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

4

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)

4

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

4

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

4

GetCapital

w w w .getcapital.com .au

w w w .getcapital.com .au/blog