A new funding facility has allowed Banjo Loans to expand further into the SME sector, offering unsecured loans of up to $1 million.
Banjo Loans (Banjo) is attempting to grow its presence in the small- and medium-sized enterprise (SME) space, with the announcement of its new unsecured commercial loan of up $1 million.
The unsecured loans are said by the SME lender to range from $20,000 to $1 million, via securitised warehouse.
According to Banjo, this new loan was made possible following the securing of an initial $100 million debt funding facility from an unnamed major financial institution, alongside its partnership with Aura Funds Management as the mezzanine funder.
Aura Funds Management director Brett Craig said that the group is happy to transition its “exposure in Banjo into the warehouse and expand our investment”.
“Banjo’s risk management has been strong since we started funding them, and we are of the view that the business is well positioned to grow significantly in the near term,” he said.
Banjo chief executive Guy Callaghan commented that he believes this development will allow the lender to “push further into a sector where we know there’s currently an over-demand and under-supply of higher unsecured loans”.
“We were previously filling a gap in the market, now we can competitively grow it,” he said.
“This will only continue as we grow our product offering.”
However, Mr Callaghan would later note that he believes alternative lenders are better suited to address SMEs.
“The listed banks have predominantly focused their attention on the retail and larger corporate markets. Often, SMEs fall between the gaps as banks try to address the growing demands in the retail market and satisfy the larger corporate customers,” Mr Callaghan said.
“As a result, challenger brands like ours are growing as alternative finance and banking solutions to meet demand.”
The CEO added that the large banks’ risk metrics “generally don’t allow them to lend unsecured but rather need to secure against property”, and that Australia is “very property-focused”.
“Many of our SME clients report that applying for a loan to one of the large financial institutions is an exercise in frustration. Approval times can stretch out to months,” said Mr Callaghan.
Mr Callaghan’s point echoes a growing consensus over the value of SMEs and with it, SME lending.
Last year, Judo Bank chief executive Joseph Healy, in a submission to the Senate select committee on Australia as a technology and financial centre, estimated there was an unmet demand for SME credit valued at around $120 billion.
However, non-majors and non-banks aren’t the only entities who have begun pivoting to meet demand.
Last month, ANZ announced small business customers could apply for both secured and unsecured loans of up to $1 million using only a new business credit application form and 12 months of business lending facility statements.
[Related: ANZ streamlines SME refinancing process]