Short-Term SMB Funding, Done Digitally And Down Under

In the land down under, faster payment rails and faster funding can help smaller firms manage cash flow more efficiently and capitalize on their growth prospects. There’s a need for that ability to tap into funding on an as-needed, just-in-time basis. Data cited by Banjo Loans estimates that the unmet credit demand among Australian SMBs was worth $118.4 billion (Australian dollars) at the end of 2019 – before the pandemic hit.

In an interview with PYMNTS, Guy Callaghan, CEO of Banjo Loans, said that more efficient data sharing levels the playing field a bit for enterprises – where smaller firms can be served by lenders as efficiently as larger ones.

In Australia, there’s been a continued push for data sharing, through the Open Banking Review, Federal Treasury and a raft of stakeholder organizations, all of which support the extension of this framework to small businesses. The Consumer Data Right (CDR) is still in its infancy in Australia, but Banjo has already connected with multiple third parties to deliver a broad range of financial products to new segments of the SMB sector, said Callaghan.

To that end, Banjo said at the end of last month that, in tandem with InfraRisk, it had launched a fast-funding, short-term, unsecured digital loan solution geared toward small and micro-businesses. Banjo obtained access to InfraRisk’s best-practice automation and artificial intelligence (AI) modeling, as well as entry to new distribution channels, said Callaghan. The loans are funded in minutes, have a minimum of $5,000 (Australian dollars) and can give SMBs the short-term working capital they need to negotiate discounts or pay suppliers (through cash on delivery transactions, for example) or creditors.

Callaghan told PYMNTS that advanced technologies, such as machine learning, are leveraged to analyze applicants’ financial data to develop risk-based offers that take into account point of sale and transaction-level data. The short-term lending platform has so far been integrated with data partners that include hospitality/retail firm ZiiCloud. The platform will initially focus on the hospitality and retail sectors.

Increased Data Sharing

Ease and speed of access to the right financial data can only assist both client and lender. “Small business owners are now becoming more and more accustomed to providing bank and non-bank lenders alike with access to the financial data they require,” noted Callaghan. “There is a real gap in the market providing small and micro businesses with short-term unsecured working capital loans,” he added, which hampers smaller firms’ growth prospects. “These businesses often can’t wait a couple of months to receive funding — they need to be able to seize on business opportunities.”

Faster Payment Rails = Faster Loans

Callaghan noted that in terms of mechanics, the fast-funding product is offered as part of their workflows, and as the loans are pre-approved, they are easy to access. The firm uses Australia’s fast payment network to issue funds in near-real time, improving the cash conversion cycle for SMBs by several days – potentially adding billions of dollars to the Australian economy.

There is often an opportunity cost to small and micro businesses from not being able to access funds straight away, he said – and due to the fast funding, advantages accrue to suppliers, who gain the assurance that customers will pay in a timely manner.

“This will only help small businesses grow, and therefore drive economic activity at a time when local markets around the world have been contracting due to the COVID-19 pandemic,” Callaghan told PYMNTS.