This past week, Marketlend ran an investor townhall. Transparency is integral to how Marketlend operates. Our investors expect it and we are committed to delivering on this promise. The investor townhall offered a chance to roll up our sleeves and explore issues that matter to the investor community.
We dug down into the mechanics of how we return principal in the event of a problem loan and the integrity of the Marketlend platform generally. There was ample room for Marketlend’s Founder and CEO to field questions and the result was a really engaging and hopefully enlightening look inside the how and why of this aspect of the Marketlend platform. Click above to have a listen.
Lending to SMEs to support sustainable growth is what Marketlend CEO and Founder Leo Tyndall is passionate about, and he wants his company to lead the way as a responsible organisation that treats lines of credit with care and delivers transparency. Click to video to here more or scroll down for a transcript of his latest chat.
So when you say giving them a line of credit, and pay them straight, no, we don’t, we pay their suppliers. So, we pay their suppliers, and we pay their suppliers based on invoice of the verified and checked, and those invoices are then presented to us, and then we pay that supplier, and then when they actually get the goods, they then sell them, and obviously then they pay us in the 90 days after that.
So, and even if our line of credit, uninsured which is a product, which is a little bit similar to like a loan, but it’s a limit, we pay the supplier. So, we allow them to pay suppliers, or services, and what we provide is a line of credit. It’s a little bit similar to an overdraft: we give them a line of credit, it’s renewable, and reviewable every 12 months, they pay it on time, investors are happy, now roll the facility over, and they can keep it going. And, the point being, is that they can then run their business knowing that if they get a big order, they’ve got this line of credit they can use, if they don’t have many orders, they can close the line down, or can reduce it, so there’s that flexibility there.
And that’s not what they’ve got when they go and get personal loans, or I call them personal loans, but S and E loans, ’cause they’re just pure loans.
Yeah, correct. yeah, and the other reason why we do that, is that we don’t really like the idea of giving people pure cash, because it could be used for alcoholism, gambling, and a few other, we’ve seen one before, where they present an invoice and we went to pay it, but before we paid the invoice, we looked at these bank statements and noticed that he was actually gambling. So, we said, “Look, we don’t think we’re gonna pay that.” Because, obviously, we look at their bank statements, and he was probably gonna use the cash that we paid for the goods, with his own income so he could do some gambling or whatever he was gonna do.
So, we look at their bank statements, so we have a number of steps, so, first thing we do is we actually look at their ability to repay the debt for debt servicing ratios, and they’re financials, after their financials we give their bank statements, we then review their bank statements and look at the entries on the bank statement. We have a team member whose only job is to look at those bank statements, and what he’ll do is, he’s a risk officer, and he’ll identify any unusual activity, but also the ability to repay, because the financials may not match the bank statement as well.
And then in this case, what we did was we saw that there was a number of gambling sites that were being paid, and even though we weren’t providing him the cash, we identified that that was a risk, and we didn’t want to lend to him.
Funding is often a constant concern for SMEs. To fund a business doesn’t just mean finance and there are creative ways to bring money in the door that can support growth.
What are your best options for funding? Here are some “outside-of-the-box” options that can help.
Presell Services or Products
This is a creative way to fundraise when your business is in the early stages. Get your elevator pitch ready for anyone who wants to talk about your new project. If you plan to offer a consulting service, web security, a new line of grocery stores, offer a presale.
A presale means you receive money before your grand opening. Give your customers proof of purchase, such as a coupon, to be redeemed when the business opens. Customers love to help a business they believe in and are happy to exchange a proof of purchase for something new.
This works best if you can show proof that your business is more than a concept. Blueprints for your new building, a working model, or an online store all help push presales.
Approach Angel Investors
If you have a tech startup or product idea that will disrupt a market, try pitching to a group of angel investors. If you get an offer of money, it will come with the caveat of equity. Angels want to take part in any business they fund, so they choose businesses they know well or like. This can work to your advantage if you are open to hearing a new voice as you build or expand. However, if you don’t want a board or individual looking over your shoulder or combing through your books, this might be a detriment to your growth.
The key to approaching angel investors is use your connections and your reputation. Start by asking people you already know if they have any connections to the investment community and use those familial or social ties to build your network. When you meet a new investor because a mutual, and trusted colleague introduced you, the prospect of getting money is much greater.
If no one can give you an introduction, try a cold email or a message sent without the buffer of a personal introduction first. Research the investor you want to talk to and see what kinds of projects they prefer. Stick to those who are active in your industry and go for it.
Once you take meetings, be sure to be as transparent as possible with your numbers. Any exaggeration or dishonesties will paint you in a negative hue and keep potential partners at bay. Be yourself and let your business speak for itself to win people over.
Crowdfunding sites like Kickstarter let you set a financial goal, break down your vision and timeline for visitors, then market yourself to potential donors. Each campaign has a set number of days to raise the necessary money. If you reach your goal, you get the money deposited into your account and the site asks for a small percentage of what you earned. If the donations fall short, you receive nothing.
Successful campaigns start long before they are up on the crowdfunding site. This requires marketing videos, a large following and tons of buzz over what you have in the works. The most successful campaigns have money promised to them before the timer ticks down.
Once the campaign is up, it can be a full-time job to manage the social media and email marketing to bring in additional money. You will also have to organise rewards for donors that don’t gobble up all your new money but still make it worthwhile to give. A campaign requires creative marketing in all outlets in order to succeed.
It’s a lot to handle, but people make real money on these sites. If you are a master of marketing, this is a good option.
Australia’s government offers a variety of grants for small businesses, but expect a complex application process and very specific criteria for funding.
Grants are available at the state or federal level and are listed online. They tend to favor specific projects or a stage of business, such as funds to start or funds to hire as you expand. Research grants ahead of time so you know what to apply for throughout the year. Tailor each application to the specific grant, don’t rely on generic forms and answer each question with clear, honest responses.
Some of the categories for grants include expansion, green business or disaster recovery. They’ve been created to help solve problems as opposed to a basic round of funding. Check out the whole list and mark which ones line up with your business or future undertaking, then mark due dates on your calendar. If you can talk to someone who received a grant in the past, ask for advice on how to present your problem in the best way possible.
Before you Finance
Still think you may need finance? Here are some things to avoid to help you make finding finance smoother and more likely to lead to success:
- Not working with an accountant – Many business owners turn to bookkeepers, but an accountant will keep your statements in order and all your numbers on point.
- The wrong partner – Investors want to see dynamic teams that balance each other out and have a clear vision with a solid plan to put it in place. Don’t waste time with someone who is unprofessional or doubts your vision. Find a partner who shares your vision and knows exactly how to help you succeed.
- No plan for the money – Anyone who funds you wants to know your plan on how to spend it. Have all of that in place before you borrow or accept the grant.
- Waiting to ask – Plan out your search for finances early. The decision to put off the search for finances can put unnecessary stress on your business. You know what you need to stay functional, so don’t hesitate to ask for it
As a former Regional Commissioner NSW, Australian Securities & Investment Commission, Chris Van Homrigh has brought his deep background in market regulation and best practice to the Marketlend team over the last year. At Marketlend, this knowledge and experience has helped support the continual refinement of a first-of-its-kind lending platform, and our constant focus on transparency and delivery of value for investors and SMEs. If you prefer to read Homrigh’s thoughts, you can scroll down for the transcript.
Well, I mean, if you look back at what ASIC looks at, it primarily has two primary objectives: one, is to have a fair and efficient markets, and the other is about having confident, informed consumers, and investors, or financial consumers, and investors. So, from a regulatory perspective, working on the investors’ side, it’s about knowing what we need to disclose to investors, the level of detail.
Marketlend, as you know, is quite transparent with all the information we provide. So, when we establish a facility with a borrower, all the information that we have, with respect to that borrower, is basically passed through to the investors. So, disclosure is a big tenant. Asset focuses a lot on disclosure, so it’s being consistent, and very apparent with the disclosure.
Again, being a lending business, there’s always loans that you don’t think are going to go into arrears, but they’ll go into arrears, or potentially go into default, and again, it’s about getting the information in a timely manner across to the investors, and the right level of information.
Now, of course we do have some investors who want more information than others, but, again, it’s about getting that information, and answering their questions. Sometimes with the legal process where things go into arrears or in default, that can be protracted. Investors are always concerned about getting their money back in a timely basis, and obviously in return they get for making the investments.
Need some general tips on improving your small business’s health –especially when it comes to getting finance? This week, we have the pleasure of welcoming Bessie Hassan, who shares our drive to educate the market and help small businesses. As the Money Expert for finder.com.au – the site that compares virtually everything – Bessie is an experienced commentator who often appears on national radio, TV, and throughout online publications sharing her best money-saving tips and property advice. Bessie is passionate about empowering Australians to make better decisions, whatever it is they’re looking for.
Whether you’re an entrepreneur looking to start a new business from scratch or a seasoned owner wanting to expand your business offshore, you’re going to need some capital at some point. To get your hands on this extra dosh, it’s likely you’ll need to take out a business loan. In business, time is money and money is time, so it’s worth knowing a thing or two about how to apply for finance the right way.
Here are four ways to improve your chance of getting the “green light” for your business loan.
1. Check your credit health
Although we’re told to keep our business and personal lives separate, this rarely happens for business owners, as lenders often look at both your company and personal credit scores before lending you money. There’s no point applying for a business loan if you know you don’t have a great credit history (either personally or via your business). Being patient and working to improve your credit score before applying will give you a better chance of securing finance.
Your company’s credit score will be impacted by how long you’ve been in operation, your credit enquiries, Personal Property Security Register (PPSR) registrations and director information. You can improve your score by paying your bills on time, keeping balances low on credit cards and communicating with your creditors. Your personal applications for credit and accounts held in your name may also be checked to help the lender determine your risk profile. Being happy with your credit score and taking steps to improve it will put you in a strong position to begin your finance search.
2. Have a solid business plan
Lenders are most concerned about your ability to repay the loan over time. They’re not going to fork out and invest in your business if they doubt you’ll be profitable and successful in the future, so they’ll want to see proof-points that your business can stand the test of time.
A thorough business plan will make it easier for you to communicate your business vision, strategies and goals to lenders. Including information about how the money will be used and some cash flow projections will show you’re serious about your business and confident in your ability to repay the loan.
3. Know what type of loan you need
There are many different financing options available for businesses. To be eligible for most, you’ll need to have an Australian Business Number (ABN) and for some you’ll need to have been operating for a certain period of time (eg one year for most unsecured loans). You also might need to generate a minimum amount of annual turnover, which can range between $50,000 and $200,000 depending on the type of loan you’re going for. To decide which option to take, you’ll need to understand why you need the capital in the first place.
For example, if you need some additional funds to meet daily business expenses, you might want to take out a business credit card. Remember you’ll need to compare providers to score the lowest interest rate you can. If your expenses can fluctuate (maybe on days when you purchase stock) then consider a business overdraft account, which allows you to overdraw on your business account to a certain limit.
There’s no point approaching a lender for equipment finance if you’re just going to spend the money on inventory – it’s important to do your research so you apply for a product that will complement your needs.
4. Don’t leave it until the eleventh hour
All businesses need money to operate so if you’re short on cash, your business’s lifespan may also be short. If you know you’re going to need extra cash in the near future, start researching your loan options now! Approval for a loan can take anywhere between a few days and a few months, depending on the type of finance you’re applying for. It’s important to have some time up your sleeve so you’re not rushing the application and can wait out the approval process (without going bankrupt in the meantime).
When embarking on your search for finance, it’s important to practise due diligence to ensure you take out a loan that will suit your business needs. Understanding your credit history, having a solid business plan in place, researching your finance options and being prepared are simple ways to improve your chance of being approved so you can make your business vision a reality.
The Banking Royal Commission has opened many people’s eyes to the need for greater transparency in the financial sector. It has also shed light on how challenging it has been for SMEs to get funding. Marketlend CEO and Founder Leo Tyndall breaks down why the push for greater transparency and accountability from the finance sector helps cutting edge platforms like Marketlend which have these values built in. Leo also suggests that banks are now shying away from SME lending, making funding sources like Marketlend even more important. Click play to hear what he has to say or scroll down to read a transcript of his interview.
Look, I think the faith in banks generally has fallen away a little bit. The credibility definitely has been damaged, and investors are now looking at alternatives, especially in the investing side. They’re actually looking at who’s out there, who’s actually lending, right, sort of brought up an article recently where they said they saw a serious influx of more investment capital.
We look at high net worth individuals or sophisticated investors or experienced investors, so we’re in a different bucket than, say, [others]. But, we have found that our investors are definitely willing to put more money to work with us, and are looking at our businesses and going well, I can see everything you’re doing. The big thing with us is transparency: they can see everything that’s being done. The Royal Commission, I think the best thing about it, is, it shows us a lack of transparency. It shows that there’s things going on that you just don’t know what the bank’s up to.
And I mean, it depends on the press, who’s saying what. But the reality is that if people are charging fees for people who are no longer around, and they’ve been running forwards and the like, I mean, the whole faith in the banking system is really faint.
Now, I must say, that I would’ve said that there was a common thread, I think in the economists around post GFC, that banks will become more like utilities, and I think with the royal commission a few others, the banks are gonna get less and less money for lend, and it will be that there will be more like utilities without taking the money paid out, or receiving paid out, and you won’t see that type of lending that you saw in the past. And we are seeing that banks are very, very, reluctant to lend at the moment.
We’re seeing clients come to us, who, typically, would’ve said the bankers actually would’ve given them more facility, and we’ve also spoke to banks, and they’ve told us similarly.
Your small business is thriving. You’re growing. You need to hire, but unsure where to begin and what resources are available. The right hire can boost your business productivity and profitability. The wrong hire can be an expensive and time-consuming mistake. Here are a few best practices for hiring employees for your small business.
1. Define the position
Before you set out to hire, ask yourself:
- What challenge is my company grappling with that a new hire could solve?
- Is this a long-term job or a temporary, contract position?
- Am I open to a remote hire?
- Can I afford a new person without damaging my bottom line?
Research each question and talk with your team. A remote hire is cheaper, but your team might struggle with the distance. A contract worker can also be a cheaper option, but if your company is growing, you may just need a full-time on-site staff member. Evaluate the full cost, including salary, benefits, taxes, workspace and equipment before you make your decision. Requirements can vary widely across regions and countries. Australia, for example, has a range of requirements that can get complicated very quickly, the Government’s Fair Work Ombudsman has a page devoted to this that includes a Pay Calculator.
2. Set your hiring budget
Hiring can be an expensive endeavor. Before you advertise the position, make a spreadsheet with the following categories:
- Job boards and advertising – Note the cost of each post per site. If you have a premium membership that lets you post for free, write the zero.
- Assessment – Skill tests run by an external company will have a flat rate per candidate. Multiply the number of applicants you want tested by the exam price.
- External recruiting – Consider outside organizations who can search and hire for you and record the cost. Remember recruiters typically take a percentage of the employee’s compensation, but this amount will usually be refunded through a “claw back” fee if the hire doesn’t work out in an agreed period of time.
- Human Resource hours – Multiply the hourly rate of each person on your hiring team by hours spent on resume reviews, interviews and follow-up.
Keep in mind that the cost to recruit is unpredictable. Record your actual costs after the process is complete and keep an eye on your hiring budget from month to month.
3. Write the Job Post
A good job post should be a clear description of the job. It should entice candidates with the essence of what the company has to offer with these basic elements:
- A clear title for the position
- A thorough overview
- The desired qualifications or experience level
- Information about how to apply
- For local hires, try Seek
- Quality remote hires can be found at WeWorkRemotely, RemoteOK, and FlexJobs
Check your job ad on any board or website to make sure your description is displayed properly and any associated links work when clicked.
4. Make the Most of Social Media
The typical company today has a minimum of seven social media accounts. Make the most of these spaces and attract your next employee with the contacts you already have at hand.
- Focus on what sets you apart – draw candidates in with industry news, updates on projects and photos of your team. Give them a peek into your company before the official application.
- Highlight value – think about what your employees love about their work. For example, UPS tells potential hires they can “Deliver wishes” as an employee. Play up the best qualities of your company and share them on all your social channels.
- Find niche networks – look for the online forum specific to your position. If you need an SEO expert, you want to post on Freedom with Writing. Developers prefer StackOverflow while Moz is home to marketers.
5. Review resumes
Resume and cover letter reviews can be a good chance to get to know each candidate. Each is a chance to see how much care a candidate put into her application and what she can add to your company.
- Look at the big picture – Read through cover letters with care. Is this a form letter or a piece written directly to your company? Review the language choice and professionalism used in the text to make sure this person knows your industry. No cover letter? Move on.
- Think in terms of Yes/No questions – Does the candidate have the qualifications you specify in the job description? Can the candidate be trained?
- Red flags – Long, over-written descriptions that take up a lot of space, spelling or grammatical errors or general descriptive language that doesn’t really tell you anything, like “a leader” or “enthusiastic” are all red flags that should give you pause.
- Find your favorite – Take the applications you like best and start the next phase of the process.
6. Interview candidates
Good job candidates see the interview process as an opportunity to talk about the job, the company, and why they would be a good fit. An interview should be a comfortable, professional conversation. But be prepared with specific questions that will help you know whether the candidate meets your needs. Additional tips:
- Assess and test – Check for a skill match with technical questions or a skills assessment test as a part of the interview. This way you know how each person works and how fast they can produce.
- Keep a goal in mind – If you want to know how a worker interacts with authority, try “What kind of oversight would an ideal boss provide?” Autonomous workers will want an absent boss while collaborators prefer an accessible leader.
- Ask for questions – At the end of the interview, give your visitor a chance to ask you something. You want an employee who asks about future projects or milestones, has questions about you as a boss or office culture.
- Watch for body language – Look for moments when your candidate’s face lights up with enthusiasm or sits forward. These are signs of deep passion.
- Define your culture – Think about what kind of office you run. Do you value teamwork? Place a premium on collegiality? Or are you looking for a lone wolf who can just get the job done? Make sure your candidate fits your company culture.
- Hire people you like – Do you like the candidate? The interview should be an opportunity for you to see whether there is any professional rapport. You’re building a team, after all, that needs to want to work together. And you’re the head of it.
7. After the interview
Narrow down your choices to two to three candidates. Start with your top candidate and do your research.
- Fact check – Is the work history accurate? Has your candidate exaggerated her experience or invented a past company?
- References – Call them. Ask them to describe their professional relationship and be specific about why the candidate would be a good fit for the job. Strengths and weaknesses. Ability to work with people. Attention to detail and deadlines. Ask them what else you should know about the candidate.
- Other calls – Do you have mutual colleagues who might have insights on this person? These calls can be more helpful than the listed references.
- Keep in touch – Potential recruits with good skill sets will get snatched away fast. Maintain a correspondence with your top two or three and let them know they are still in the running.
8. Extend the Offer and Negotiate
You have your favorite, you’re ready to hire, now what?
- Act Quickly – Decide as fast as you can so you don’t lose your hire to a competitor. Aim for one to three days after the interview.
- Put the job offer in writing – the whole job and all the details. Include any policies your company upholds including sexual harassment, dress, extra work days or hours.
- Make the Offer – Schedule time to present the offer. In person is always best, but not always possible. Then, present it with enthusiasm! Make sure the candidate understands all the elements of the offer, both in writing and in your presentation.
- Set a Deadline for a Response – Give the candidate time to consider the offer, discuss it with family, etc. But set a deadline for a response.
- Negotiate – If the candidate wants to negotiate salary or other elements of the offer, be prepared. This is where your budget comes in handy. Be flexible, but know what your budget will allow you to offer.
- Make the Hire – If the candidate accepts the position, you have a new hire! If not, move on to your next resume and keep going.
You did it – you’ve made a great hire! And you now have a bank of resumes that might come in handy for future hires. Be sure to save them and note the ones that stand out.
Thank each of the candidates you interviewed with a personal call, if possible. Send email responses to all the candidates who applied for the position, thanking them for taking the time to apply and letting them know the position is filled.
The hiring process is a difficult one, for all involved. How you handle the candidates you don’t hire is as important as how you handle the ones you do. Your professional courtesy in this process will serve you well in the long run. You’ll likely be making more hires down the road, and word will travel about what it’s like to apply for a job with your company. Make sure it’s a good experience.
Running a SME is always a challenge and funding one can be particularly difficult. Marketlend Founder and CEO Leo Tyndall and his team are focused on delivering a more transparent and fair marketplace for SMEs. Part of this job is helping to educate the market to help SMEs avoid some of the pitfalls in the lending space. Watch below or scroll down for a transcript of his interview.
The problems there is there’s no long-term support to the SME industry. So, the typical loan and if you look at the last fintech report, they pointed that the majority of their lenders lend between six to eight months. For an SME, they need a lot longer loans, they need capital to be turning over regularly. They have growth or they have needs, and what happens is these lenders are firstly doing principle interest payments, it’s a short-term lend, it’s a little bit like what I would call a sugar high, it gives them money right there and then, but then it doesn’t set them up for the long term. The classic one is the … talking about the tea company, she’s able to deliver to Sydney Opera, but with … line, it would have been P and I and it would have drained her cash flow on a daily basis.
So the issues that seemed to be with the SME lenders is that they, themselves, probably still haven’t been able to get their heads around what the real risk is, so as a result of that, what they do is just go in quick and come out quick, and it is a case that they’re generally not interested in lending over about 50,000 dollars. They don’t want to go for higher, and part of the reason for that is if you set up a direct debit for say, 100,000 dollars, and you got back to the client and you say, “Look, here’s what you’re going to be paying per day,” the client may balk at it because he’ll go, “Well, that’s going to strain all my cash flow…”
Well, it’s not that they get away with it, it’s a need, it’s a demand thing, and it’s speed. So if you ring up tomorrow and you ask for a loan, and get (other firms), one of the others can give you a loan within 24 hours. We had a comment from one of our borrowers who was lending through us, and then they got a … loan, and they turned around and said, her husband actually did this, and her husband isn’t the finance guy, and she said it was so easy: just click the buttons and you went ahead and did it, and as a result of that, they caused him problems because we looked at the risk and said, “Well, why do you have this … loan that’s draining your cash flow?”
And it’s more that businesses don’t have time, typically, to look at their various options. They’re not strongly educated in that area of finance, and then they’re just looking at speed. They need to pay their next supplier, they need to pay their wages, and as far as they’re concerned, they’ll fix it up next day and it’s fine, and that’s their focus, and so it works okay for a while, but if you don’t have a very clear plan of how you’re going to pay it down, well, then the problem is it bites into your cashflow, and we’ve seen that happen a number of times.
ABC News just did a hard-hitting story on SME lending in Australia and they turned to Marketlend for some perspective on the question. In particular, they were looking for Leo’s thoughts on recent attempts by some players in the market to self-regulate amid general shortcomings around disclosing the true cost of loans to SMEs. Leo and the Marketlend team believe it’s absolutely essential that SMEs know what they are getting into when they seek funding and that there are no surprises.
Click here for the news story. Leo appears at the 5:25 mark.
Marketlend CEO and Founder Leo Tyndall wants his investors to know that no one applies for a loan on the site without a thorough review of their financials, and that transparency and responsibility –and ultimately care for the underlying businesses that borrow– drive Marketlend’s mission. In this video, Tyndall breaks down what his team looks for in a potential borrower’s financial profile. The key for Marketlend is the long term health of the businesses it lends to, because healthy SMEs thrive as businesses and as borrowers –that’s why assessing what is reasonable, fair and sustainable in terms of repayment ability is so critical. Click the video to hear about the process. Prefer to read? Scroll down for the transcript.
So, Marketlend requires at least one year’s financials. We look at their debt servicing ratios, we actually look at what it looks like before the loan and after the loan. We typically have a hurdle of 1.5% on debt servicing after the loan. We also turn around and we point out to the borrower that we’re doing a monthly charge, on the uninsured we may do weekly, but what we do, do is, we look at their ability to repay.
We don’t want a situation where we’ve advanced the money, and then they can’t pay us back. So what we’ll do is have a look at all their cash flows, we also look at, essentially, a new structure in the way of we look at their full cash flows, their expenses and then say, “Okay, what is their true flowing cash that they can afford to pay it?”
And we will go through their bank statements as well, so we will go through their bank statements, and for example, on a supply chain, we may turn around and someone says, “I want 100,000.” We look at their bank statements and say, “You couldn’t even pay 100,000 back to us on three months on the supply chain, so why would we advance you that money?”