The SME Association of Australia (SMEA) is developing a peer-to-peer (P2P) lending platform in response to a lack of understanding among SME lenders and brokers.
While the SME lending market has improved in recent years, business finance is by no means readily available and many small to medium-sized businesses struggle to secure finance, SMEA chairman Craig West told Mortgage Business.
“There is a large volume of wealth from business owners tied up in their own business,” Mr West said.
“The problem with that is, they don’t have additional security to secure the lending,” he said.
“They might have a home, but that home is secured already by the bank against their business overdraft or their motor vehicle fleet or their plant equipment or whatever it is.
“So surplus security just doesn’t exist.”
Mr West pointed to Westpac’s recent investment in P2P lender SocietyOne and said the SMEA is looking to develop a similar lender model for business owners.
“I have engaged a consultant to look at it for the SMEA to find out how it could work,” he said.
“We have got the network and we are designing a software system to match businesses up.”
While there remain many technical, legal and compliance issues to be resolved, Mr West said the biggest thing that will work in the P2P lending platform’s favour is the fact small business owners understand small business.
“They understand the cyclical nature of cash flows, which are things that large corporate banks really don’t quite get,” he said.
“Despite all the publicity and what they might say, the banks aren’t very good at it.”
Mr West said the association has already looked at software that could be used as a matching mechanism, and expects a P2P lender service to be available to the Australian SME community in the next three to six months.