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Evidence of lending peaks in period prior to end of calendar year festive season.
Data analysis by OnDeck Capital Australia (OnDeck), a subsidiary of the US-listed OnDeck Capital, has shown definite peaks and troughs in small business on-line lending and confirmed strong cyclical funding patterns across the sector in Australia.
Service industries like accommodation and food services showed increases in funding pre-Christmas and at the end of the financial year, in line with the increased demand for services over the festive season and in preparation for end of year reporting. The construction industry also showed stronger funding during these periods.
Mr Cameron Poolman, Chief Executive Officer, Ondeck Australia, said there was a strong correlation between the seasonal nature of the lending patterns and the reasons small businesses were seeking funding.
“A Survey undertaken earlier this year told us around 40 per cent of funding went towards equipment purchase and another 36 per cent and 32 per cent of funding went to managing cash flow and inventory purchase respectively,” he said. “If we overlay the Survey findings against the data, we can see an alignment between small businesses thinking strategically about peak periods and taking advantage of down times and reporting periods to ensure businesses are efficient and ‘fit for purpose’ during their busiest periods.”
The data also found some lending patterns in other small business sectors were more evenly distributed around the year. Bucking the festive season and end of year trend, retail trade lending remained constant throughout the year, despite the obvious spike in consumer demand for retail products around festive periods.
According to the data, some borrowing patterns also extended to the day and time small businesses sought funding. Most small businesses were likely to apply for a loan in the middle of the week and during business hours.
Mr Poolman added: “These patterns are obviously entrenched across small businesses. For brokers, this means understanding the patterns and then building awareness with their own clients about the impact of these patterns on their businesses. Most importantly, each business is different, so brokers should work with their clients to really understand when and how much to borrow to take advantage of market cycles and maximise growth opportunities.
OnDeck Small Business Owners Survey, April 2018 – commissioned by OnDeck Australia through research firm, YouGov Galaxy