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A new peer-to-peer business lending platform has been launched in Australia to assist SMEs in gaining access to funding.
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New SME lending platform announced
04 December 2014
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8 minute read
UK-based online lending platform ThinCats has launched in Australia. ThinCats Australia now enables sophisticated and wholesale investors across the country to lend directly to SME borrowers – a viable alternative to traditional bank lending.
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The platform looks to exploit inherent price inefficiencies in current bank lending practices, influenced by heavy branch and staff costs, to provide a cost-effective funding solution for SMEs. ThinCats UK will supply the software, as well as initial training and ongoing product development and support to operate the platform.
ThinCats Australia's chief executive, Sunil Aranha, who has more than 25 years of international and local SME banking experience with Citibank, Commonwealth Bank of Australia and the Export Finance Investment Corporation in Australia, said the platform will allows Australian SMEs to bypass the current "restrictive" lending environment.
“We are offering SMEs in Australia, which borrow about $73 billion a year to finance their operations, an alternative to the very restrictive and high-cost lending of the major banks," he said.
“The vast majority of these businesses are hindered from growth by not having access to prompt and cost-effective funding to capture business opportunities as they arise, which is potentially available from Australia’s 400,000 high-net-worth investors and their super funds holding around $1 trillion in investable assets looking for better returns”, he added.
The system enables sophisticated investors to review and assess loan submissions made by businesses and make their own investment decision, setting the amount they wish to invest and the interest rate they wish to receive, typically between 8 per cent and 16 per cent per annum. Lenders can spread their risk by lending to multiple businesses at a price determined by the market, providing them with access to a fixed interest asset class which has traditionally been the domain of the banks.
The loan is funded by the lowest bidders, who get the interest rate they requested, while the borrower gets the weighted average interest rate, determined by the marketplace.
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