The $60 billion-plus gap in the local SME lending market has become the new credit battleground as a mass of alternative lenders join the fight.

Speaking at the Australian Business Banking Summit recently, RFi Consulting Managing Director Alan Shields said local fintech players were filling the void for loans, particularly those of less than $250,000.

“That’s where you’re going to be fighting,” Shields said, as reported by Asian-Pacific Banking and Finance. “If you’re a bank the question I have for you is, ‘does your business banker really understand what it means to be a small business owner’?

“One of the things alternative lenders are doing very well is coming in and saying, ‘we understand your business. We understand what keeps SMEs awake at night’.

“From a bank perspective, well … you’ve got rates. They’ve (fintech lenders) got speed. They’ve got efficiency of process. They’ve got understanding business needs on their side … and they’re coming.”

Tyro recently joined the lending market offering eligible Tyro EFTPOS Banking customers unsecured loans based on an understanding of their business.

Tyro Business Loans are easy to access, comes with a flat fee, and there’s no need for collateral.

Customers can get a loan offer on their smartphone that’s ready to use. You simply choose the loan amount[1], how fast you want to repay it[2], and accept the offer and provide a personal guarantee with a few taps on your phone. The funds are then transferred into your interest-bearing Tyro Bank Account within minutes.

Explosion of fintech lending

The market for small business lending in Australia is estimated to be around $250 billion. Australia’s fintech lending sector, which was virtually non-existent two years ago, is growing more rapidly than in the US or UK which both started more than a decade ago.

Total fintech lending in Australia in 2015 was $466 million which was more than five times the previous year ($83 million).

So why do SMEs find it hard to get finance from banks?

Finance expert Neil “The Bank Doctor” Slonim said the reasons were:

1. Lack of security

Housing affordability has meant that many small business owners, especially younger people, don’t have a house they can offer as security.

Others who own property might simply not be prepared to mortgage their house either because they don’t believe they should have to or are not prepared to take the risk.

2. It’s not just property security that is not available

The proliferation of service businesses has meant that many SMEs don’t have plant and equipment, inventory or even debtors they can offer the bank as security.

3. Lack of track record

Technology and globalisation enable businesses to grow rapidly but they may not be able to demonstrate a track record of profitability needed to give the bank comfort.

4. Taking too long to make a decision

Most SMEs are dissatisfied with the time it takes to get a decision.

5. Constant restructuring and personnel changes

These changes hinder the ability of the bank to process loan applications in a timely manner.

6. Disengagement

All these factors have led to a disengagement with SMEs concluding there are just too many hoops to jump through to get support from the bank.

[1] Up to the maximum amount set out in your offer.

[2] Subject to minimum repayment amounts.