A first outside the US: American Express launches unsecured business loans for Aussie SMEs

American Express will leverage its global brand to offer small businesses unsecured loans, in a first for the company outside of the United States.

The launch of American Express’ business loans will offer unsecured capital of between $5,000 and $250,000 to SMEs in Australia on annual interest rates starting at 10.95%.

Martin Seward, American Express Australia’s vice-president of global commercial services, says the need for the new product is based on AMEX’s own research, which found Australian SMEs are looking for $130 billion in capital.

“We certainly believe small- to medium-sized enterprises are facing challenges accessing cashflow and working capital at the best of times, but during COVID-19, that has become even tougher,” Seward tells SmartCompany.

AMEX’s survey of over 1,000 businesses found more than two-in-five are seeking loans this year and 26% need capital as a direct result of JobKeeper ending.

“It’s really starting to shape up as two sides of a story for SMEs: some that are still challenged by COVID-19, while others have rebounded and are looking to grow,” he explains.

AMEX first launched business loans in the US in 2017, and Seward says demand has seen “double-digit growth over the last three to four years”.

Unsecured loans allow borrowers to access capital at interest rates lower than credit cards without needing to secure the loan against personal property.

AMEX’s move to offer business loans in Australia will see the financial services company compete against the big four banks, as well as fintechs such as Judo Bank, Prospa, Get Capital and Moula.

While the big four banks do have unsecured loans available for their business customers, many business customers have to secure their loans against assets in order to access funds.

Neil Slonim, independent SME finance advocate, says the advantage of AMEX’s unsecured business loans over those offered by fintechs is that it is an established and global brand.

None of these fintechs “are an established, global brand, none of them had an existing customer base, and as startups they all found it very difficult to access low-cost funds,” he says.

AMEX, on the other hand, is an established brand, with an existing customer base, and because it is a global bank, it has access to low-cost funds, Slonim says.

“AMEX is offering nothing that Judo, Prospa and Moula wouldn’t do,” he says.

To deliver the loans, AMEX has partnered with global origination platform ODX and will initially offer the loans to a select group of American Express business card members, with more customers invited to apply within the first half of this year.

AMEX was not able to confirm how many cardholders exist in Australia, but did confirm that at the end of 2019, there were 114 million cards in force worldwide.

Over the last three years in Australia, AMEX has signed on an average of more than 50,000 new merchants each year.