12 August 2019

Alternative lending is changing how businesses are borrowing

The small business lending landscape has changed in recent years. More and more small to medium enterprises (SMEs) are looking beyond traditional lending channels – which often require the merchant to secure the loan against their own home – and explore alternative lending options.

Given the size of the SME population; they account for more than 99 per cent of all Australian businesses, contribute $380 billion to the economy and employ more than 5.5 million people, it’s critical there are a range of options for business owners in all sectors to access credit.

Here at Tyro, we specialise in servicing the retail, hospitality and health verticals with innovative payments and banking technology. With those strong ties to key industries and a mission to empower businesses with solutions to help them grow, we realised merchants, particularly in the hospitality and retail sectors, were seeking a faster, simpler and more flexible way to borrow.

So, we designed a loan product which allows our merchants to borrow up to $120,000 based on an assessment of their EFTPOS transaction history ($50,000 for first time borrowers).This allows Tyro to provide loans that support their cash flow with the advantage of repaying a percentage of their amount borrowed through their daily EFTPOS settlements. It also removes the need for an application process or paperwork. Instead, merchants can accept loans straight from the Tyro App, with funds available in their account in 60 seconds once they accept the loan offer and provide a personal guarantee (both in the Tyro App).

Loans are subject to Tyro’s eligibility and credit criteria.

Should you consider an alternative lending option?

As with traditional business loans, alternative lending options should be thoroughly researched with consideration given to the features and potential advantages of each.

Many alternative lending products appeal to SMEs because they remove the requirement to secure the finance against their personal assets. Many SMEs are reluctant to secure against their personal assets, while a fluctuating housing market has created a barrier even for those who are prepared to secure against their home.

Hence, alternative lending is becoming more popular as SMEs look for ways to access finance to address short-term cash flow, buy new equipment or facilitate growth.

There are advantages to secured lending, commonly the size of the loan and the cost to borrow, however this type of funding isn’t always easily accessible to everyone nor is it always the best option for everyone.

Some things to consider when assessing alternative lending options

Repayments
·       How often repayments are required and how much effort is required to manage them?
·       How the repayments will impact your cash flow and what the ramifications are for late payments?

Cost
·       How much it is it going to cost you to borrow?
·       What will be the total amount repaid over the life of the loan?

How much can I borrow?
·       How does the lender assess your business?
·       How much do you need to borrow?
·       What are you using the loan for?

Alternative lending products for the most part use innovative solutions which do a lot of the assessment legwork behind the scenes, meaning the access to finance is often much quicker.

Traditional loans can require considerable amounts of paperwork and subsequent wait times for approvals, while alternative lenders leverage technology to expedite the assessment process.

For instance, Tyro merchants can accept loans straight from the app due to the fact their assessment is based on their EFTPOS transaction history. They can adjust their loan amount, accept terms and conditions, provide the personal guarantee and have funds available in their account in 60 seconds. Eligibility criteria apply.

Here’s a complete overview of how a Tyro Business Loan works:

More info here: https://www.tyro.com/business-loans/