What role do non-lenders play in small business lending?



Demand for loans to small businesses is rising despite the outlook for inflation and higher interest rates, and non-banks such as OnDeck and Lumi have a major role to play in catering to this demand.

Read more: Small business pulse strong at non-banks

According to OnDeck research, one in four small businesses are rejected for finance by a mainstream bank. Among those that failed to secure loan approval, as many as 25% reported delays in the lending process that have negatively impacted the business.

“In the current business climate, no small business can afford that sort of delay – no matter whether they require finance for growth, to take advantage of supplier discounts, or to navigate rising costs,” said Nick Reily, head of partnerships at OnDeck Australia.

OnDeck specialises in loans to small businesses and has a better understanding than many where the market is going.

“This is 100% of what we do, and because small business lending is all we do, OnDeck has a thorough understanding of the needs of small business,” Reily said.

Non-banks also actively train brokers to better understand how products, processes, and credit decisioning meet the needs of small businesses. To help brokers read the market, Lumi educates them on emerging and current customer demands.

Speed is another factor for small businesses as they plough ahead through choppier economic conditions – particularly in this new and less-forgiving credit environment. Many small businesses have seen their best-laid plans upset or have missed a prime opportunity by the dreaded “slow no,” which manifests, for one, when there is a last-minute request for an extra document in an application.

“Speed and ease of application continue to be extremely important for businesses who come to specialist business lenders,” said John Clifford, head of third party at Lumi. “As you might expect from a leading fintech lender, [at Lumi] we pride ourselves on speedy delivery of outcomes – usually in the space of hours – and being clear at the outset about what information we’ll require.”

In small business lending, brokers would also be wise to note a strong interest in avoiding penalties.

“Businesses want flexibility when seeking finance and want to understand if they can pay back their business loans earlier without any fees or penalties,” Clifford said.