria, which can make it harder for some small businesses to access funding.
In fact, around 1 in 4 Australian small businesses are declined for finance.[1] According to the ABS, access to funding is also one of the biggest barriers to business growth.[2]
That's one reason more Australian businesses are exploring alternative lenders.
Non-bank lenders often offer faster approvals, more flexible lending criteria, and funding options designed for SMEs that may not fit traditional bank requirements.
If you've been declined by a bank, or simply don't want to wait weeks for an answer, alternative lending may be worth considering.
Why aren’t banks always the best option for SME funding?
Traditional banks remain an important source of business finance, but they're not always the right fit for every business.
Bank applications can involve extensive paperwork, longer assessment times, and stricter lending requirements. If your business has limited trading history, inconsistent cash flow, or operates in an industry banks view as higher risk, approval can be more difficult.
That's where alternative lenders can provide another option.
What are alternative lenders?
Alternative lenders are non-bank financial institutions that provide business finance. This includes fintech lenders, private credit providers, and specialist business lenders.
Many offer fully online applications, faster approval times, and finance products designed specifically for small and medium-sized businesses.
What are the pros and cons of choosing an alternative lender as a small business?
The benefits
Many businesses turn to non-bank lenders for reasons such as:
- More flexible lending criteria. Alternative lenders may consider businesses that don't meet traditional bank requirements, including newer businesses or those with non-standard financials.
- Faster approvals. Depending on the lender and your application, funding may be available in as little as 24–72 hours.
- Simpler application process. Many lenders require less paperwork and use digital applications, helping reduce the time spent applying.
- A wider range of finance options. Many non-bank lenders offer flexible products suited to different business stages, industries, and cash flow needs.
Many alternative lenders also offer unsecured finance, meaning you may not need to provide property or other major assets as security.
Instead of focusing solely on available collateral, some lenders place greater emphasis on factors such as cash flow, business performance, and repayment capacity.
Depending on your needs, you may also be able to access products like unsecured business loans or a business line of credit, giving you flexible access to working capital without securing the loan against an asset.
The potential drawbacks
As with anything, there are both pros and cons to choosing an alternative lending solution. A few drawbacks to keep in mind include:
- Interest rates can be higher, particularly for unsecured lending or businesses with weaker credit profiles.
- Repayment schedules may be more frequent, with some lenders requiring weekly or daily repayments instead of monthly instalments.
- Fees vary between lenders, so it's important to compare the total cost of the loan, not just the advertised rate.
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Is alternative business lending right for me?
Alternative lending may be worth considering if your business:
- Needs fast access to funds
- Is new or growing quickly
- Has been rejected by a bank
- Has a poor or thin credit history
- Doesn't have assets to use as collateral
- Doesn't need a large loan amount
- Can make weekly repayments
It can be particularly useful if speed, flexibility or access to unsecured finance is more important than borrowing through a traditional bank.
If you're comparing lenders, it's worth looking at the total cost, repayment structure and eligibility criteria – not just the interest rate.
Ready to compare your business finance options?
Rather than applying to lenders one by one, Valiant compares business finance from more than 90 banks and non-bank lenders to help match you with a suitable option.
Our specialists can help you understand your options, manage the application process and, depending on your application, help you access funding in as little as 24 hours.
Ready to get started? Apply online and we'll help you compare your options.
