The online SME lending landscape has changed dramatically since OnDeck launched in the Australian market in 2015, with growth in the market now outstripping that of the US.
“These are exciting times for the Australian small business lending sector,
which is poised to hit $2B by 2020”. -Noah Breslow, OnDeck Global CEO.
In the US, OnDeck wrote its first online loan for small businesses in 2007 and have since seen a clear shift in the market, from low awareness to skepticism to an explosion of competition and activity. In the last 18 months the industry has begun to mature as weaker players have died off and stronger players have survived.
The Australian market is on a very similar path but is likely to get there much faster. OnDeck analysis shows the industry is growing by 79% each year and is on track to reach $2B by 2020, up from just $10 million in 2013 – a tremendous rate of growth by any standards.
The market opportunity
There is a huge amount of potential in the Australian market, however, some key differences remain between the US and Australian markets based on the latest OnDeck Small Business Owners’ survey.
While Australia has moved out of the low awareness phase, the research found that just 30% of small business owners think there are more small business lending options today than there were five years ago, compared to 70% in the US. This signals a significant opportunity for the industry.
The research has found there is also a high level of unmet demand in the Australian market; 55% of business owners have been rejected for financing, and one in five said they were unable to take on new work due to cash flow restrictions. As a result, many are turning to personal credit cards or loans from friends and family to access much-needed capital.
Alternative finance providers have a key role to play in growing the Australian economy by plugging the gap left by traditional lenders and providing better access to capital. With 25% of small businesses planning to seek out financing in the next 12 months, OnDeck want those businesses; through their trusted brokers, to consider alternative financing.
Positive forces in Australia
Rapid fintech adoption is supporting Australia’s alternative finance market, which has now surpassed Japan to become the Asia Pacific region’s second-largest fintech player1. And Australian businesses are feeling optimistic about their operating environment, with 56% expecting to grow in the next 12 months2.
Forthcoming regulation is also expected to level the playing field between traditional lenders and fintech players. The Government’s ‘Review into Open Banking’ will promote greater competition and the introduction of mandatory comprehensive credit reporting (CCR) will be vital to the development of the market, enabling lenders to access both positive and negative credit reports. The change will bring Australia into line with other economies such as the US and UK, which have been successfully leveraging positive data for some time.
In short, Australian small businesses are set to win big, with increased product choices, wider access to credit and a more developed and responsible lending environment. At OnDeck, we look forward to continuing to service the needs of small businesses as the Australian market moves towards maturity.
Our OnDeck Broker network creates more opportunities for small businesses to access short term finance and achieve their goals.
Benefits of OnDeck and the Broker program
Partner with a lender that helps your clients get on with it.
For more information visit: www.ondeck.com.au/broker
Click to view photos from our latest Broker Networking event held on the 17th of April 2018.
1. Cultivating Growth: The 2nd Asia Pacific Alternative Finance Industry Report, KPMG 2017
2. Asia Pacific Small Business Survey, CPA Australia
*Information relates to the operations of OnDeck Group, including On Deck Capital, Inc. and its subsidiaries.
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