Why Aussies are turning to alternative business lenders

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 rules, which can leave small business owners confused and uncertain.

A massive 1 in 4 small businesses in Australia are denied finance [1]. And, according to an ABS report, the most common barrier to successful business growth and development is lack of access to funding [2].

So, how can you grow your business the way you want if the big, established businesses are the only ones getting to ‘yes’? The more you have, the more you get, right? Wrong.

Valiant is shaking up the finance industry to make lending easier (and fairer) for Aussie SMEs having trouble securing finance with traditional lenders. If long applications bother you or you’ve faced a recent rejection, let Valiant help. You can wait for funds to arrive in your bank account in as little as 24 hours.

The potential risks of choosing a bank lender as an SME

A report from a well-known private funder found that 29% of small and medium-sized enterprises (SMEs) say their business suffers. This is due to the long and complicated process of applying for bank funds. It can take several months before you see any funding, and that’s if you get approved at all.

Applying for finance unsuccessfully can also put a black mark against your name, which can be damaging to your reputation as a borrower when you need cash in the future.

But how do you get a ‘yes’ from your lender, especially as a small business, in order to grow and prove your creditworthiness? Is there a way to avoid undergoing hours of stressful paperwork, phone consultations, and risking damage to your credit score? Enter alternative lending.

What are alternative lenders?

In a nutshell, alternative business lenders are non-bank financial institutions that offer funding solutions to businesses. Think online lending platforms, peer-to-peer lenders, fintech lenders, and private credit funds. They're often privately owned but still highly regulated by the Australian Securities and Investments Commission (ASIC).

With non-bank lenders, the application process is typically done online and involves minimal paperwork, and thanks to automated processes and software, the approval times are quite fast.

The benefits of choosing an alternative lender for small businesses

Many businesses turn to non-bank lenders for reasons such as:

• Being unqualified for traditional loans due to strict lending criteria. Alternative lenders are more open to newer businesses or those with non-traditional financials than traditional banks.
• Needing access to funding quickly. Fast access to funds can be a game-changer for small business owners. With alternative lenders, you can get money to your account in 1–3 business days.
• Avoiding complicated and long-winded applications. Most non-bank lenders only require your basic business details, bank statements, proof of identity and, in some cases, financial reports.
• Wanting more options. Non-bank lenders offer bespoke solutions, so there is more flexibility to choose a product that aligns with your cash flow, business stage, or growth plans.

Another key benefit of going the non-traditional route is that you don't need to offer collateral. Non-bank lenders understand that SMEs are still growing and are still on their way to obtaining high-value assets like properties and equipment.

Sure, lending without collateral makes you a greater risk, but that doesn’t automatically make you unreliable—it’s your ability to successfully run a profitable business that non-bank lenders care about.

Rather than making you put personal or business assets on the line to secure your loan, non-bank lenders are more interested in your overall business plan, profit and loss statements, annual sales, and financial statements.

Unsecured business loans also allow you to borrow money without collateral upfront, which is great news for businesses that don’t want to risk their assets being taken away or don’t have access to appropriate security to begin with.

Or there's also the business line of credit route. With this type of business financing, you can access funds up to a set limit and use them whenever you need to, only paying interest on the amount that you use.

Potential drawbacks of alternative lending

As with anything, there are both pros and cons to choosing an alternative lending solution. A few drawbacks to keep in mind include:

• The interest rates are typically higher, particularly if you're not providing collateral or you have poor credit (though for most SMEs, the benefits outweigh the cost).
• Loan terms may be more rigid, and your repayment schedule may be tighter than the usual monthly cadence. If you have longer revenue cycles and are likely unable to keep up with weekly (or even daily) repayments, this might not be the right solution for you.
• Your loan may come with hidden fees, so it's important to carefully review your agreement before signing it.

Is alternative business lending right for you?

Typically, alternative lenders are a suitable choice for businesses that:

• Need fast access to funds
• Are new or growing quickly
• Have been rejected by a bank
• Have a poor or thin credit history
• Don't have assets to use as collateral
• Don't need a large loan amount
• Can make weekly repayments

If that sounds like you, we can help you kickstart your application process—let us explain how.

Get approved in three simple steps

If you need funding fast, and don’t have time to wait around for a potential ‘yes’, let Valiant streamline your application in three easy steps:

1. Click here to get started and fill in a few basic details so we can understand your business goals.
2. We’ll contact you to confirm your eligibility before starting the application process.
3. Sit back while we do the heavy lifting and find you a competitive loan aligned with your business goals. Wait for cash to arrive in your account in as little as 24 hours.

We compare a diverse suite of lenders, including both traditional non-bank institutions and alternative lenders, to ensure you’re getting a suitable product for your needs at a great rate. Our service is free for you to use and doesn't affect your credit score whatsoever, so there’s no need to worry about risking damage to your credit history.

Better yet, we’ll do the paperwork and negotiation so that you can get back to building your business and snapping up sales. Don’t let big banks hold you back from your success. Get fast funding for your business needs, minus the headache.

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References

1. https://www.theadviser.com.au/lender/44589-1-in-4-smes-declined-for-big-bank-finance-ondeck
2. https://www.abs.gov.au/statistics/industry/technology-and-innovation/innovation-australian-business/latest-release