The online small business lending market in Australia is growing at a faster rate than the US market did at a similar stage of development, the CEO of OnDeck Global has said.
Speaking at the AltFi Australasian Summit in Sydney, CEO Noah Breslow said it could reach more than $2billion in annual originations by 2020.
He said that despite over 6,000 banks offering small business lending options in the US, online lending to small businesses has flourished.
He added: “When you compare that to Australia with a more concentrated banking system, there is even more opportunity for online lenders to provide innovative lending solutions to SMEs.”
Research presented to the summit shows Australia has overtaken Japan to become the second largest alternative finance player in the Asia Pacific region, second only to China.
Breslow continued: “In addition, increased access to data, supportive government initiatives and favourable small business sentiment are all likely to lead to further growth for the industry.
“Furthermore, the Government’s ‘Review into Open Banking’ and the introduction of mandatory comprehensive credit reporting (CCR) will likely promote greater competition in the Australian market.”
Yet despite the Australian market’s growth potential, awareness of alternative finance sources still remains an issue, according to OnDeck’s latest Small Business Owners’ Survey, commissioned by research firm YouGov Galaxy.
Only 30% of small business owners thought the number of lending options had increased over the past five years, compared to 70% in the US.
Sixty-three percent of small businesses have been heavily reliant on traditional banks, followed by 29% on specialist financiers, 27% on credit unions and 27% on family and friends, to source finance.
The research also found signs of unmet demand, with 55% of business owners having been rejected for financing they requested.
When it comes to future borrowing plans, 33% of Australian small business owners planning to seek additional finance for their business indicated that they would consider an online lender.
Breslow said: “There is a real opportunity for the online SME lending industry to increase awareness of the innovative products and services that are now available, as an alternative to the traditional loans offered by banks.
“After pioneering online small business lending more than ten years ago in the US, it is encouraging to see many markets globally adopting similar alternative financing solutions.
“For OnDeck, Australia is an exciting market to be operating in and we’re thrilled with the results so far.”
OnDeck entered the Australian market in 2015 via a partnership with MYOB, a leading accountancy software provider, to help close the funding gap between small business financing needs and the availability of capital from traditional sources. The business is also working with brokers and aggregators, including Connective Asset Finance and College Capital.
The AltFi Australasian Summit was held in Sydney on April 16, with speakers and panel members from across the globe discussing trends in SME lending, fintech and how the finance sector is changing.