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Growing demand for alternative lending

New PayPal research reveals growing demand for alternative lending, with 42% of Australian SMBs saying they have used a non-bank, alternative lender. 

PayPal Australia has today announced that it has provided over $500 million (AUD) of finance to Australian small business through its alternative finance offering, PayPal Working Capital.

Demonstrating the demand for faster, flexible funding alternatives, over 25,000 business loans have been made to more than 7,000 Australian small businesses since the launch of PayPal Working Capital locally in 2014.

In line with their announcement, new independent research commissioned by PayPal has been released, which reveals that that three quarters of Australian SMBs (75%) think the process of securing a traditional business loan is more difficult than it used to be. A further two thirds (67%) think getting approved for a business loan is increasingly becoming a barrier to doing business. One in five (20%) SMBs have even been refused a bank loan in the past.

Andrew Baines, General Manager, PayPal Credit in Australia said, “At PayPal, the support we offer to small businesses goes beyond being a button on a website. PayPal Working Capital only launched in Australia less than five years ago, and with over $500 million now issued to more than 7,000 businesses, we can see that there is an ongoing demand for alternative finance solutions to support small businesses and to help them thrive.

“The PayPal Working Capital product allows our customers to access the finance they need, typically within minutes. The fast and easy application process removes the barriers to what business owners need to focus on most – the successful running and operation of their business.”

PayPal’s research found that 2 in 5 SMBs (42%) have used a non-bank, alternative lender and when asked how their consideration of sourcing a business loan has changed in the last year, 2 in 5 (39%) said they would be more likely to consider a non-bank, alternative lender, compared to only 18% who said they would only consider a traditional bank loan. This preference for alternative lending jumps to 54% for SMBs that have been operating for less than 5 years and 70% for SMBs that have previously used a non-bank, alternative lender.

“The businesses we work with have told us that securing a traditional business loan can be a long and drawn-out process; time which many small businesses just don’t have. Increasingly, we are seeing businesses seek tailored solutions which meet their business needs, and bridge the gap left by traditional funding providers. In order to remain successful, it is important that Australian SMBs are weighing up their options and sourcing the best lending solution for their business,” Mr Baines said.

The research also found that the majority of Australian business owners are stressed about cash flow, with the research revealing nearly 2 in 3 SMBs (61%) are concerned about the new financial year and half (48%) are more anxious than they were last year about cash flow. In fact, over a quarter of Australian SMBs (28%) are always worried about cash flow. According to the research, the main factors causing cash flow pressure are customers spending less, rising costs and tougher lending standards imposed by the big banks.

Melbourne based Phoebe Yu is one of the small business owners to have benefited from this alternative funding, after setting up Ettitude, a high-quality, innovative bed linen company, in 2014.

Ms Yu said, “It was extremely difficult to get a traditional bank loan without having collateral assets and whilst trying to reinvest to help grow the business. PayPal Working Capital offered us the perfect solution, alleviating cash flow and inventory stresses, particularly around holiday seasons. We are currently paying off our 10th Working Capital loan and will most definitely be drawing from it again in the future. The flexible funding has helped us expand our business across Australia and into the US”.

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Loren Webb

Loren Webb

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