Category Archives: Borrowers

Finding the capital to kick-start your business – invoice financing

Starting a small business can be one of the most exhilarating experiences a person can undertake, which is in part due to the risks and challenges that stand before you. Once you’ve made the decision to tackle the challenge and begin your journey, it becomes quite urgent for you to be able to get your hands on a lot of capital. Unfortunately, not many people share the same enthusiasm that you have with your business and won’t be eager to hand over their funds to help you out. But why is it easier for big businesses to receive massive loans, whilst your smaller loan is mulled over by the big banks?

Bigger businesses are less likely to fail

How has a business grown big? By being successful. Successful businesses generally equal a healthy cash flow. With clear profit results, it’s a lot easier to convince a bank to lend you money. It’s like going to a horse race and having an untried two-year-old take on the defending champ. If you were a gambler, you would go with the tried and tested choice. At the end of the day, as exciting as a new talent is, potential doesn’t mean bills will be paid on time.

Fixed Cost

One of the problems that is completely out of your hands is the cost associated with a loan. Some of the costs are the same, whether you are borrowing a hundred thousand or a million dollars. Because of this, obviously a bank’s margin will be higher on the larger loan. This one is completely out of your hands, and we wouldn’t recommend you borrow more just to appease your bank.

Expensive evaluation

It is much harder to obtain a small business’s records for analysis. This could be because they haven’t been well kept, aren’t available to the public or aren’t exceptionally flattering. Without a certain degree of transparency, you are again deemed to be an excessive risk, simply because the money lender doesn’t know what it’s getting itself into. This factor you can control, but it may not help you if the numbers aren’t on your side either.

Even if you do manage to secure a loan, the process is nowhere near as quick as a larger competitor. This is why more and more small businesses are looking to marketplace lending, peer to peer lending or debt crowdfunding as their new solution.

Leveraging invoice financing to fuel business growth

Cash flow can make or break a small business. You don’t have hundreds of other customers to fall back on to pay their invoice and get you out of a tight spot. You need all of your customers to be pulling their weight, and paying their invoices as they become due. That’s in an ideal world, and more often than not, the business world is not ideal. You have to be ahead of the game and think outside of the box to get your hands on your hard earned money to grow to your full potential. This is where debtor or invoice financing comes into its’ own.

You can rely on your sales

Big businesses gain their security through their assets. Their multimillion dollar property would be the most obvious example. You don’t have that (yet) so your sales really are the life blood of your business. Relying on your own hard work, rather than a non-current asset will grow your business at the appropriate rate for you.

Your business grows with you

When businesses survive the initial startup, they can fail in the growth stage. Success can allow a bank to lend you too much money, which can prove to be too much of a temptation for some. Invoice financing controls the growth at which you are expanding. You don’t have to predict growth; you can only expand as your bank account does. Invoice financing is a much safer option; especially if this is the first time you’ve created a startup. Invoice financing doesn’t mean you have to give away your customers. Your customers will realise that you are funding your business and still you as the supplier. A good invoice financing solution will result in improved customer relations as there is more communication with them by you and the invoice financing solution provider.

You don’t have to offer discounts

A strategy many businesses utilise to guarantee early payment is a discount. You are essentially underselling your product in exchange for an earlier return. With debtor financing or invoice financing, you’re guaranteed the cash flow, and can now afford yourself the luxury of time to receive full payment. This way you are not undervaluing yourself, and receiving the full payment which is rightfully yours.

Personal relief

This one is possibly the reason that will allow you to sleep a lot easier at night. Your personal property won’t have to be used to help finance your tougher times. If you’ve had an exceptionally busy month, which will take a few months to recover all of your payments, two months can be a very long time for your business to live on promises. Instead of having to delve into your own pockets, your invoice financing will leap to your rescue, and ensure you live to fight another day.

Don’t go for a quick solution

When you start looking for invoice or debtor financing, what you are essentially seeking is someone to buy your invoices with ease, without administration hurdles and most importantly at a competitive price. You may find that there are many different solutions that may look cheap at the time of offering, but when you take into account service fees, selection criteria and the short-term nature of their financing, you will find there are only a few offerings that make sense. What makes marketplace lending or peer to peer lending solution of debtor or invoice financing attractive is that you set the term, the rate you are willing to pay and also there are no hidden fees. Your investors are your peers, not some large multinational that may leave you when the times change or they have a restructure or strategy rethink. With marketplace lending you get to say these are my terms and invest now to take advantage of a great opportunity, not what are your terms and can you please lend. More importantly, marketplace lending sets you up for the future because you build an investor base that supports you in your business.

Administration

The biggest downfall of many small businesses is that when they start out, they have only a few people doing tasks or they do it all themselves, but as they grow the administration tasks expand and leave these people bogged down with administration tasks. This is where Marketlend, a well establish marketplace lender also known as a peer to peer lender, not only assists you with the improved cashflow with debtor financing or invoice financing, but also handles all the collections, payments and legal processes.

For more information check out  Marketlend  or call them on 0280066798.

The Falling Australian Dollar

When many people think of the idea of a “weaker” Australian dollar, they seem to panic. It’s spread all over the media and positioned as if it was a recession or natural disaster. For investors, the issue is working out the consequences of a falling Australian dollar and the benefits. But first, let’s find the root of the falling Australian dollar, and work upward from there.

 

So, what are some of the possible reasons for a falling Aussie dollar? It isn’t a straightforward answer. It is a sum of certain things happening in the global macro economy over the last few years. The first possible reason is one to do with monetary policy. Many large nations across the globe took part in aggressive quantitative easing over the last 6-7 years. When we increase the volume of a currency, the relative buying power or value of the Australian dollar increases.

 

In addition to this, as growth slows in China, we see a contraction in demand within the commodities market; leading to a plummet in the price of iron ore.

 

A weak Australian dollar isn’t only bad news. The Australian dollar’s strength over the last few years has resulted in a loss of competitiveness within the global economy. A weak dollar should give back some of our much needed competitiveness and contribute to an increase in the volume of net exports. Sectors like tourism, international education, and foreign investment will experience a boost, whilst many of our domestic importers will feel their belts tighten and prices increase.

 

So what’s the market like for an investor? Commodities are not in the greatest place right now, they are sliding down and don’t look to be picking up in the next few weeks. You’ll probably see an increase in demand for domestic goods, instead of buying online from overseas. Companies that rely on exporting overseas and catering to Australian consumers as well are the most attractive investments in these times. The easiest way to do that is through P2P (marketplace) lending, where the borrower is a private company, it’s hard to invest into private companies without connections, and certain Australian marketplace lenders offer investments into lucrative corporate opportunities.

 

In conclusion, a falling dollar isn’t a bad thing at all. It’s probably good news for us right now; there are much bigger fish to fry within the Australian economy. Most diversified portfolios will be able to sustain themselves through this period of economic down turn.

 

Leo Tyndall, CEO of Marketlend,  a P2P lender, Marketlend at marketlend.com.au.

This is not an advice, and any investor should seek independent financial advice prior to investing.

Marketlend was interviewed recently by Canstar to discuss its business and what makes it different in peer to peer lending in Australia industry

Peer to Peer (P2P) lending, sometimes called Marketplace Lending, has been around in Australia for several years, but has only just started to take off. Marketlend, a wholly owned subsidiary of Tyndall Capital Pty Ltd, is one of the newer players to market and we caught up with CEO Leo Tyndall for a quick Q&A. See the article at here .

Q: Why can P2P, or Market Lending, provide a better solution to the borrower?

A: Simply put it gives the borrower direct access to investors. In response to your question:

1. It diversifies the lender base for the borrower enabling them to be able to reduce their reliance on the risk appetite of a lender;
2. It offers the borrowers the ability to build their own investor base for future bond or equity offerings;
3. It gives borrowers flexibility in the terms of their loan;
4. It provides the ability to the borrower to offer security that is not centralized around property real estate;
5. In the case of Marketlend there is flexibility to the borrower in the type of product it can obtain, either line of credit, debt finance or inventory finance;
6. It removes a lot of the additional transaction costs by enabling the borrower to bypass the middlemen and go to the capital markets investors to get money and
7. It enables the borrower to get lenders to understand its businesss.

Q: Why can it provide a better solution for lenders?

A: For lenders, it offers:

1. High returns;
2. Direct access to the borrower;
3. A structured environment that gives them analysis of credit, loan management and collection facilities;
4. First loss protection in the form of insurance or cash collateral support;
5. Real time reporting and
6. Transparency.

Q: Does it provide access to people who otherwise could not get a loan?

A: Marketlend will not lend to borrowers who are unable to get credit elsewhere. Marketlend and the investor can see how many queries a borrower has made, and it is not a lender of last resort. As Marketlend invests with you, it will not offer a listing on the marketplace that it is uncomfortable with the risk profile for. Furthermore it will not list or invest in startups or borrowers with defaults.

A: Can borrowers expect better priced loans than through traditional lenders?

Q: When a comparison is made for business loans not secured against property real estate, trade credit or debtor invoicing, it is definitely cheaper, varying between 4-8% in some cases.

Q: How do you manage the investment risk for lenders?

A: Other than the fact that investing in a term deposit has the backing of a rated bank, with insurance and cash collateralization, we would argue that the only increase in risk is the infancy of the industry and lower performance history, to date we have had all loans paid on time and no defaults.

Q: What is the approval process for a loan? How long does it take?  Is it faster than traditional lenders?

A: Approval process is as follows:

1. Borrower enters his details through a website application form on marketlend.com.au;
2. After a 10 page completion, he either electronically signs his application or prints his application and returns the signed application back to Marketlend;
3. Our credit officers are notified of the completed application, they will assess its merits, and determine whether to forward it  assessment through the grading model or reject;
4. Prior to grading, the application, the financials will be assessed by chartered accounts, and a report provided to assist in the grading model;
5. The application is then put through a grading model, which is an automated model that takes approximately 65 factors into account to give a result as to the likelihood of the repayment of principal and all interest to the lender;
6. After the result, the borrower is contacted to advise his grade, expected rate of interest and a commentary is prepared based an interview with the borrower about his business
7. A listing is then put on the marketplace, where investors can bid on the loan
8. This process usually takes around 12 hours, and as it is small business lending, I am told by brokers that this is quite quick and faster than the banks.

A: What risk profile of investor, in your opinion, is suited to P2P lending?

Q: Investors suited to the platform are investors seeking strong returns, with transparency. The investor must understand that this is not a bank, and that the industry is still young. We find we get investors from all areas, and it is the fact that they are disclosed all the facts that they can make their own assessment and chose different risk.

The Greek Economic Crisis and Peer to Peer Lending

Commentary
The Greek Economic Crisis:
Greece has experienced a tremendous amount of attention, after the strenuous and frustrating months of negotiation between creditors and the Greek Government have come to a crescendo.
Creditors had given Greece another opportunity for a bailout, under the provision that strict austerity must be practiced. Alternatively, Greece could vote ‘no’ to these provisions, and default on these loans.
The Greek Government put its decision to a referendum. One side, led by the opposition leader, was ‘Yes’, we will adopt austerity and accept the bail-out, and on the other, campaigned heavily by the Greek Prime Minister, was ‘no’, which risks default and exit from the euro-zone.
From the moment that the votes were rallied, and a resounding majority voted ‘no’, Greece had stepped into uncharted, yet dangerous waters. It has an opportunity to create history, and hold its own destiny in its hands, a dangerous, yet empowering situation.
Businesses and institutions are struggling to manage, as imports become increasingly harder to obtain, the entire country is strapped for cash, and more importantly the political effects of default will soon resonate throughout the euro-zone, potentially leading to Greek exit. This has led to shockwaves in the world economy, as the Australian dollar fell to a six-year low, and almost all major economies were negatively affected.
Investors have a big question mark over their heads. What does this mean for them? The Greek Economic crisis highlights the importance of independence and information in investing. Investors should know where their money is going, and it is very easy to lose sight of this idea when you are investing.
Peer to peer lending platforms, like MarketLend, and other P2P lending hubs show the importance of this idea. Banks, Governments and Politicians are not always secure, typically not transparent and it is the unknown that seems to surprise us.
Statements we are hearing from super fund participants are “I didn’t know my fund was at risk, or took risks in countries where I would not invest”. To a lot of those funds, the answer is simply it is all interconnected. But how do you know?”
Investing and transparency should go hand in hand, so that you can invest knowing the risks. It’s in situations like these, it comes to be known that directly investing is favourable because you can know your risk. Peer to peer lending offers such investments.

Demand for Working Capital Business Loans is staggering – 7.1M listed within weeks, with another 1M in pipeline

The obvious need for working capital business loans in Australia is evidenced by recent demand from the newly launched only Australian business peer to peer lender, Marketlend.

Within a month, Marketlend has  7.1 Million loans listed on the marketplace from borrowers with strong credit and significant asset positions, and another 1.2Million in the pipeline. It is obvious that the need for working capital business loans is not filled by the major banks, or corporate credit providers.

The borrowers are strong corporates who seek to improve their bargaining power with suppliers or consolidate debts that are charged at rates in excess of 20%.  Without the security of property collateral, competing products to Marketlend are corporate cards or expensive factoring solutions that are limited by high interest rates or limit to the lending amount.

Investors – Self Managed Super funds and others

With a burgeoning Australian self managed superannuation market looking for yield, it is a no brainer for these investors. Marketlend provide a stringent credit and rating process, and offer investors net returns between 10-14% dependent on the risk. A personal property security interest is created over the supplies and the business, complimented by director’s guarantees. This is fully transparent and accessible to the investor.

For the borrower the ease of an application process that takes less than 10 minutes to complete, with approval and listing within 1 hour, there are few competitors in this space.

“These are borrowers  have bank facilities, and strong credit performance but seek for an alternative for their working capital that offers transparency, speed, reduced finance and administration costs. We return to the borrower the ability to bargain with its suppliers by paying them overnight, and to the investor, a strong yield that is stable and easy to collect” Leo Tyndall, Founder of Marketlend.

Financial System Reform – Recommendation 18- facilitate crowdfunding for debt – SME finance – Marketlend well poised for the future.

Financial System Review – click for the full report

Government should continue its current process to graduate the fundraising regime to facilitate securities-based crowdfunding. This would enable entities to make public offers of securities to a potentially large number of people (the ‘crowd’). The risks associated with crowdfunding investments would require some adjustments to consumer protections, including capping individuals’ investments and clearly communicating the risks.

Government should then use the policy settings for securities as a basis to assess wider fundraising and lending regulation to ensure it facilitates other forms of crowdfunding, including peer-to-peer lending.

A range of crowdfunding models are emerging globally. Crowdfunding facilitates the funding of projects or businesses, where small amounts of money are raised from the ‘crowd’ via an online facilitator (or platform).⁶⁸ Financial crowdfunding models include:

• Securities-based crowdfunding, where the ‘crowd’ invests in an issuer in exchange for securities — either equity (crowd-sourced equity funding, CSEF) or debt.⁶⁹
• Peer-to-peer lending, where an online intermediary facilitates lending between individuals, often in the form of unsecured personal loans, potentially to fund a business.⁷⁰

Objectives

• Graduate fundraising regulation to facilitate innovations in fundraising emerging from new technologies and ensure policy settings are consistent across funding methods.
• Provide firms, particularly small and medium-sized enterprises (SMEs), with additional funding options.

 

Financial Reform Recommendations for allowing the development of crowdfunding options for business to access

Article by Neil Slonim – Financial Reform Report released on 7 December 2014

If adopted, the financial reform recommendations made by the team headed up by businessman David Murray could usher in some of the biggest changes to Australia’s banking system in recent history.

The recommendations are broad, but the key ones impacting small business are those calling for super funds to drop their prices and the government to relax rules around governing crowdfunded equity.

The big banks will be required to hold much more common equity capital against their mortgage business if the inquiry’s recommendations are adopted, while financial planners would need to hold a relevant tertiary degree and be able to prove their competence in managing superannuation.

The inquiry has recommended a ban on self-managed super funds borrowing to buy assets and says the corporate regulator, the Australian Securities and Investments Commission, should be granted more power to crack down on white collar crime.

Numerous professional bodies expressed their support for the recommendations yesterday, including CPA Australia, whose chief executive Alex Malley said in a statement that the report “addresses some of the fundamental issues facing Australia’s financial system and signposts some of the critical work that needs to be done”.

“Recommendations for allowing the development of crowdfunding options for businesses to access, the establishment of a new ‘innovation collaboration’ and an emphasis on removing unnecessary regulatory impediments to innovation all have the potential to help business prosper,” said Malley.

However, SME banking expert Neil Slonim says that the 2.1 million small Australian businesses have missed out.

Slonim, who heads up advisory firm ‘The Banking Doctor’ told SmartCompany the report’s lack of specific recommendations relating to the SME banking sector is “disappointing”.

“There was really nothing specific in the 44 recommendations that related to SMEs and startups, other than a generic statement that the inquiry wants to encourage the development of crowdfunding and peer-to-peer lending, which would potentially give SMEs more funding options than they currently have,” says Slonim.

“But other than that, there is really very little if anything else in the inquiry that would give SMEs hope they would get better access to funding.”

Slonim says the two key banking issues facing SMEs are a lack of access to finance and the need for greater competition between the big four banks.

“The inquiry makes some recommendations that would level the playing field between the big four banks and smaller providers of mortgage finance, which will help the consumer sector, there is nothing similar for SMEs,” he says.

“There is a lack of genuine competition between the big four banks, which control more than 80% of the marketplace, in an environment in which it is very difficult for smaller players to compete for SME business.”

And while the Murray report recommends that the government extend protections from unfair contracts for SME loans, Slonim says that “assumes” small businesses are able to sign a contract with a lender in the first place.

Slonim believes it is likely the government will adopt most of the recommendations contained in the Murray report, but says there will be another period of consultation with Treasury before the government officially responds at the end of March 2015.

“Joe Hockey will now be lobbied by all and sundry, particularly the banks” he says.

Marketlend – New Theme Picture

Marketlend new theme picture

We have also have established our new theme picture, meaning new kids shining light on a stagnant banking industry

Trust Documents executed by Trustee, Marketlend, Tyndall Capital and Jardine Lloyd Thompson

In a first for the peer to peer industry, Marketlend from inception is operating a securitisation trust structure to offer investors the most secure and protected funding opportunity available.

Master Trust Deed, Security Trust Deed, Sale and Origination Deed, and Back Up Servicer Deed were executed on 24 December 2014.

AET, a wholly owned subsidiary of IOOF, who manages approx. 123 Billion of wealth funds in Australia was appointed the Trustee, and Security Trustee.

Jardine Lloyd Thompson, listed on the UK stock exchange will perform the role of back up servicer.

“We have structured our lending platform with a solid foundation, that will be built to last. From the mom and dad investor to the large financial institutional investors, all investors are protected and purchase a secured bond where the underlying asset is a loan in the trust or part thereof if the investor wishes. These notes will have the traditional trading aspects to them, and whilst liquidity take a while to build, the notes are tradable instruments in the capital markets.” Leo Tyndall, Founder and CEO.

An interview with Marketlend CEO – Leo Tyndall

Interview with Marketlend CEO – Click here to listen

 

Marketlend is a new Australian lending platform founded and led by Leo Tyndall.

Launched in the same week that the Financial System Inquiry (FSI) of Australia released its “blueprint” for the Australian financial system for the next ten years, this new platform shows how innovation in financial products is  global.

We were lucky enough to get a chance to speak to Leo in the week of his launch.

Leo provides us with an interesting insight as to how Marketlend is a necessary addition to the Australian business finance marketplace and what makes its offer so distinctive.

The FSI report is generally encouraging towards crowdfunding and new and novel approaches to finance and we can be sure that where Leo’s team lead others will certainly follow.

You can stream the interview from here, our Podbean account or download it for later listening