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Australia set to outpace US in online SME lending, says global CEO

by OnDeck Australia,   May 07, 2018


With the Australian SME lending sector poised to hit $2B by 2020, these are exciting times if you are planning to grow your small business.


The online SME lending landscape has changed dramatically since OnDeck launched in Australia in 2015, with growth in the market now outpacing that of the US.

In the U.S., OnDeck wrote its first online loan for small businesses in 2007, and we have since seen a clear shift in the market, from low awareness to skepticism to a stampede of competition and activity. In the last 18 months, the industry has begun to mature with clear market leaders continuing to scale in the space.

We believe the Australian market is on a very similar path but is likely to get there much faster. With a broader range of lending options, to turn to for financing. When we launched our Australia business, we were certainly in the low awareness phase of the industry, but since then, we have seen originations continue to increase. OnDeck analysis shows the industry will continue to experience strong growth, estimated at 79% each year, and by 2020, this represents a potential $2B. Compared to five years ago, when the annual online SME loan volume approached $10 million, the growth in adoption is tremendous by any standard.


Know your options

There is a huge amount of potential in the Australian market. However, according to OnDeck’s latest SME survey, there are some key opportunities for us to support awareness and adoption among small businesses owners.

When we spoke to Australian small business owners, we found just 30% of you believe 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 to increase awareness of the financing solutions available outside of those offered by traditional banks.

Our research also found many of you are experiencing difficulties with accessing financing. Over half have been rejected for financing and one in five have been unable to take on new work due to cashflow restrictions. As a result, many are turning to personal credit cards or loans from friends and family to access much-needed capital.

While a traditional small business loan from the bank can be a good option for some, it is not always the most accessible or suitable for very diverse funding needs of small business owners. Most banks focus on personal assets such as property rather than business quality when deciding who to lend to, making borrowing problematic.

With 25% of you planning to seek out financing in the next 12 months, we believe alternative finance providers have a key role to play in growing the Australian economy.


Positive forces in Australia

Encouragingly, there are currently a number of positive forces at play that should help to broaden the range of small business lending options 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 a recent study of Australian small businesses shows many of you are feeling optimistic about your operating environment, with 56% expecting to grow in the next 12 months2.

Forthcoming regulation is also expected to help level the playing field between traditional lenders and fintech players. The Government’s ‘Review into Open Banking’ recommends greater competition and innovation in the banking system. We also believe that the introduction of mandatory comprehensive credit reporting (CCR) will be significant to the development of the market.

CCR will enable lenders to access both positive and negative credit reports, allowing them to make a more balanced assessment of an applicant’s credit history. The change will bring Australia into line with other economies such as the US and UK, which have been successfully leveraging positive credit data for some time.

While the CCR changes being made in Australia currently only affect consumers, we would very much advocate for the rules being extended to small businesses, which would improve access to credit.

Going forward, we believe the data-led operating model in Australia will continue to evolve and by 2020 would expect to see industry-led standards for conduct and disclosure, open banking adoption and increasing acceptance of the online SME lending sector by capital markets.

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 serve your small business’s financing.

Our customers getting on with it!

Looking for some inspiration to start or grow your business? Read about the experiences of the husband and wife owners Max and  Deborah Macarthur of New View Window Cleaning on Sydney’s Northern Beaches, the first Australian small business to win OnDeck’s Small Business of the Month award.


1. Cultivating Growth: The 2nd Asia Pacific Alternative Finance Industry Report, KPMG 2017

2. Asia Pacific Small Business Survey, CPA Australia




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