Small business lenders keen to take advantage of delays in the approvals process are spruiking fast turnaround times for loan assessments and payments.
As buoyant economic conditions stir the animal spirits of Australia’s 2.5 million small businesses, niche lenders such as OnDeck and global payments giant Square are fine-tuning their pitch to local entrepreneurs in need of capital.
The Australian subsidiary of United States SME lender OnDeck on Wednesday revealed a new product called Lightning Loans which use an algorithm to approve borrowers in 90 minutes and deposit up to $100,000 in their account in less than two hours.
OnDeck CEO Cameron Poolman says for many borrowers who have had bad experiences with banks taking weeks before ultimately declining the customer, it’s just as much about knowing you can get a loan quickly than accessing the funds right away.
“A quick no is better than a slow no,” he said.
Customers of the big four are becoming increasingly frustrated by delays in the approvals process that force business owners to endure excruciating wait times before they are told where they stand.
Specialist lenders including OnDeck are looking to leverage bottlenecks in the system by getting answers and money to customers faster.
Not that the incumbents are sitting on their laurels, mind you.
Commonwealth Bank’s BizExpress Online tool promises to approve and deliver as much as $100,000 to customers in as little as 12 minutes.
Speed isn’t the only innovation fintechs are hoping to bring to the loan space, with US payments player Square announcing its intention to begin offering Australian customers flat fee micro-loans two months ago.
The Jack Dorsey-backed fintech has issued about $8 billion in loans so far as part of a strategy to keep customers within its ecosystem.
Square sells tiny white devices that allow small businesses to accept credit and debit card payments. Customers can pick up the device from Officeworks for about $50 and be up and running within minutes. Square now also offers micro-loans using risk-based pricing.
Square customers can apply for unsecured loans of up to $75,000 and secured loans of up to $250,000. If Square holds enough information to automate the process it takes a customer just three clicks, with a response provided on the same day and the funds deposited the following day.
Square Australia head of industry and payments Samina Hussain-Letch says after launching its Australian no-interest flat-fee loans product in May it has had “an incredible reaction” that “exceeded expectations”.
“I’m really comfortable with our next business day proposition at the moment, not to say that we won’t consider [same day delivery at some point] if there’s a need. But it’s not something that is high on our priority list at the moment,” she said.
Square is fully funded with $US4 billion in cash and short-term investments, according to its latest quarterly result.
Ms Hussain-Letch says it isn’t seeking the same level of scale in Australia and for now is just happy to serve its growing customer base.