Prospa: Making loans to small business

The online lending space for small business is booming, and one of the new services available is Prospa, which aims to provide an easy application process for small business to access funds to grow their businesses.  Canstar speaks with co-founder Beau Bertoli about the benefits of Prospa’s services.

Many small businesses look to traditional means for funding their business activities, such as overdrafts and business credit cards from large to medium banks.  However, for many of these businesses, especially those that are just starting up, the costs for securing such funding can be high.

Some small businesses may be unaware that there are alternative channels available for getting funds.   One such alternative is Prospa, a company that specialises in providing tailored loans to small businesses.  Prospa aims to make the loan application process easy for small business by providing a simple online application process that can be completed in around ten minutes and a decision delivered to the customer within hours.

Please note that the information in this article is general only and should not be taken as recommendation.

How does Prospa work?

A business looking to get a loan makes an application online through the Prospa site, which takes approximately ten minutes to complete.  The customer requires their driver’s licence number and their business ABN to proceed.  An option is available for the customer to allow Prospa to use an advanced bank verification system that instantly verifies bank information inserted into the online application. A decision is generally given within an hour, and funds are deposited into the customer account on the same business day.

Businesses can elect to make their loan repayments on a daily or weekly basis. This decision is based on the type of business that the customer is running.  The ability to make daily or weekly repayments is a useful feature of Prospa’s loans, as it assists the company in better managing their cash flow and ensuring that loan repayments are made, and the company’s credit file is kept intact.

Who is Prospa aimed at?

Prospa is aimed at small businesses looking to for loans between $5,000 to $250,000 for a period anywhere between three and twelve months.  It may be useful for fledgling business that might not otherwise be offered loans through traditional banks. In effect, Prospa offers an unsecured business loan that is priced according to various factors including how long the customer has been in business, the cash flow health of the company and other factors.

Prospa offers a comprehensive FAQ section, which can be accessed here Prospa – FAQ

CANSTAR Q&A with Beau Bertoli – Prospa Co-founder

Canstar sat down with Beau Bertoli, co-founder of Prospa, to ask him some further questions.

Q:  There are a number of P2P lending platforms on the market today. In your view, what makes Prospa stand out from the rest?

A:  Prospa is not a P2P lender or ‘matchmaker’ connecting lenders and borrowers. We are a Balance sheet lender meaning we have the funding in place to make loans ourselves – this means we have skin in the game and evaluate risk very carefully to ensure the quality of our loan book is high.

There are a number of ways we stand out from other alternative finance providers:

  • Prospa is Australian owned and operated – and our locally developed technology talks specifically to Australian small businesses. We are four years old but built to last – we are here for the long term, and we are passionate about changing the way small businesses experience finance.
  • We have lent over $150m to thousands of small businesses across Australia
  • We have the largest network of quality partners, with over 2,500 financial advisors and brokers happy to recommend our solution for small businesses. We also work with a number of high profile listed brands like Xero, Westpac and AFG with values similar to our own.
  • We are the fastest growing technology company in Australia (winner Deloitte Tech Fast 50), third in Asia (Deloitte Asia Tech Fast 500), we are a Telstra Business Award finalist 2015 and ranked 33rd by KPMG as a global Fintech innovator.

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Q:  Apart from cash-based businesses such as those in hospitality, are there any other industries that would benefit from daily repayment?

A:  Daily repayments suit any business that takes cash payments on a daily basis: hair salons, butchers, any kind of retail business. Basically any business with regular cash flow can benefit from the flexibility of daily payments.

Q:  Apart from businesses with volatile or uncertain cash flows, such as tradespeople and professional services firms, are there any other industries that would benefit from weekly repayment?

A:  Weekly or even fortnightly repayments tend to suit businesses with lumpy cash flow or those that issue a number of invoices, like tradies, agencies, medical and dental services. Freelancers can also benefit from weekly repayments. Essentially we analyse the cash flow of our clients and discuss with them what they can manage without stress, and what day or days they should make the payments.

Q:  Are you seeing a large take-up in customers choosing the daily repayment option?

A:  Yes, the largest proportion of our customers choose the daily repayment option.

Q:  Do you have a fixed rate for all borrowers or is it based on the creditworthiness of each borrower?

A:  We look at the creditworthiness of a business when assessing a loan application and offer rate for risk. We use our advanced technology, in the form of a credit decision platform developed specifically for Australian small businesses, to evaluate over 400 different data points. This means we are customising a loan solution to every customer based on their credit worthiness, with the variables being the length of the loan term, the amount borrowed and the rate.

Q:  How do your rates compare against traditional banks and ‘payday’ lenders?

A:  Our rates are higher than the secured loans from traditional banks because the risk profile of small business is higher. Our core product is an unsecured loan, meaning we don’t have any security if the business owner is unable to repay their loan. Where we differ is that we have developed a way to lend to small business where the traditional banks will not. Our rates are similar to credit card rates, but are fixed for the term of the loan and there is no compounding interest liability.

Q: Who do you regard as your main competitors?

A:  We compete mainly with products offered by the traditional banks. Small business owners are still largely unaware they have alternative sources of funding and turn to hugely expensive options like overdrafts, credit cards and even taking business loans secured against their family home. We are focusing on educating small business owners they have faster, easier ways to access the finance they need to grow, without putting their home on the line or spending hours in bank queues filling out mountains of paperwork. 

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CANSTAR is an information provider and in giving you product information CANSTAR is not making any suggestion or recommendation about a particular product. If you decide to apply for a product, you will deal directly with a financial institution, and not with CANSTAR. Rates and product information should be confirmed with the relevant financial institution. For more information, read our detailed disclosure, important notes and additional information.

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