We recently reported on the Banking Royal Commission’s inquiry into financial services. Citing the lending crackdown facing small Australian business as a driver of an uncertain economic climate. Getting a small business loan is now even more difficult than before. The inquiry was first initiated in order to ensure more responsible lending practices. But it has now created the impression that the inquiry has precipitated an unintended consequence. In that banks have become even reluctant to extend favourable terms to small businesses in Australia.
Small business hit hardest when it comes to getting a small business loan
The Council of Small Business of Australia Chief Executive Peter Strong reported: “Members are reporting that bank credit is becoming much harder to get because of the Royal Commission.” The tougher conditions are as a result of more scrutinized lending T’s and C’s. Small businesses are reporting that in the past 3 – 6 months, conditions have really affected areas like asset financing, where approvals have actually halved. “The great threat here,” says Larry Prosser, CEO of alternative lender Beyond Merchant Capital, “is those small businesses are crucial for economic growth. This sector is responsible for more than 5 million employees. They are a driver of innovation, competition and positive change in the country. If they can’t grow…the economy can’t either.” Most of the big 4 banks declined to comment. However private bankers did admit that they have felt internal pressure to tighten the reigns.
What can a small business owner do about it?
Behind every small business, is an entrepreneur who will make a plan. Getting a small business loan has never been easy. The sector is as risky as it is promising. But this problem has definitely escalated in recent months. Forcing many small business owners to think differently when it comes to getting a small business loan. But we don’t want to paint such a grim picture. And while there is a certain reality to manage, small business owners have luckily always liked a challenge. Entrepreneurs are wired for adversity. So the real opportunity here is to think differently.
What options are out there for a small business owner?
This is leading to a huge shift toward alternative lending. One great option is Merchant Financing. This kind of business loan bypasses the whole traditional loan system but in a legitimate and practical way. Here a retail business (older than 6 months) lends against future credit and debit card turnover. The process does not require the same factors as a traditional bank loan: No collateral, no lengthy paperwork, no long turn-around times. Once approved, the amount is repaid at an agreed percentage via every future card swipe that goes through their EFTPOS terminal. This PAY-AS-YOU-TRADE model works in line with turnover. Great for seasonal business! A product like this is a huge win in its fluid approach to getting a small business loan.
Small business owners really don’t need to wait for the tides to turn. They can take the opportunity to think differently. Perhaps a more attainable option like Beyond Merchant Capital’s Merchant Financing is the better way to go. For more information on getting a small business loan, call us today on 1300 945 438 and make things happen tomorrow.
Speak with a lending specialist today about funding the growth of your business.