With banking licence in hand, Avenue Bank promises paper-free bank guarantees to SMEs

Finance sector upstart Avenue Bank has been granted a full operational licence, allowing the venture to reveal its core product: a streamlined bank guarantee system, promising small and medium enterprises a better service than the Big Four currently provide.

Avenue Bank says SMEs can apply for its fully digital bank guarantees in five minutes, with approval turnaround times within 24 hours.

That is in contrast to what Avenue Bank calls a time-consuming and paper-based process at many traditional banks.

Speaking to SmartCompany on Tuesday, Avenue CEO Peita Piper said legacy banks have overlooked bank guarantees, leaving SMEs to navigate slow application processes.

This can contribute to delays in time-sensitive scenarios, Piper said, like when a business is planning its move into a new office or storefront and the landlord requires a bank guarantee to confirm the move.

Avenue Bank says no business property is required as security, and its services can be obtained without a director’s guarantee.

It currently offers a 3% p.a. fee on its bank guarantees and up to 3.5% p.a. interest on security deposits.

Sign-up fees are temporarily waived as Avenue Bank shops its niche product to the market.

New systems are coming for parties on the other side of the bank guarantee deal, too, Piper said.

“For the other banks that offer bank guarantees, a lot of them have to actually go into the branch to make the claim,” Piper said.

“We have digital claims, and the landlords can claim anywhere, anytime with us.

“But we do have future plans to also then help them manage their bank guarantees digitally, through technology that we’re looking at developing for landlords, with landlords.”

Avenue’s bank guarantee debut coincides with the Australian Prudential Regulatory Authority’s (APRA) decision to hand it a full Authorised Deposit-Taking Institution (ADI) licence, three years after the venture first gained the ability to offer short-term finance to SMEs.

With the full ADI in hand, Avenue is also considering further growth in the small business bank guarantee niche.

“This is just our initial target segment that we’re looking at,” Piper said.

“And we’re looking at that segment first, but we do have future plans to do bank guarantees for other purposes.”

Avenue’s emergence bears some similarities to Judo Bank, which also champions lending products it claims are more suited to SMEs than those offered by legacy banks.

Avenue’s corporate leaders are certainly no strangers to the pressures faced by small business borrowers, either.

The digital bank was co-founded by Dale Hurley and Colin Porter, the latter of whom serves as executive director.

Porter also founded CreditorWatch, the credit monitoring bureau which, to this day, provides sobering statistics on small business trading conditions.

His frustrations when navigating the bank guarantee process when founding CreditorWatch contributed to Avenue Bank’s focus on the product, Piper said.