According to the most recent Australian Bureau of Statistics (ABS) lending data, new commercial finance commitments fell 8.7% in June 2016 compared with the previous month (in seasonally adjusted terms). New business lending in June was down 23.4% on the same time last year.
Nevertheless, the Reserve Bank will be hoping that the August cut in official cash rates, some of which will flow through to business lending, will help to spur demand. Business loan interest rates, even more so than consumer lending interest rates, can vary considerably depending on the credit rating of the business. So for small businesses considering commercial finance, doing a quick credit rating check first could be a good idea.
OnDeck Australia: “Many businesses don’t realise that they already have a credit score”
According to small business lender OnDeck Australia, a business credit score is a key indicator used for assessing credit or loan applications, and being aware of this score will help small businesses make informed financial decisions.
“There is a low level of awareness about business credit scores among Australian business owners. OnDeck Australia has talked to thousands of small business owners since launching this year, and we consistently see a lack of awareness among them, about their suitability for a business loan. Know Your Score is about raising awareness and making it more accessible to find out a business credit score, and potentially, funding to grow their business,” said Cameron Poolman, CEO of OnDeck Australia.
OnDeck has announced a free online credit score service called Know Your Score, which utilises data provided by credit bureau Veda. A business credit score uses commercial indicators such as registered defaults, potential loan enquiries or any external administrations that may be registered against a business.
“Some services that allow you to check your credit score can have an impact on your score, so they shouldn’t be used too often. The really neat thing with Know Your Score is that this is the only free, instant way to check your score without affecting your credit rating,” said Mr Poolman.
RateSetter offers business loan investment
OnDeck isn’t the only online platform in the business loan space; in late May marketplace lender RateSetter announced that it had received an ASIC license to provide business loans and is now offering business loans of up to $150,000 for terms from six months to five years. The loans are targeted at established businesses that are seeking finance to grow or expand.
“The success of small and medium sized businesses is vital to the Australian economy. Businesses need funds to increase productivity, grow and create jobs, yet traditional lenders’ inflexible approach leaves many businesses unable to get funding on fair terms, especially if they’re unwilling to put up the family home as security,” said RateSetter Chief Executive Officer (CEO), Daniel Foggo.
“This is particularly true when the amounts requested are relatively small. At RateSetter we understand that businesses’ financing needs change over the life of their business, so we offer small as well as larger loans at competitive rates.”
RateSetter’s move into lending to businesses follows the evolution of the peer-to-peer lending industry in the UK, where over half of all lending is now to businesses.
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