Online payday lender Loan Ranger is negotiating with one of the US’s biggest online lenders to launch a business finance service early next year.
Online payday lender Loan Ranger is negotiating with one of the US’s biggest online lenders to launch a business finance service early next year.
The new operation will offer business loans of up to $100,000 through an online system that will take as little as 10 minute to assess an application.
Managing director David Brennan said the focus on business lending was a central plank of the group’s strategy to target lending sectors not serviced by the major banks.
Loan Ranger plans to fund the line-of-credit loans from its own balance sheet initially, but Mr Brennan said it could migrate to a peer-to-peer platform in the future.
“We will fund this initially from our balance sheet, like we’ve done with Loan Ranger, but if it becomes palatable for us and our investors to do it in a true peer-to-peer fashion, we will,” Mr Brennan told Business News.
“We’re going from short duration consumer finance to short duration commercial finance.”
The loans will typically be based on a three to nine-month contract for a line of credit or traditional instalment loan.
The tie-up with the US operator, if it’s finalised, would give Loan Ranger the rights to use its software and underwriting model through an agreed brand in Australia.
It will give Loan Ranger access to the small business loan market in Australia, while its US partner will get exposure to Australia’s developing online lending sector.
“It takes away all the need for customers to send in manual information, it’s a fully online assessed application,” Mr Brennan said
“We are working out commercial terms now and I will head to the US in the next few weeks to finalise that and we’ll look to roll it out here in about January.”
Peer-to-peer finance platforms have grown exponentially in the US and UK, principally because they offer lower rates and cut traditional financial organisations out of the transaction by matching borrowers with private lenders.
Their success has attracted the interest of the big banks, with Australia’s biggest peer-to-peer lender, SocietyOne, counting Westpac venture capital fund Reinventure Group among its backers.
Loan Ranger plans to fine-tune the technology for the business finance operation, incubate it ‘on balance sheet’ by running it for three months before tapping its investor group, including UK based Liberum Capital to fund the expansion of the loan book.
“That has always been on the cards, we have always known we would have to find more money for longer duration loans,” Mr Brennan said.
