Online small business lender, Prospa, has been named Australia’s fastest growing technology company at the annual Australian Deloitte Technology Fast 50 awards – and it has big plans for the broker channel.
In the two years from 2013 to 2015, Prospa achieved a phenomenal 6971% growth in revenue and joint CEO, Beau Bertoli, told Australian Broker
that he expects growth to continue as the SME sector continues to grow.
“The Australian economy is really built on small businesses. There is something like 2 million small business owners are out there representing 46% of economic growth or GDP, so small businesses are a crucial part of the Australian economy,” he said.
According to Bertoli, traditional lenders just can’t properly service the SME sector, which has left small businesses seriously underserviced when it comes to their financing options.
“When we started [Prospa], what we realised was that there was very limited lending that was unsecured to the small business community and small business market. We that realised that in order to solve that problem and provide finance to small businesses, we would need to do that in a technologically enabled manner,” Bertoli told Australian Broker
“If you talk to a bank and you ask what a small business loan is, quite often they will tell you it is a $200,000 or $500,000 loan. Our average loan is $25,000. To a typical small business owner the loan is very small and as such, large lenders doesn't really have the means to assess and approve those types of loans because it is the same effort whether it is $25,000 or $200,000 — so they would much prefer to do the larger loans.
“So the loans are not big enough and also the small business owner doesn’t want to offer security for the loan. To take out a $25,000 loan and put your $700,000 family home on it, that is a pretty big disconnect from what the customer really wants and what the market was providing.”
In August, Prospa announced a partnership with major aggregator, AFG, which saw them added to its panel of lenders. Bertoli said the partnership has been successful and the online lender is now in talks with other major aggregators to further penetrate the broker market.
“The relationship is still in its infancy, now we are into month four of [our partnership], but the results have been fantastic. I think we have both been very happy with the way that the loan book is growing,” Bertoli told Australian Broker
“We are obviously in talks with lots of different partners and that includes some of the other large aggregators… What we have found is that vast majority of finance brokers out there have small business customers and they are often providing more than one type of finance for that small business customer, so adding another product to their suite and having what is part of the future of how finance is going to be written as a part of their product offering is becoming more and more crucial for finance brokers.
“As the mortgage market, particularly in Sydney and Melbourne, starts to come off the boil and the regulators are tightening up the capital requirements for banks, it is going to mean that diversification is more important to these finance brokers.”
Whilst Prospa will remain committed to the small business lending sector at the moment, Bertoli said it is not ruling out diversifying its product offering in the future.
“At the moment we are very focused on the SME sector and it truly is a really big category and a very large market and we are very confident that we can build a very successful business just in that space,” he told Australian Broker
“Certainly the short term will very much be focused on the Australian small business owner but in the future there is no reason for us not to consider lots of different products and lots of different geographical areas. Right here, right now though, it is about the Aussie
SME and in the long term it could be a lot of different products even globally.”