Non-bank lenders: the future of business funding is here now

There was once a time when banks were the only financial institution businesses considered for lending. And the most common solution was a bank overdraft to give them a line of credit. Although effective in some instances, it was a slow process and typically secured against the business or the director’s personal property.

Today, some non-bank lenders in Australia offer a trade finance facility as a holistic, flexible alternative.

The benefits of this include:

• the ability to have an unsecured facility, whilst setting your own supplier trading terms with up to 60 days interest free and 120-day repayment terms
• the buyer and supplier both having visibility of all transactions
• the fact that it acts as an all-encompassing supply chain procurement solution

Most importantly, though, businesses don’t have to realign their supply chain strategy to fit with the finance offering, as non-bank lenders offer products that complement and help to grow existing strategies.

Octet’s Supply Chain Finance Manager, Joe Donnachie, explains how trade finance solutions for businesses are growing in popularity.

“Trade finance acts as a perfect supplementary solution,” he says. “It can be when the bank’s funding is restricted, or when there are seasonal purchases, or even when the business is growing at a rate where having additional working capital is critical to allow that growth.”

Are you seeking a more tailored business finance solution? You’re not alone.

Leading research group RFI Global partnered with Octet to survey Australian businesses about their financial plans. The results revealed an increase in businesses searching for financing solutions outside traditional banks.

The Australian businesses surveyed stated their intentions to use more non-bank lending options in the future, including trade finance, export financing, import financing, invoice factoring and invoice discounting.

Octet’s Co-CEO, Brett Isenberg, explains. “The research shows clearly that firms with higher revenue and those in primary, secondary and logistics industries will be demanding more tailored working capital solutions from non-bank lenders. This is to help navigate the current and upcoming economic turbulence.”

Businesses of all sizes also reported less reliance on traditional business credit cards. Likewise, those with a turnover of $140 million+ were 45 per cent more likely to use a business operating account or trade finance product to fulfil transactional funding needs.

Why are more businesses turning away from banks and looking towards non-bank commercial lenders? Joe offers several reasons.

• Speed to market. Decisions must be made quickly and confidently to accelerate growth and keep up with the competition. “Banks take longer to get their ducks in a row,” he says. “Businesses can miss out on opportunities waiting for funding to become available.”
• Restrictions. “With quite limiting covenants at times, there’s a whole raft of restrictions in place when banks are lending to a business,” says Joe. Likewise, there is often a fixed limit on funding available from banks. “Whether funding is restricted from breached covenants or the bank’s risk appetite changing, the client is usually the last to find out, and they suffer as a result.”
• Security. Banks offering secured loans don’t always consider the unique structure of each business. “Traditionally, a bank might want either a registered GSA over the business itself or a director’s asset as security,” Joe explains. However, in cases of unequal shareholding, this can cause issues in the company.
• Platforms and technology. Today’s businesses need innovative digital solutions for their finances. “Banks often have cumbersome platforms that aren’t always user-friendly, instead of streamlined procurement technology designed specifically for business supply chains, including interactions between their local and global suppliers.”

Are you considering embracing more innovative finance solutions for your business? Joe advises companies making the switch to a non-bank lender to be prepared before they do.

“Speedier funding and more efficient solutions are all possible,” he says. “But businesses need to have the relevant financial information available, provide reconciled accounts and have various internal processes locked down.” 

He also suggests that businesses establish whether a non-bank lender fits them well. “Ask for a platform demonstration to see if it works for your business. Bring the accounts team into the fold. As the ones utilising the facility day to day, it also needs to be a good fit for them.”

Octet offers a range of finance solutions for businesses wanting to move away from more traditional commercial lenders. Our trade finance facility provides flexible and fast credit for businesses of all sizes, whilst some entities might require a debtor finance solution (also commonly known as Invoice Finance) to unlock the potential in their accounts receivable. Using Octet’s Digital Wallet, you can also leverage existing funding sources to pay local and global suppliers through a single, secure online platform.

Octet partners with fast-growing Australian businesses to tailor finance solutions that work for them. Ready to grow on your own terms? Speak to us about the options — including trade and debtor finance — that make sustainable growth possible.