The Australian Bureau of Statistics reveals that over 99.5% of businesses in Australia come under small, medium, and micro-enterprises. Almost every business face some financial struggle in Australia. Entrepreneurs have to face unfair delays in getting funding.
The alternate finance market in Australia was estimated to be 1.15 billion dollars in 2020, which is double the year 2016. Australia is now posing as the leader in the alternative finance market in the entire Asia Pacific region.
Thus, alternative lending in Australia is steadily growing.
Alternative finance is a form of capital that is obtained outside traditional banking. Various types exist under this finance: crowdfunding and peer-to-peer lending.
It is a common problem for entrepreneurs and business owners to have their loan applications rejected due to the inability to be compliant with the traditional and rigid bank rules. Alternate financing comes to the rescue for them to lend their services and achieve their business goals.
Benefits of Alternative Finance
The growth of alternative lending in Australia is unprecedented. Till now, more than 20,000 small and medium-sized businesses have obtained loans. It is expected that the present borrowing of 2.2 billion dollars will go up to 5 billion dollars. Several players are now catering for this need of the people. Thus, rejections now are no big deal with vast choices.
Quick access to finance with a simple application process
This is one of the stark differences between traditional banking and alternative lending. Availing of a loan is not a simple task anywhere globally, and the same applies to Australia.
Traditional banks take several months to decide about giving a loan. The procedures they follow are complex and take a long time. Lots of documents and proofs are required, and many bureaucrats are involved. Disagreements over collateral are widespread, and it even extends the time.
It is a time-consuming and tedious process. But the new kind of alternate finance has made the process quite simple and easy. It has made many turn their back to mainstream lending institutions as alternate lending provides loans in a few days.
Access to unsecured business funding
All the loans provided by banks are secured on assets. Banks will not offer loans without business or personal assets submitted as security. However, the provider will not always ask for guarantees with alternate finance. It is a massive relief for emerging companies.
The population that suffers without access to funds in Australia are those involved in SMEs. Alternate financing rightly observed this and employed specialists to service SMEs. They are more aware of the challenges faced by these people and know the industry well. It makes the people believe that they are in safe hands.
Availing of a loan is possible even with bad credit.
Without a good credit history, it is impossible to get loans from banks. Alternate financing considers credit scores as one of the eligibility criteria and does not entirely rely on it. Loans are provided under alternate financing even for those people with bad credit.
Finally, alternative financing has become an excellent way to boost the economy. Banks are also doing their part, but their traditional rules and regulations are very rigid. It only helps large enterprises that can provide satisfying collaterals and good credit history.
But a large chunk of the population with thousands of small and mid-sized businesses that deserve flexible, low amounts, and immediate cash requirements are left unserved. Alternate financing is now in the mission of providing enough credit for the SMEs to grow.