Fintech lenders are preparing their pitches to access the government's business securitisation fund, although small businesses are unlikely to experience a flow-on affect until years into the future.
Non-bank lenders believe other factors, including access to more information about borrowers, could have a bigger impact on risk pricing and better deals for small businesses.
"I think having data available is bigger for us. At the end of the day, nothing beats data to get the real risk profile of our customers in place," chief financial officer of OnDeck, Jerry Yohananov said.
OnDeck and other fintech lenders will be entering information sessions on the Australian Business Securitisation Fund this week in preparation to make investment applications.
The scheme was unveiled in November 2018 and is a funding pool to purchase parcels of small business loans from lenders, providing them with a stronger pipeline of capital to help address the costs of accessing small business finance.
We’re applying taxpayer funds here, it’s important to get it right.Rob Nicholl
It will be overseen by the Office of Financial Management Australia, which this week published a set of investment principles as a framework for how the fund will operate.
This guidelines mean the fund will look at whether a lender has good governance and a responsible approach to lending.
A launch date for the fund has still not been determined.
Office of Financial Management chief executive Rob Nicholl said it will consider applications for investment carefully and is keen not to "unnecessarily rule people out" when non-lenders apply to access the funds.
However, he said the rollout would be a multi-year process and boosting competition in lending would be a top priority.
"We’re applying taxpayer funds here, it’s important to get it right," Mr Nicholl said.
Non-bank lenders welcomed the guidelines and said they were confident of meeting the requirements, though when it comes to the scope of this providing an immediate boost to affordable small business funding they are less sure.
"Most likely the cheques won't be written until later this year," Mr Yohananov said.
However, he said other factors like lack of information reporting across the sector and limited access to data about potential borrowers also increase the price of finance for smaller operators.
"We'll continue to raise this issue as I think it's the biggest needle-mover out there," he said.
Other founders have welcomed progress on the fund though called for caution with its rollout.
Lumi founder Yanir Yakutiel said it was critical the fund maintained a "level playing field" when investing in lenders.
"I think that the fundamental problem the government is trying to solve is that lack of liquidity on the riskier ends of the credit curve and it is imperative that when allocations are made, they are made there, where capital is lacking, and not on the less riskier ends, while displacing other forms of bank capital," he said.
Lumi said it was confident it met the investment criteria to be able to access the scheme.