Online business funding: A global perspective

The Internet of things has rapidly altered the global perspective in the business world. Traditional institutions such as banks, financial institutions, credit providers and the like are playing catch-up with non-bank providers – many of which offer their services online.

The rapid rise of FinTech enterprises has put the banking industry on notice: businesses are now seeking funding from a myriad of sources, and banks are no longer the default option. Part of the problem with conventional systems such as bank funding is regulation. The global perspective on online funding has changed over the last few years.

The global financial crisis of 2008/2009 set in motion a series of events designed to safeguard the banking industry. While these measures are geared towards shoring up macroeconomic stability by preventing the failure of big banks, they do little to assuage concerns of up-and-coming SMEs (small and medium enterprises) seeking capital funding. The problems are widespread.

In developed economies such as the United Kingdom, the United States, Canada, Australia and New Zealand, it is SMEs that comprise the bulk of economic activity. By curtailing or preventing access to lines of credit, banks are ultimately disadvantaging themselves by ‘forcing’ entrepreneurs and small business owners to seek funding elsewhere. Online business funding has picked up the slack where banks have burdened SMEs with stringent criteria and higher rejection rates.

The Australian Case Study

Australia is a classic example of a developed economy facing funding challenges. For starters, Australian banks and financial institutions have made it increasingly difficult for small and medium enterprises to receive the necessary funding for their ventures. The banking framework in Australia has been designed to protect banks and disadvantage SMEs. As such, Australian entrepreneurs seeking financing for their day-to-day operations are having to look elsewhere. Small business lenders are popping up across the board, and popular platforms like SmallBusinessLoansAustralia are facilitating this process for SMEs.

For starters, small business financing solutions do not need to go through Australian banks anymore. Many highly-rated lenders are now available to Australian SMEs, including Capify, Prospa, Spotcap, Sail and others. Typically, funding from as much as $5,000-$450,000 can be acquired. Unlike traditional banks and financial institutions, these non-bank lenders offer their services almost exclusively online, and minimal documentation is required. However, there are certain requirements vis-à-vis minimum turnover and other eligibility criteria. Compared to big banks, it is far quicker to make an online application for a business line of credit, and eligibility can be confirmed within 60 seconds. If approved, money can be transferred to a client’s account within 24 hours, and the funding amounts can be anywhere from $5,000 through $400,000.

How to compare lenders?

Since every business has different capital requirements in terms of amounts needed, urgency of funds, purpose of funding, and available paperwork, it’s important to evaluate lenders on their merits. In Australia, credit providers cater to a variety of businesses, including SMEs. Foremost among their concerns is the application process, the approval process and the regulatory requirements. Today, Australian and foreign online funding sources make it much easier for clients to access capital than banks. Granted, interest rates may be higher than the prevailing rates at banks, but the approval rates make up for the difference. Additionally, the funding can be used for purchasing new equipment, vehicles, machinery, repairs, or even as a capital cushion.

Selecting the right provider for a business loan is an arduous undertaking. Multiple factors need to be considered such as the credibility of the provider, the regulatory constraints, the online application process, the paperwork compliance, and the size of the business loan that is required. Fortunately, many online business funding sources are now available. From the UK to Australia, South Africa to Canada etc., online business funding is growing in importance on a global scale. For business owners, it’s important to ensure that the money can be repaid. Business owners are technically less vulnerable than individuals and it’s incumbent upon SMEs to weigh up the pros and cons of business lending with these alternative small business loans. Ultimately, it’s best to test bank and non-bank offers for the best deals.