Business picks up for non-bank lenders

2014-07-18 00:00

SMALL business owners are among the many people who are increasingly turning to less traditional, non-bank lenders for finance.

“The second half of 2014 will see an increase in activity among less traditional, non-bank lenders,” said Gary Palmer, chief executive officer of Paragon Lending Solutions, a non-bank asset-backed lender.

This was because banks were struggling with regulations and often could not approve loans timeously for clients, Palmer said in a statement.

He said the strict regulatory environment had created many business opportunities for non-bank lenders.

“Out of all business sectors, small business has the biggest challenges in raising funding, with the least resources available to them,” said David Lewis, chief executive officer of Retail Capital.

Retail Capital is an alternative business finance provider that serves small business owners who accept credit and debit cards as a form of payment. It has advanced over R350 million to hundreds of businesses.

Lews said: “Despite what TV advertisements might portray, the small business owners’ typical experience of applying for bank funding is more like this:

• The bank approach to lending is driven by risk mitigation rather than understanding small businesses.

• No bank decision-maker has spent time with you.

• There has been no face-to-face interaction and no visit to your premises to understand the business.

• Only SMEs with perfect credit records and substantial collateral are approved and most applications from small business owners are declined.

• The application processes are geared towards bigger businesses and not tailored for small businesses.

• Banks require security in exchange for access to funding — many small business owners have probably already invested their securities in their business.

•It often takes three to four months for a bank funding application to be processed and money paid out.”

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