National Australia Bank has entered the online SME lending market with the launch of the NAB QuickBiz Loan, which allows customers to borrow up to $50,000 in unsecured funding via a new online application process.
Developed by NAB’s in-house innovation hub, NAB Labs, the online platform uses financial technology to assist with the loan application process and states that customers will have money in their account within three days of NAB receiving their signed loan document.
The QuickBiz Loan carries a fixed interest rate of 13.85% for terms of either one or two years. The loan is repaid by monthly principal and interest payments and there are no application or ongoing fees.
According to Angela Mentis, NAB group executive for business banking, “in the early days of business ownership, small businesses often only require small amounts of funding – and many owners don’t have a property or other significant assets to secure a loan against. We’re responding to these customer needs, placing more emphasis on the strength of the business rather than traditional physical bricks and mortar security.”
Jonathan Davey, executive general manager of NAB Labs added the NAB QuickBiz Loan is “another example of the bank’s agile approach to meet customer needs”.
Meanwhile, Canstar’s research manager Mitchell Watson says “from NAB’s point of view this is a move to help stem any loss of low-risk customers to smaller, more agile competitors.”
According to Watson, “the advertised 13.85 percent does seem to be a fair interest rate”, given it is lower than the 16% being charged by the Commonwealth Bank’s Simple Business Overdraft. However, it should be noted that an overdraft is a more flexible and expensive loan product than a principal and interest loan.
What this means for your business
QuickBiz Loans are unsecured, although borrowers should enquire about whether personal guarantees are required. They should also check to ensure the 13.85% rate is based on the outstanding balance rather than the original limit. Any discrepancy would have been evident had the NAB website quoted the interest rate on an APR (annualised percentage rate) basis. Borrowers should also be aware that they could be up for costs if for whatever reason they terminate the loan before the expiry date.
An interest rate of 13.85% is at the lower end of the rates charged by the new breed of online lenders. Banks will always be able to offer cheaper loans to customers because of their lower cost of funds but while it is important, price is not the only factor SMEs consider when it comes to borrowing.
The biggest attraction of the online lenders is the ease of doing business and although there is little doubt that banks can develop software and systems at least as good as the online SME lenders, none of them will survive in this increasingly crowded marketplace if they fail to deliver on the commitments made on their website.
NAB says the QuickBiz loan product is launching in early June, although the website has already been up for several days. In fact, four days ago I applied for a QuickBiz Loan and the experience has been insightful in that the process is not automated, as it is with true online lenders where your application is made totally online. Rather this was an online enquiry. In addition it has not been quick. Having submitted answers to several basic questions about my identity and existing relationship with NAB, I then received the following message in an automatically generated email:
“Thank you for your enquiry regarding the NAB QuickBiz Loan.
“We are currently reviewing the information you provided us and we’ll be in touch shortly to discuss your application further.”
Four days later there has been no response. Of course there are always teething problems in implementing new ways of doing business but this experience re-enforces the importance of good execution. Banks have lots of great products and ideas but too often their execution lets them down.
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If the big banks really get their act together with online SME lending, it’s going to be tough for the new little guys to compete. But this remains a big “if” and in the meantime the new players are backing their ability to do better on product and service delivery.
However this unfolds, we are finally starting to see genuine competition in the SME lending market and that’s a great thing for those SMEs who for years have been missing out.
Neil Slonim is the founder of theBankDoctor.org, a not-for-profit online resource centre that helps business owners deal with the challenges of funding their business.