‘Punched in the guts’ Moula digs in as OnDeck prepares to enter the Australian SME lending market

When Moula co-founder Aris Allegos heard American competitor OnDeck had chosen Australia as one of the targets for its international expansion, he felt like he’d been punched in the stomach.

It’s the moment many startup founders dread: a large well-funded competitor launching in the same market. OnDeck is certainly that. The US online lending portal raised over $US1 billion in its initial public offering late last year.

“Your initial reaction is boom, someone’s just punched you in the guts, or called my baby ugly or what have you,” Allegos says.

“That’s the moment of despair. But you’ve got your team around you and you go, well (a) it’s a big enough market, and (b) it helps differentiate us and the path we’re going down.

“And you just get on with it. But boy it’s a roller coaster.”

Like OnDeck, Moula offers loans targeted to small businesses that are quickly approved and get cash in the hands of business owners within one business day.

Moula doesn’t have the international ambitions of its larger competitor. Allegos says the limited access to credit data in the Australian small business lending space makes it difficult to apply elsewhere, and believes it’s a problem OnDeck will need to wrestle with. He says in the United States and the United Kingdom there’s a lot of sharing of credit histories, which is not the case in Australia.

“Come to Australia and the majors keep the data inside their respective banks,” he says.

“Positive credit reporting with respect to small business in Australia is effectively non-existent. For us, we thought we need to build that platform in Australia, specifically for Australian businesses.

“We will focus entirely on the $12 billion of annual lending that goes into that sub $100,000 space (in Australia).”

Since launching in May last year, Moula has been growing steadily. In its first few weeks it was doing a loan a week, with the average loan size being about $10,000. Currently it’s doing $200,000 worth of loans a week and the average loan size has grown to $30,000.

OnDeck’s gross revenue for the quarter ended March 31 was $US56.5 million, up 98% from the previous period. Since being founded in 2007, it has loaned more than $2 billion to business across the US and Canada.

Up until last month Moula’s funding platform was only available to eBay stores, but now the startup has expanded to offer its service to bricks-and-mortar retailers. That’s because integration with over 50 banks in Australia gives Moula access to the financial information needed to complete the process it uses to assess borrowers.

“Small business lending is evolving and the integration of new data sources means that we continue to disrupt the traditional lending model,” Allegos says.

“In the past, SMEs have felt the pinch as lenders tighten their belts. Businesses now have the opportunity to access funding in real time, knocking down previous barriers to business growth.”

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