Online small business lending is growing by 79 per cent and could hit $2 billion by 2020, according to OnDeck.
In his address to the AltFi Australasian Summit 2018 in Sydney, OnDeck CEO Noah Breslow claimed that online SME lending in Australia is growing at a faster rate than a comparable stage of development in the US market, predicting that growth could reach over $2 billion in annual origination by 2020.
“Having grown at a compound annual growth rate of 151 per cent since 2013, we expect to see continued strong growth in the coming years,” Mr Breslow said.
The OnDeck CEO pointed to continued growth in online SME lending in the US market despite competition from approximately 6,000 banks.
“When you compare that to Australia with a more concentrated banking system, there is even more opportunity for online lenders to provide innovative lending solutions to SMEs,” the CEO said.
Mr Breslow added that proposed industry reforms and an increasingly favourable business environment would also help spur further growth.
“In addition, increased access to data, supportive government initiatives and favourable small business sentiment are all likely to lead to further growth for the industry.
“[The] government’s Review into Open Banking and the introduction of mandatory comprehensive credit reporting (CCR) will likely promote greater competition in the Australian market,” the CEO continued.
However, Mr Breslow claimed that despite anticipated growth in the industry, small businesses continue to lack awareness of alternative finance solutions.
The chief executive cited the latest Small Business Owners (SBO) survey commissioned by OnDeck which revealed that 30 per cent of small business owners believe that the number of finance options has increased over the past five years, compared to 70 per cent of small business owners in the United States.
The survey also revealed that 63 per cent of small businesses are “heavily reliant” on traditional lenders to secure finance, followed by specialist financiers (29 per cent), credit unions (27 per cent) and family friends (27 per cent).
Further, the study found that 55 per cent of business owners have been denied the finance they requested, with 37 per cent claiming that such difficulties affected their delivery of products and services and 32 per cent noting that it led to layoffs or recruitment issues.
Additionally, when asked about their future borrowing plans, 33 per cent of respondents stated that they would consider an online lender.
“There is a real opportunity for the online SME lending industry to increase awareness of the innovative products and services that are now available, as an alternative to the traditional loans offered by banks,” Mr Breslow said.