If you’re a small business owner searching for some extra funding, you don’t want to wind up saddled with a loan and an interest rate that will send your business under instead, do you? Of course not! You want an affordable source of cash and you want it quick.
That’s where small online lenders come in. Whether you’re after funding to purchase inventory or equipment, manage working capital or pay for a new marketing campaign, these new entrants to the business loan scene are becoming a force to be reckoned with.
So to help you decide whether borrowing from one of these challenger brands is the right way to go, we’ve collected the below need-to-know information.
From peer-to-peer lenders to innovative fintech companies, small, online challenger brands are coming out of the woodwork to offer a genuine alternative to the big banks. Generally, they offer two main types of financing - a business loan or a line of credit.
There are a load of lenders offering both options in our business loan comparison table, but let’s take a look at some of the top ones in a little more detail:
Banjo is an online lender offering unsecured loans to small businesses in Australia since 2014. One cool thing about Banjo, is that once you’re approved you have access to an ongoing loan facility - so if you need to borrow a little extra, you won’t have to go through the application process all over again.
Moula is an Australian online lender which exclusively deals with funding small and medium businesses. Its run on a platform that analyses your business data to decide what loan amount and interest rate you’ll qualify for. And if you like your business loan with a little corporate responsibility on the side, you’ll be glad to know Moula sponsors Thankyou - an organisation aimed at ending poverty.
Founded in 2014, SpotCap is an international company, based in Germany with offices in Sydney, giving Aussie businesses access to a line of credit facility worth up to 2 months of your business revenue. Similar to Moula, SpotCap uses a credit algorithm to look at your real-time business and cash-flow data when you apply.
GetCapital is Australia based, offering loans and line of credit facilities to small and medium businesses across the country. GetCapital also offers the Acquire rewards program - which will allow you to earn 1 rewards point per $1 drawn down on your loan or line of credit, up to 30,000 points per loan, which can be redeemed through the Qantas Frequent Flyer scheme.
Bigstone is an online small business lending marketplace. Bit of a mouthful, huh? What that means, is that Bigstone is a peer-to-peer lender - a service that connects you as a borrower to individual investors that meet your lending needs. Once approved by the team at Bigstone, your loan request will be listed on the marketplace for investors to view and fund. Easy!
RateSetter is a pretty well-known face on the peer-to-peer lending scene as the first lender to open the door to everyday investors, and has been operating in Australia since 2014. Although the Aussie arm is an independent company and mostly locally owned, it’s also part of the UK based Ratesetter group, which means you get the security of being backed by a big international company.
Prospa is an online lender aimed at helping small businesses get the funding they need, when they need it. It uses a smart proprietary technology platform to allow borrowers to quickly and easily apply for loans up to $250k. At Prospa, creditworthiness is based on the health of your business - not your personal credit score.
When you’re looking for a business loan, you want things to be as quick and easy as possible, so you can get on with work. There are a bunch of good reasons to go with a small online challenger, including:
Of course, nothing’s perfect. There are disadvantages to taking out a loan with an online lender, including:
If you’re a small business owner in need of a little extra padding in your budget, it might be tempting to whip out your credit card. But this isn’t really a good budgeting strategy - credit card interest rates are often sky high, and it’s easy to slide into debt, especially when you start dealing with thousands of dollars at a time, which you often are in business.
In this case, a small business loan can be a much better choice - it’s a structured loan, and you’ll only be able to borrow to a preapproved limit, plus, you can usually snag a much better interest rate than you would on a credit card.
So put the plastic away, and find a business loan to suit your needs.
Banks generally offer a set interest rate on each of their loan products, so you know what you’ll be getting. But with small online lenders, it can be a little more complicated, because many will offer you a loan rate tailored to your borrowing power and business.
What interest rate you receive will depend on factors like your credit score, how your business is doing and how much you want to borrow. And keep in mind, generally speaking, the more detailed business data you can provide a lender, the better your loan offer will be.
So how do you know if you’ll qualify for a small business loan? Although eligibility will be a little different for each lender, there are a few things that are common to most, that you can check off your list before you go ahead and apply.
Here at Mozo, we only compare business lenders that are regulated by ASIC, which means they must adhere to responsible lending regulations, keep your business information secure and disclose any fees and rates that will be payable by you the borrower. Of course, before signing up with a business lender it’s important to read the terms and conditions, so you’re aware of your repayment obligations, as these differ from provider to provider.
To compare all the loans listed on the Mozo website, visit our business loan section, which pulls 45 business loans into the one place for you to compare side by side.