Understanding the new landscape of business lending

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1 Understanding the new landscape of business lending loans Powered by

2 The small business finance problem Australia s two million small businesses are the backbone of the economy. They employ over seven million people or 70% of the country s workforce. Take Anthony Raciti of Dolcissimo When it comes to funding however, they are not well served. A typical business that would need quick access to cash: + + Local restaurant + + In business for 3 years + + $750,000 Annual Revenues + + $80,000 in Net profits + + Has no collateral This is a major problem since many small businesses rely on quick access to cash to help them through specific solutions. 80% of small businesses can t get funding from a bank * I needed to quickly upgrade certain gelato equipment that I ve got on the premises. Just two months ago I purchased a juicer, and cash flow was a challenge. A bank application could have taken many, many months and we would have missed the Christmas trading period, which was very important. 2 I 3 *Source:

3 Traditional banks and the lending process For most small businesses, the first place to turn for a loan is their bank. However, getting a bank loan is no easy thing. A business would need to commit to ~20 hours of paperwork, providing profit and loss, cash flow forecast, bank statements, etc., then wait weeks (if not months) for an answer. Often, after all that, the result is a no. While all that time has passed, there s a very good chance that this business, like 25% * of small businesses in Australia, would have missed the opportunity they needed the money for in the first place. APPLY APPROVE FUND BANK PROCESS OFFLINE PAPERWORK MANUAL REVIEW SEVERAL DAYS BANK TIMELINE Add up the time it takes away from a business owner 20 HOURS * WEEKS-MONTHS SEVERAL DAYS This is why fintech solutions like MYOB Loans Powered by OnDeck have risen in Australia to provide quick, easy access to funds. 4 I 5 * MYOB SME Business Financing Survey, April 2015

4 What is fintech? The term fintech is short for Financial Technology it s the business of providing financial services by making use of software and modern technology. It has turned the traditional model of investing on its head. When it comes to funding small businesses, there are several fintech options, including: + + Crowdfunding + + Peer-to-peer lending + + Invoice financing + + Online lending + + Loan matching sites. Online lending is one of the most popular types of fintech to emerge in Australia in the past few years. These are companies that use business health data to help determine worthiness, rather than just relying on a business credit score. The rise of online lending means small businesses have more options for funding in a streamlined way which ultimately means faster access to working capital. Why would small businesses need quick access to cash? Purchasing new equipment or inventory It s not uncommon for a small business owner to need fast access to shortterm financing to take advantage of a business opportunity. Purchasing specially priced inventory that will turnover quickly and provide additional profits can be a good reason to take out a short-term business loan. Overcoming a seasonal cash flow gap Many seasonal businesses sometimes require an additional influx of capital to meet expenses, as long as the business maintains sufficient cash flow to comfortably make periodic payments. Office space expansion, renovations, and new construction Building a business sometimes requires more capital than what is available from cash flow. A short-term loan could be a good fit for covering expenses that can be recouped in less than 12 months. Boost staff requirements during an unforeseen business influx Often when an opportunity hits, businesses need to hire contractors to cover a busy period. A short-term loan allows businesses to take advantage of the opportunity, knowing that they ll recoup the money within a month or so. Emergency repairs Paying for repairs on equipment critical to business operations can be a good reason for a short-term business loan. It can help get operations running again without a 4+ year loan obligation. 6 I 7

5 The impact of business credit scores There is a lack of awareness of business credit scores and what they mean. The reality is that 90% of businesses don t know their credit score. Credit scores are important for businesses as all lenders traditional and online use this information to assess whether a business is likely to repay a loan. A lender s risk appetite will drive credit related decisions, such as whether they will approve a loan. Any business that has applied for credit in the last 5 years has a credit file held at a credit bureau. A credit report contains information such as: + + Credit enquires + + Public records + + Trade data. Typically, in Australia, each time a business checks their credit score through a lender or bank, their score is negatively affected by this inquiry. However, our partner, OnDeck, has a fast and free Know Your Score tool that allows companies to check their business credit score and establish the health of their business without the risk of lowering it. Visit myobloans.com/kys to check your business credit score. 8 I 9

6 Siobhan Belmore, Tree Access Tree Access is a small but rapidly growing company that focuses in tree removal and tree pruning. There was a large storm event in Melbourne and we were doing a lot of insurance clean up works. We probably had about six to eight weeks of clean up works to do and we needed to keep our cash flow going to pay our employees. Dealing with traditional banks can be a frustrating process. If you don t have all the information they require at the time, you need to source that and the process gets put on hold a lot. The application and approval process alone can take up to 2-3 weeks. I would recommend MYOB Loans to other businesses and we will continue to use them in the future. Not only did we have to hire additional contractors during that time but we had to hire in cranes, excavators and tipper trucks, and we needed to keep our cash flow going to pay our employees and contractors. Getting a loan through MYOB Loans was a really easy process. I was able to speak to one person at OnDeck and the process took only about 2 days before we had funds in our account. We felt comfortable going through that process because we already had an existing relationship with MYOB. 10 I 11

7 loans Powered by MYOB understands that growing a business can be tough and accessing finance isn t always easy. That s why we ve partnered with OnDeck and developed MYOB Loans; to help small businesses get ahead. Flexible term loans $10,000 to $150,000 6 to 24 month terms 3 steps to your next loan The Application Process Apply online A fast and easy 10 minute online application plus 3 months of business bank statements Quick decisions About OnDeck OnDeck is a leading small business lender dedicated to changing the way small business owners access capital. OnDeck Australia is backed by On Deck Capital, Inc., founded in 2007 and a publicly traded company on the New York Stock Exchange, and is partnering with MYOB, the accounting software provider trusted by more than 1.2 million businesses. Funding based on the health of your business. OnDeck have lent $6+ billion to businesses globally in over 700 industries. Get funded Receive funding in as fast as 1 business day. Apply online at myobloans.com 12 I 13

8 Engage and connect with us myobloans.com loans Powered by Loans are issued by On Deck Capital Australia Pty Ltd ABN Loans subject to lender approval. MYOB holds a 30% stake in OnDeck Australia and has a referral agreement under which it earns a commission on loans referred to OnDeck Australia. All rights reserved. No portion of this book may be reproduced mechanically, electronically, or by any other means including photocopying, without written permission from the publisher. MYOB Australia. Level 3, 235 Springvale Road, Glen Waverley, Victoria, ASME AU