A Guide To Alternative Lending

A Guide To Alternative Lending

Authored by Athena Nagel

It is often difficult to obtain bank loans for small and medium-sized companies even though their businesses have a strong financial track record of success. In such cases, alternative lending plays a significant role. Alternative lending in Australia is progressing significantly. There are almost 119 Alternative Lending sectors present in Sydney, Australia.

Alternative lending in Australia has become a more realistic option for small-scale and medium businesses. It is also a growth-driven sector that helps to expand the operations of several sectors across the region.

What is alternative lending?

It is a kind of business loan, which differs from traditional bank lending.

Alternative lending generally operated via online mode. Unlike traditional loans, alternative lending in Australia offers a wide range of business financing products, which includes –

  • Term loans
  • Business lines of credit
  • Equipment financing
  • Invoice financing

Traditional bank loans are difficult to qualify, as it requires strict requirements and extensive application processes. At the same time, alternative lending is speedy, easily accessible, and more flexible in that aspect.

The alternative lenders use the following ways to initiate the process –

  • They use different software to scan business financials,
  • They use algorithms to underwrite loan applications quickly as well as sync with accounting files.
  • The processing of the application process will be completed through online mode.

Advantages of Alternative lending:

  • The alternative lenders provide flexible loan requirements for a certain type of loan, such as annual revenue.
  • It is an easy application process.
  • It also gets approved fast, and the application is speedy as well.

How does alternative lending in Australia work?

  • The loans range from USD 5,000 to USD 5 million.
  • And its duration includes three to five years.
  • They help finance small-scale businesses around the world, which eventually promotes innovation and brilliant ideas.

Alternative Lending

Types of Alternative Lending in Australia are –

Direct Lending

It helps to fund leveraged loans to the borrowers with the help of business development companies to raise capital from investors. It provides both investors and businesses with significant growth opportunities. In short, they provide bank-type loans without a bank.

It also shows strong yields that encourage the market to grow further. It also helps to open up to new streams of funding for previously excluded businesses.

Venture Debt

This type of lending helps obtain capital for a specific opportunity that may promote a typical venture capital investment.

It is helpful in equity financing rounds. It can also provide significantly lower long-term cost than successive equity financing rounds.

Structured Equity Products

It offers flexible funding that provides access to capital without affecting business owners’ equity stake.

Debt Financing

Small and medium businesses often use this for capital.

Non-bank Cash Flow Lending

This kind of loan requires a personal guarantee from the business owner. However, it can also offer substantial access to debt financing for businesses with strong returns.

Recurring Revenue Lending

This type of lending is based on annual recurring revenue (ARR) or monthly recurring revenue (MRR), which is always an excellent choice for several software-as-a-service (SaaS) companies.


With the help of this, small and medium-sized businesses will help in a more accessible and affordable way. Therefore, it will help to enhance the performance of any company by becoming a debt instrument.

Mezzanine Financing

It helps bridge the gap for both parties by completing the transaction, as it can be converted into stock embedded in the financing deal.

Meanwhile, banks have grown increasingly, and they have also started lending to small and medium-sized businesses.

However, a streamlined loan process can more easily be accessed to the capital with the help of alternative lenders, which are more profitable and flexible in the loan market.

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