S M A L L BU S IN S S L O A N SM oveO verBankstheN on-BankL endersHaveArrived
W ithbusinesslendingunder$100,000 shrinking thefastest
S m allBusinessL endingisP lum m eting
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S m allBusinessL oansnoL onger“ P rofitable” forBanks
■ T heaveragecapitalacrossBankloanbooksincreasesfrom8% ofassetsto10.5% to13% ofassets
● Banksincreasingly focusedonm axim isingcapitalefficientandreturnoncapital(vsstraightprofitability m easures)
■ BaselIIIm eanthatm ortgagesaresignificantly m oreprofitablethanunsecured sm allbusinessloans(evenw henthehigherratesonsm allbusinessloansaretakenintoaccount)
■ O ff-balancesheetsecuritizationstructureshavenoteventuated (yet)forportfoliosofunsecured businessloans
■ S ignificantsupply-dem and im balanceresultsacrossm ostpricepointsinthesm allbusinesslendingm arket
BaselIIIcapitalrequirem entsfocusheavily onloancollateral(w ithunsecuredloansrequiringincreasedcapitalsupport)
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High Dem and w ithvery lim itedsupply
Banksarefocusedonproperty secured lendingtoS M Es(atm idsingledigitinterestrates)
T raditionalM erchantCashAdvanceproviderstypically offervery highinterestrates
S M Ecreditdem and betw eenthesetw oextrem esislargeandsignificantly underserved
4
Q■ Dem and athigherratesisdrivenby:
High returnS M Eprojects(e.g.opportunity topurchasestockatheavydiscount),and
M ustdo projects(e.g.fundw orkingcapital,pay unexpectedbillz)
P 45%
30%
Merchant CashAdvance Providers
9%
6%
Banks
P
■ Bankspricebusinessloansinanarrowbandlargely independentofdem and;~6-9% p.a.
■ T raditionalM CA providersarepricing~30-45%
9%
BAN KS
M CA;s
■ L argeunm etdem andforcreditinpricingsegm entbetw eenBanksandM CA s
HugeS upply – Dem and Im balanceacrossS M ECreditM arket
Q
Q
P
Dem and S upply S upply-Dem andIm balance
Unmet DemandBetween MCA andBanks
S m allBusinessL endingisS hiftingtotheN on-BankM arket
■ Dropinsm allbusinesscreditsupply hasresulted inthebirthandgrow thofthenon-banksm allbusinesslender
■ L eadersam ongstthedirectlendingfirm sinclude:
● O ndeckCapitalw w w .ondeckcapital.com .au
● Kabbage.com w w w .kabbage.com
● M arketInvoice w w w .m arketinvoice.co.uk
● FundingCircle w w w .fundingcircle.com
● CanCapitalw w w .cancapital.com
● Ezbob w w w .ezbob.com
■ S hiftingm arkethasalsoseenthebirthofseveralinnovativebrokersandm arketplaces. Globalleadershereare:
● L endio w w w .lendio.com
● Biz2credit w w w .biz2credit.com
■ Grow thratesam ongstsom eofthesefirm sareat100% +com poundannualgrow thrates
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N on-bankS M Elendingm arketisincreasingdram atically
T heFutureofS m allBusinessL ending
■ L ikely toseecontinued shiftinbusinessaw ay from thebanksunlessregulatory changesarem ade
■ N on-Banklendersareplayinganim portantrolebutcostofcapitalconstraintsseesm ostoperatingathigherratesonthecreditcurve
■ N on-Banklendersdrivingsignificantinnovation– online,fast,innovativecreditm odelsetc.
■ T hereisastrongcaseforgovernm entinterventiontosupportincreased lendingtosm allbusinessandatim provedrate
■ L ikely thatinfuturenon-banklendersm ay provideoriginationandcredit,servicingcapability,w ithw holesalefundingcom ingfrom thebanksorsecuritizationm arket
● O ndeckCapitalhaspartnered w ithseveralregionalbanksandisalready providingtheirIP andprocessesona“ w hitelabel” basis
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GetCapital
w w w .getcapital.com .au
w w w .getcapital.com .au/blog