The challenges faced by small businesses when borrowing in today’s climate are numerous, but with new operators providing a variety of digital options on highly accessible platforms, are small business operators better serviced by tech-savvy lenders? Ahead of the 29th Annual Credit Law Conference, several panellists weigh in with their views.
‘Low touch’ world; high expectations – Adam Lane, TradePlus24
“We live in a world in which almost everything is now quickly and easily available with just a few clicks on a smartphone. Want a massage at home, help moving a fridge, or your favourite entrée from that obscure little restaurant that previously never delivered? There’s probably an app for that.
“This shift towards a digital society is also transforming the way we do business. We’re working remotely across countries and time zones, our digital marketing strategies are more important than ever before, and customers are increasingly turned off by physical paperwork or in-person interactions. Customers are voting with their feet – and not just consumer customers. Business customers are becoming equally demanding of digital solutions.
“In the area of business lending, as one key example, business owners have for a very long time simply accepted that it can take between two to three months for a loan to be approved, and up to another 2 months to then receive the cash. This process is renowned for being time-consuming, paperwork-driven, and not always successful.
“But as the inefficiencies of the business lending market become increasingly apparent, a growing greater number of digital lenders are emerging with solutions.
“At Tradeplus24, our sophisticated business lending platform unlocks digital data from a business’ accounting system in real time, and transforms it into financial grade credit assessment, risk, and fraud analytics information. All technological complexities aside, the benefit to the business owner is simple: indicative approval in as little as 3 days, with funds hitting the owner’s account within a couple of weeks.
“This type of digital solution may have taken longer to be available to, and embraced by, business owners, but it’s my fervent belief that it won’t be long before it will become the norm. And any lenders who do not embrace this new era of digital lending will quickly find themselves struggling for new business.”
One-size-doesn’t-fit-all – Jill Lawrence, ASBFEO
“More than 97 percent of Australia’s 2.3 million businesses are small businesses and it’s important that we take their varying and complex needs into consideration. To this end, I believe having that face-to-face contact and bespoke assessment will always be required.
“Information available to lenders does not always reveal the context of why a small business is seeking funding. A purely digital approach just looks at the ‘black and white’ facts and figures; you don’t have the ‘why’.
“Someone with an ATO debt may have a prohibitive credit report, but it could be that their region has recently suffered through a drought and is not indicative of their ability to service a loan going forward.
“If we are to replace human judgement with data, then the data will need to be granular enough to reflect these sorts of complex circumstances. It’s not just about the dollars and cents – algorithms will need to consider location, industry, type of business, among many other factors.
“Having said that, it is about having the right balance. Digitisation can – and must – streamline the paperwork. But, in credit assessment – and for the final decision – there will always be a need, in my view, for that to be done outside the digital space”.
Impartial, but mindful – David Carter, Dentons
“There appears to be a perception that online borrowing might be easier or “cutting corners” and we need to make sure that’s not what’s portrayed to the market. In my view, it’s just a different offering, without many of the processes which banks are required to follow with their small business customers.
“Another point of difference is the protections offered to small business borrowers by bank lending. Small business customers are well-protected by the Banking Code of Practice. In digital platforms there is also the added concern of data protection, with issues such as the Privacy Act and data encryption all coming into play.
“As new digital credit providers enter the market, offering innovative and flexible products via alternative credit models, the regulatory environment will inevitably become more complex.
“It will be necessary to keep an active eye on the sector entrants to make sure new and emerging digital small business customer have protections where needed, but those customers still receive the flexibility and ease of access which attracted them to those platforms. Governments, regulators, industry players and consumer protection advocates will need to work together on this front”.
Adam Lane, Jill Lawrence, David Carter and Prospa’s Anna Fitzgerald will form an expert panel at the 29th Annual Credit Law Conference – 4-6 September 2019 – where they will talk more about digital SME lending from a commercial and legal perspective.