An online lender has expanded its offering of equipment finance, saying it is providing a solution for the “underserved” market of small business owners.
OnDeck Capital Australia said it had received feedback from small businesses and brokers about the length of the loans.
The lender found that a lot of equipment had useful lives longer than the length of repayments. Small businesses can also find it difficult to get funding from mainstream lenders.
Cameron Poolman, Chief Executive Officer of OnDeck Australia, said brokers often speak to OnDeck about the challenges they encounter obtaining traditional finance solutions for nonprimary assets.
He said, “These include assets such as catering equipment, gym equipment, racking, IT, food processing and fit-outs, which mainstream financiers will not finance because of the asset type or its age.
“Currently, to purchase these types of assets, many small business owners must resort to using their valuable working capital or turn to family and friends. Often the purchase simply doesn’t happen and that limits the development or even the ongoing operations of the business”.
To overcome these problems, OnDeck has launched a new product which offers secured lending with repayments between 24 to 48 months. Its current finance product in the space is unsecured and from six to 24 months.
Group sales manager at OnDeck, Michael Burke, said, “We kind of gathered from speaking to existing customers that 30% of our customers were using our facility to buy their plant equipment and it had a useful life beyond our funding. So they were saying it’d be great if you could finance over a longer term and that provides them lower repayments.
“Certainly the interest from brokers and small businesses generally is that access to capital is a very important part of delivering on a growth strategy.”
Burke said that the application process for each product was a simple one page application and for this newer product six months’ worth of business bank statements were needed.
He added, “I think the product offering itself is a very nice fit to or extension beyond our unsecured products.
“Brokers have the ability to work with a financier who’s been funding for ten years. OnDeck in the US has been in business since 2007 so they have the ability to work with a financier who’s certainly well established.”
According to research from OnDeck, one of the main reasons small businesses borrow from online lenders was to buy equipment.
CEO Poolman said, “We want small business in Australia to succeed. To do this, we must support and invest in solutions for them. Our focus is on a small business owner’s overall financial health, and not just purely on the short-term resale value of its business assets.
“As such, our equipment finance solution places no maximum age restrictions against any asset class. It provides small business the finance to purchase necessary equipment, frees up cash and gives owners more opportunity to focus on what’s best for their business.”
The term loan is secured against the value of the equipment and its potential to generate ongoing revenue. The term for OnDeck’s product ranges from 24 to 48 months for amounts from $10,000 to $100,000.