P2P lender RateSetter to move into business lending
The fintech innovator is now licensed for business borrowers as well.
The peer-to-peer lending space continues to diversify, with retail investors now being able to fund business loans through P2P lender RateSetter. The lender was granted a new licence by the corporate regulator to facilitate the funding of business loans by retail investors, the first of its kind in Australia.
While there are other P2P business lenders, such as ThinCats and Marketlend, already operating in the market, RateSetter will be the first opening its loans to retail investors. Both unsecured and secured loan options will be available, but the focus will primarily be on secured loans.
Speaking to the Sydney Morning Herald, RateSetter chief executive Daniel Foggo said traditional lenders weren't properly serving businesses in need of finance.
"Traditional lenders are rigid and formulaic in how they decide to lend – it's all about the home. We will look at a wider range of security options, including the assets of the business or personal guarantees," he said.
RateSetter's retail investors aren't going to identify whether they are funding a consumer or a business; they will specify their terms, the amount they want to lend and the interest rate. They will then be matched with the next suitable loan that's approved on the platform.
For borrowers, the interest rate would begin at 7.3% p.a. for a small business taking out a secured loan $30,000 for two years. Loans of up to $150,000 with terms of between six months and five years will be available.
The alternative business financing space is becoming increasingly competitive, with fintech opening the door for more innovative platforms and financing solutions. Fintech can offer small businesses solutions outside of the big banks, whether it be for higher approval rates, quicker finance or more flexible lending solutions.
While banks are moving forward with fintech in personal finance, they are lagging more when it comes to business lending. The Big Four all raised their business lending rates in March independent of a rate increase from the RBA.
Small business lenders are offering a range of solutions for small business, with RateSetter the latest innovation that is brought over from overseas (RateSetter's UK arm already facilitates P2P business loans). Some lenders, such as ThinCats and Marketlend, offer P2P business loans that are available to sophisticated investors, while others, such as FundX, offer invoice financing. Lenders such as Moula, SpotCap and Prospa offer short-term unsecured business financing to SMEs through online lending platforms.