How Do Non-Bank Lenders Work?

Essentially, this is because the more information you give us the easier and quicker we can assess your loan.

The fin-tech industry is still relatively new in Australia and, understandably, there is still a lot of uncertainty among consumers. We find that this is mainly due to the fact that consumers feel they just don’t know enough about online lenders. So, in order to shed a little light on what it is we do and how we do it, we’ve put together the top questions we get about online lenders and our application process:

The main difference between non-bank lenders and their traditional bank counterparts is the speed of the application. Non-bank lenders have a much quicker application process, often able to approve and fund loans within 24 hours. This is because the entire process can be done online and over the phone. Alternative lenders utilise new technologies to underwrite and execute loans, making it quicker and easier to get funding.

Another key difference is the one point of contact customer service that non-bank lenders provide. It’s a much more personal application with customers being able to talk to the same person throughout their loan process.

Most non-bank lenders (Moula included) offer unsecured finance options, so we don’t require you to put up your house as collateral for a loan. Instead, we assess online business data to underwrite loan applications. We look at BAS, bank transaction feeds and accounting data feeds. If you use an online accounting platform, like Xero or MYOB, we can integrate directly with that to get the data we need.

This is all done through our online application screen but we never actually have access to your accounts. All we see are snapshots of your transaction data; we can’t actually do anything in your account. Plus, all your data is automatically deleted after your loan is finished so there’s no permanent record of it. (Read more about Online Data Security.)

The interest rate we charge is dependent on our assessment of the risk of the borrower and is based on a business’s cash flow in the first instance. Our rates range from 0.61% per fortnight on the outstanding balance to 2% per fortnight. In dollar terms, the 0.61% rate would mean that a $100,000 loan held for a full year would result in repayments of $108,444. In APR terms, our rates start at approximately 15%.

This all varies from business to business. But basically, the more data you give us, the easier (and quicker) we can assess your loan and the more likely you are to get a lower rate.

The biggest thing to do is to permission us into your cloud accounting data or your electronic bank data. I know that sounds scary, but we don’t actually get access to your accounts. We only see a ‘read only’ snapshot of the accounts to get the necessary data.

Apart from that, just have all the paperwork you think you need at the ready (the more the better). If your business is structured as a trust, have the trust deed handy (and certified). Then it’s just simple things like reconciling your bank transaction information (if that doesn’t make a lot of sense, contact your accountant or bookkeeper). Also, keep your credit file clean – a good credit score is tricky to get and easily lost. Understand what drives a credit score and pay close attention to these factors.

Even if we aren’t in the position to lend, we will still try to help the small businesses after they have been declined. Often we will run through the reasons for the decline and help them with certain disciplines, which will put them in a better position for borrowing in the future. For example, helping them understand how credit scores can be impacted by a variety of actions and inactions on the part of the borrower.

In most cases, businesses aren’t declined because they’re ‘bad’ businesses but usually because they didn’t have the data or paperwork, or because they didn’t have enough business history to assess. Many of the applications we decline are for businesses that are just too young and we encourage them to reapply again in a few months once they have some more business data.

One of the most common questions we get is about what customers can do if they have been rejected to improve their chances next time. Often it’s about good discipline. Submitting tax returns and BASs on time and paying the tax office (or setting up payment plans with the ATO). Being aware of the drivers of credit scores and subsequently managing those drivers to maximise your credit rating. Avoiding simple things like bank dishonours and considering critical and discretionary business expenditure – do you really need that new BMW?

Overall, it’s about being diligent. As a small business owner, you have to look at the real cost of financing and whether it makes sense for your business. Read the fine print, especially in terms of upfront costs and early exit penalties, as well as the true interest costs (APR versus a standard interest rate).