In Australia, financing that lends or issues funds to individuals or businesses without the requirement of going through a standard bank is called alternative lending. There are various types of alternative lending in Australia, like invoice financing, peer loans and advanced financing of R&D in Australia. Various institutions in Australia use different forms and methods of this lending.
What is it doing for businesses?
It is seen that individuals and businesses in Australia are relying on alternative lending more than the standard bank loans. This generally happens because these alternative lenders have a work contract with short track record borrowers. There is no security in this, but the money is simply available whenever required, and the loans are usually given at a low-interest rate. The standard banks, still being chosen for businesses and lending, are not as demanding as alternative lending in Australia. This is because of its slow growth and rigid structure in the market. On the other hand, alternative lending is a fast and flexible alternative with a high loan acceptance rate.
Types of alternative lending
To determine whether alternative lending is ideal for the firm or not, the nature and the market of the individual’s business decides a lot. Despite this, there are various methods of lending. This makes it flexible and a one-stop destination to get what they want. Alternative lenders usually offer contracts through fast and simple processes that do not require much time and effort; also, the loan gets passed within a short time. The types are below:
1. Invoice financing: Being a popular take in the market, this financing is ideal for owners of small businesses. Usually, small businesses face cash flow problems because their customers take a long time to pay. With this financing, you can quickly get the small sum you need.
2. Equipment Financing: This lending can be possible through traditional and alternative lenders. In this, individuals use their vehicles to secure the loan. Although there is a risk in this type of lending, losing the car fails the loan payment.
3. Non-Bank Lenders: These institutions lend money without a banking licence. Some have one-off fees; others have APRs. They have various options for the borrower and offer loans for more extended periods. They are flexible and comparatively less restrictive for businesses with short credit track records. There is even scope for an online application of loans with this lending method. It is necessary to read the agreement carefully before taking the loan.
4. Credit Lines: If an individual is looking for short-term credit with flexible options, an alternative lender would be ideal. These would provide easy, quick and stable access to your funds. When comparing various lenders on repayment methods, interest rates are necessary before finalising the application.
5. P2P Loans: These forms of loan transactions occur between the borrower and investor. These are a marketplace for the investors to look at whom they want to invest by examining their portfolio and business transactions. These are viable for individuals who need quick and easy loans without paying a visit to the bank or making a detailed record.
6. R&D Funding: This is a new type of financial instrument. This lending system uses a company’s tax credit future payment to secure funding. This cash source is one that most Australians have access to. The problem with this is that it takes months to get the money in the bank. Individuals or companies have immediate access to the loan they have issued.
This is a rapidly growing lending method in Australia, especially with the various types; people are getting more inclined towards this. This is because this is quick, flexible and efficient financing. This is ideal for individuals or businesses already burdened with debt, and visiting the bank might not suit them.