In today’s world, where SME clients are short on time, accountants are now seen as much more than just book-balancers. Clients are increasingly looking for accountants who offer a full suite of services, including advice on business, tax and also, how they can access finance. This means that it’s becoming more and more important for accountants to add value to their clients by being in the know about new lending solutions. Here are two ways it can help your practice:
Not everyone needs to be an innovator, but everyone does need to learn about what technology is out there. So, how does unsecured online lending work?
Online lenders like Moula are harnessing technology to underwrite loans. This isn’t just about using simple web forms instead of paper application forms. Some lenders have developed platforms which actually analyse a business’ data, and make a decision based on the health of the business. Banks and traditional lenders will manually assess a business, which is why they’ll often ask to see things like a business plan. Online lenders are able to link to accounting data sources (such as Xero and MYOB) and do all this all in a matter of minutes. In essence, the data is what secures the loan.
Whereas banks take an average of 21 business days, or four weeks to approve a business loan, some online lenders can approve an unsecured business loan within 24 hours. Savvy accountants who are informed about these new loan products, and can introduce them to their clients, will benefit from a changing perception of their relevance to their clients. Beyond simply ‘balancing the books’, you can become a valuable resource for helping your clients grow their business.
2. Your clients’ growth is good for your business, too
At a minimum, you want your clients’ businesses to stay healthy, so that they continue to use your services. But what’s even better is if their business actually grows.
This is all a great opportunity for an accountant. However, in a landscape where some SME lenders are perceived as predatory and over-priced, accountants and advisers are also faced with the challenge of navigating the market to identify the most appropriate and trustworthy solution for their client. Ultimately, in order to add value, accountants need to be informed about which business loan providers are best suited to their clients’ finance needs. To that end, below are some key considerations when assessing the available alternative online lending solutions:
What is the real Annualised Percentage Rate (APR) of the loan?
Some lenders claim not to charge an interest rate on their loans, but apply a factor rate to the initial loan amount, leading to a considerably more expensive loan product on an APR basis. Other lenders may position themselves as offering a lower interest rate but charge significant upfront fees, direct debit fees etc. which, when bundled together, create a substantially more expensive financing alternative. Be sure to read all the fine print regarding fees and pricing. For more on this, here’s a short piece about hidden fees.
Is security required?
Some lending solutions require assets to secure the loan. A big factor to consider is not just whether a client has an asset to tie up as security, but whether it makes sense to do this.
Are there penalties for repaying a loan early?
Most loan products charge a hefty fee if you want to repay early. Lenders like Moula offer clients the flexibility to exit early with no extra fees, and this is something to consider.
Be careful not to damage your client’s credit rating
Shopping around for a new loan product may cause your client’s credit rating to be adversely impacted, as running multiple credit checks will harm a business’ credit score. To be informed, shop around, but shop smart.