Small business loan approvals from banks are at 94%, so why have applications declined?
What do nine million Australians have in common? They’ve all dreamed about becoming their own boss by starting a small business.
That’s according to new YouGov research commissioned by the Australian Banking Association (ABA), with the research also revealing the major hurdle many would-be owners face in getting their small business up and running: finance.
YouGov found that 60% of people wanting to start their own small businesses said that access to money was the biggest factor holding them back - higher than ‘life circumstances’ (42%) and a lack of experience (36%).
There is some good news for Aussies looking for a business loan to kickstart a new business though.
According to Australian Banking Association CEO, Anna Bligh, banks currently have an application approval rate of 94% which, combined with the current low interest rate environment, means that now could be a great time for businesses to apply for a loan.
However, in what may be a surprise given the high percentage of successful applications, business loan applications through banks have actually fallen by some way since 2014.
“Small business loan applications have declined by a third (33 percent) since the 2014 calendar year. Encouragingly, there has been a lift in the June quarter. It’s early days, but we hope that it will continue,” said Bligh.
“There could be many reasons for the downturn, including believing that they won’t get a loan, thinking it takes too long, deeming the application process too complex or they’re simply borrowing money from other sources.”
Rise of the ‘challenger’ lenders
So who are these ‘other sources’ that small businesses are turning to?
Over the past five years a number of challenger lenders have entered the Australian business lending space, offering a competitive, online alternative to banks.
According to GetCapital CEO, Jamie Osborn, lenders like GetCapital have been able to leverage technology and data to better serve the needs of small businesses, precipitating a shift away from banks.
"Banks have optimized their business models around mortgage underwriting. This means that their credit underwriting process is centered around property security and the application and assessment processes are long and arduous, with lots of paperwork. This model doesn't work well for small business owners,” he said.
“A handful of challenger brands in the business lending category, such as GetCapital, have taken a different approach, by building a product and service offering from scratch to meet the specific needs of small businesses.”
“Small businesses want a fast and efficient application process, a credit decision based on the strength of their business rather than the size of their family home, and lending products that fit their specific requirements and a high level of service.”
RELATED: Kick the habit: 6 alternative business loans to the big banks
Ready to kickstart that dream by finding a business loan of your own? Check out some of the hottest offers around (including Get Capital’s offer) below, or head over to the Mozo business loans comparison hub for even more deals.
Compare business loans 2019
Unsecured Business Loan
A straightforward business loan with no hidden Lumi fees or charges. Speedy application and approval process with fast access to funds according to Lumi.
Interest Rate
Upfront Fee
Funding speed
from 9%-Within same dayUnsecured Business Loan
A straightforward business loan with no hidden Lumi fees or charges. Speedy application and approval process with fast access to funds according to Lumi.
- Interest Rate
- from 9%
- Upfront Fee
- -
- Ongoing Fees
- 2.5% establishment fee of the disbursed amount.
- Late payment fee
- $50.00
- Transaction fee
- $0.00
- Early repayment penalty
- $0.00
- Other fees
- -
- Loan type
- Loan
- Security type
- Unsecured
- Minimum loan amount
- $10,000
- Maximum loan amount
- $750,000
- Minimum loan term
- 3 months
- Maximum loan term
- 5 years
- Repayment frequency
- Weekly
- Repayment types
- Principal & Interest
- Minimum trading period
- 6 months
- Minimum annual turnover
- $60,000
- Application speed
- within 24 hours
- Approval speed
- 2 hours
- Funding speed
- Within same day
- Extra repayments allowed
- yes
- Redraw allowed
- yes
- Other benefits
- Early payout options and early repayment discounts are available. Principal-only payout available after 6 months.
- Other restrictions
- Loans above $300,000 must be secured by property.
Prospa Plus Business Loan
Prospa uses risk-based pricing to determine your interest rate. They look at factors including your industry, years in business, cash flow, creditworthiness and the overall financial health of your business.
Interest Rate
Upfront Fee
Funding speed
Interest rates vary based on risk.3.5%from 24 hoursProspa Plus Business Loan
Prospa uses risk-based pricing to determine your interest rate. They look at factors including your industry, years in business, cash flow, creditworthiness and the overall financial health of your business.
- Interest Rate
- Interest rates vary based on risk.
- Upfront Fee
- 3.5%
- Ongoing Fees
- $0.00
- Late payment fee
- $0.00
- Transaction fee
- -
- Early repayment penalty
- $0.00
- Other fees
- -
- Loan type
- Loan
- Security type
- Secured
- Minimum loan amount
- $150,000
- Maximum loan amount
- $500,000
- Minimum loan term
- 3 months
- Maximum loan term
- 3 years
- Repayment frequency
- Weekly
- Repayment types
- Principal & Interest
- Minimum trading period
- 3 years
- Minimum annual turnover
- $1,000,000
- Application speed
- 10 Minutes
- Approval speed
- Same-day approval
- Funding speed
- from 24 hours
- Extra repayments allowed
- yes
- Redraw allowed
- no
- Other benefits
- -
- Other restrictions
- -
Unsecured Business Loan
Business Loans from $5,000 to $5,000,000 with high approval rates. Access to funds on loans up to $500,000 in as little as 3 hours. Cash flow friendly repayments and open minded offers.
Interest Rate
Upfront Fee
Funding speed
On Application3%, starting at $399from 3 hoursUnsecured Business Loan
Business Loans from $5,000 to $5,000,000 with high approval rates. Access to funds on loans up to $500,000 in as little as 3 hours. Cash flow friendly repayments and open minded offers.
- Interest Rate
- On Application
- Upfront Fee
- 3%, starting at $399
- Ongoing Fees
- no
- Late payment fee
- $50.00
- Transaction fee
- -
- Early repayment penalty
- no
- Other fees
- -
- Loan type
- Loan
- Security type
- Unsecured
- Minimum loan amount
- $5,000
- Maximum loan amount
- $5,000,000
- Minimum loan term
- 3 months
- Maximum loan term
- 1 year
- Repayment frequency
- Weekly, flexible
- Repayment types
- Principal & Interest
- Minimum trading period
- 4 months
- Minimum annual turnover
- $144,000
- Application speed
- 10 Minutes
- Approval speed
- within 1 hour
- Funding speed
- from 3 hours
- Extra repayments allowed
- yes
- Redraw allowed
- no
- Other benefits
- Daily repayments available.
- Other restrictions
- Fast Business Loans for amounts up to $500,000 are funded in 3 hours, Small Business Loans can take 24 hours.
Fixed Rate Unsecured Business Loan
Interest Rate
Upfront Fee
Funding speed
-On applicationVariesFixed Rate Unsecured Business Loan
- Interest Rate
- -
- Upfront Fee
- On application
- Ongoing Fees
- $0
- Late payment fee
- $0.00
- Transaction fee
- $10 ($50 for staff assisted withdrawals)
- Early repayment penalty
- not disclosed
- Other fees
- -
- Loan type
- Loan
- Security type
- Unsecured
- Minimum loan amount
- $5,000
- Maximum loan amount
- $250,000
- Minimum loan term
- -
- Maximum loan term
- -
- Repayment frequency
- -
- Repayment types
- Principal & Interest
- Minimum trading period
- Varies
- Minimum annual turnover
- Varies
- Application speed
- Varies
- Approval speed
- Varies
- Funding speed
- Varies
- Extra repayments allowed
- yes
- Redraw allowed
- yes
- Other benefits
- LVRs available of up to 100% residential property or 80% owner-occupied non-specialised commercial property for secured loans up to $3 million.
- Other restrictions
- Eligible Westpac customers only. Annual turnover less than $50m.
Read reviews and learn more about Westpac business loans
Business Overdraft
Interest Rate
Upfront Fee
Funding speed
10.47% p.a. variableNegotiableVariesBusiness Overdraft
- Interest Rate
- 10.47% p.a. variable
- Upfront Fee
- Negotiable
- Ongoing Fees
- Fees and charges apply
- Late payment fee
- $0.00
- Transaction fee
- not disclosed
- Early repayment penalty
- 0
- Other fees
- -
- Loan type
- Overdraft
- Security type
- not disclosed
- Minimum loan amount
- $20,000
- Maximum loan amount
- -
- Minimum loan term
- -
- Maximum loan term
- -
- Repayment frequency
- n/a
- Repayment types
- n/a
- Minimum trading period
- Varies
- Minimum annual turnover
- $75,000
- Application speed
- Varies
- Approval speed
- Varies
- Funding speed
- Varies
- Extra repayments allowed
- n/a
- Redraw allowed
- n/a
- Other benefits
- -
- Other restrictions
- Must link with a NAB business transaction account and is repayable on demand
Read reviews and learn more about NAB business loans
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