How to fund your business without using the bank

The following report serves as an introduction to the emerging world of alternative finance

Alternative finance enabling business growth

When it comes to accessing finance, business owners are accustomed to hearing 'no' from the bank.
In fact, according to the Australian Bureau of Statistics (ABS), small business loan applications are rejected at roughly twice the rate of medium-sized businesses. Alternative lenders are the most likely to extend credit to small businesses, as they focus on real-time business data to better understand the creditworthiness of small business borrowers

HARVARD BUSINESS SCHOOL

According to the Harvard Business School ‘State of Small Business Lending’ report published in July 2014, there was an approval rate of 64 per cent for small business borrowers from alternative lenders, as opposed to only 19 per cent approved by banks

NSW BUSINESS CHAMBER

When small businesses are denied access to finance, they stop innovating, competing and growing and even run a greater risk of bankruptcy. Just shy of 18 per cent of those rejected had to lay off staff, according to a study by the NSW Business Chamber

NSW BUSINESS CHAMBER

When small businesses are denied access to finance, they stop innovating, competing and growing and even run a greater risk of bankruptcy. Just shy of 18 per cent of those rejected had to lay off staff, according to a study by the NSW Business Chamber

This is a significant concern given the contribution small business makes...

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Around seven million Australians are employed by SMEs

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SMEs produce more than half a trillion dollars in output (almost 60 per cent of private sector economic output)

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SMEs spend almost $6 billion per year on research and development

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SMEs make up almost 100 per cent of innovative businesses

Despite the undeniable contribution small business makes to our economy, for traditional financial institutions, small business is not BIG business

IT'S EASY TO SEE WHY...

When an SME needs finance, they’re not asking for hundreds of thousands of dollars. Compared to an enterprise, these businesses ask for relatively small amounts of finance, commonly to manage working capital and cash flow or to purchase inventory

The banks often can’t justify the cost of processing smaller credit applications and SMEs are turned away. Banks typically demand five years’ worth of business data plus another few years of business forecasts before providing a loan. Many SMEs are not in the position to share that kind of data but are in a good position to grow

The banks often can’t justify the cost of processing smaller credit applications and SMEs are turned away

Banks typically demand five years' worth of business data to analyse plus another few years of business forecasts before they will provide a loan. Many small businesses are not in the position to supply that kind of data but they are in a good position to grow

Alternative finance has found a way to make small business BIG business

How?

By utilising cutting-edge technology to keep overheads to a minimum, enabling them to offer a viable alternative to customers

ALTERNATIVE FINANCE IS AFAST GROWING SECTOR GLOBALLYIn 2015, the online alternative finance industry in the Americas grew to $36.49 billion, a 212 per cent increase from 2014, according to research from Cambridge UniversitySimilarly the online alternative finance market in Europe grew 144 per cent between 2013 to 2014, and Australia is no exception

JENS WOLOSZCZAK, FOUNDER AND CEO OF SPOTCAP

“Globally alternative finance is revolutionising the way SMEs access finance and driving the community toward achieving business goals”

According to a report by KPMG and the Cambridge Centre for Alternative Finance, the total volume of business finance reached almost $685.6 million in 2015 in the the Asia-Pacific region (excluding China), growing 259 percent from 2013

Alternative finance is thought to have the potential to become a $95 billion a year industry in Australia alone by 2019, according to the same report

By overlooking small business and deeming it too costly and/or risky, traditional providers have created a gap in the market big enough for a whole range of alternative finance providers to fill. These providers are motivated by a desire to cater to a section of the financial market that is currently underserved by banks

In particular, the business borrowing system was broken. A better system, one designed to support SMEs, has emerged

lachLAN HEUSSLER, MANAGING DIRECTOR OF SPOTCAP AUSTRALIA

“Alternative finance will become so ingrained in the lives of SMEs it will become the first port of call for small business owners looking for capital to fuel growth”

Consider your finance needs

Find out what type of alternative finance is right for you

Where to go for advice or information

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