For consumers and businesses, going to the bank for a loan is no longer the only option for financing, and technology is just part of what’s driving the change in the lending marketplace. These changes involve the emergence of “online marketplaces” for lending including equity and reward-based crowdfunding and peer-to-peer consumer and business lending platforms.
This alternative finance market differs from traditional banking or capital market finance through technology-enabled “disintermediation,” which means utilising third-party capital by connecting fundraisers directly with funders, in turn, reducing transactional costs and improving market efficiency. The Australian alternative finance market was worth $348 Million in 2015 and grew to $675 Million in 2016 with Australia being the second-largest market in the Asia-Pacific region.
There are now a wide variety of personal and business loan lenders who use technology to match borrowers and investors, such as Society One, Prospa, Spotcap, and Ratesetter. These platforms allow borrowers to submit details of themselves and what they seek the money for. Investors then decide if they want to offer the funds and at what interest rates they are willing to offer (there may also be other stipulations). This is often done on an unsecured basis, so no real estate is required.
When it comes to secured lending for business, the concept of security is also changing. Take something like invoice factoring, where a company will sell the value of their invoices and get the money upfront to help cashflow and growth. Normally, a funder will want all your invoices as part of the deal. Now there are lenders that treat each invoice as an “asset,” therefore you can sell just one invoice when you need the cash rather than all your invoices.
These ones aren’t exactly lenders but still have a place:
– Credi is a platform that allows family and friends to draw up, negotiate, and accept loan agreements between each other. It also sends alerts and keeps track of repayments. The platform not only covers personal loans and property deposits but also loans for start-ups.
– Easyshare is great for shared households where the old days of splitting bills and rent can now be done in an app on your phone. It even reminds people to pay on time.
And here we were at Clever Finance Solutions thinking it was just us who had it tough keeping up with all the different interest rates for loans!