Promoted by Moula.
Comparing business finance options can be challenging for brokers and borrowers when there is no standard way to present important loan pricing elements. This problem has been solved with the introduction of SMART Box™, a tool that makes it easy to compare important loan pricing metrics.
In mid-2018, a group of online lenders signed the Australian Finance Industry Association (AFIA) Online Small Business Code of Lending Practice with the aim of increasing transparency and standardising loan pricing disclosure. Introduced in January 2019, SMART Box™ was created as a way to quickly and easily compare business loans. The SMART in SMART Box™ stands for Straightforward Metrics Around Rate and Total cost.
SMART Box™ is a one-page loan disclosure document which displays the basic loan elements – including Loan Amount, Disbursement Amount, Total Repayment Amount, Expected Loan Term, and Repayment Frequency. The six common pricing metrics in the document include Total Cost of Credit, Average Monthly Repayment, Total Interest Payment (TIP), Annual Percentage Rate (APR), Cents on the Dollar, and Factor Rate. With these metrics clearly displayed, business finance brokers can quickly compare the options available and determine how well they match a client’s objectives.
Transparency has been a cornerstone to Moula’s approach to online lending since it was established in 2014. As one of the six original signatories of AFIA’s Code of Lending Practice, Moula played a key role in developing SMART Box™.
As Head of Sales at Moula, Tas Tzimos works with finance brokers who are part of Moula’s Partner Program. He notes that SMART Box™ standardises the disclosure of loan metrics so that finance brokers and business owners can get a clear picture of the finance options available.
Tzimos explained how comparing loan products could be confusing in the past. “We’ve had business owners look at two different loan options and think that one was cheaper while, in fact, it turned out to be the more expensive option due to the fees attached,” he said.
“With Moula there are no hidden fees or charges, and it’s in the borrower’s interest to know this when comparing finance products. The Total Cost of Credit metric in the SMART Box document shows the amount the borrower will pay in interest and other fees. Having this and other information presented clearly makes it possible to accurately compare loan products.”
Tzimos notes that fintech lending has been growing at a fast pace in Australia, especially as a result of banks tightening SME lending and the Banking Royal Commission.
“Between 2013 and 2017, balance sheet lending from Australian fintech lenders increased at a compounded annualised growth rate of 79%. A growing number of finance brokers have recognised the opportunity in this niche and have diversified to grow their businesses. The introduction of SMART Box™ makes it easier for brokers to help their clients choose the best finance option for their needs. In addition, brokers who are new to this type of lending are able to quickly and clearly understand the difference between loans being offered, so they can confidently advise their clients.”
Speaking about the current climate in business finance, Tzimos said, “Given the lack of trust and transparency exhibited by the big banks as uncovered by the Banking Royal Commission, SMART Box™ brings clarity to borrowers seeking online business finance from fintechs by providing clear and accurate information.”
“While banks have tightened credit and introduced restrictions, fintech lenders such as Moula have streamlined the lending process. As more business owners turn to brokers for assistance in securing finance, we have increased transparency and decreased turnaround times. This makes life easier for brokers and their clients seeking fast and reliable solutions.”
Learn more about SMART Box™ in A Broker’s Guide to SMART Box™.
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