Importance of Online Lending for Small Business in Australia

This research paper discusses the importance of online lending for small businesses in Australia, its growth potential, and the impact of government regulations on the industry. It also explores the reasons for the failure of small businesses and the ways in which the government has aided struggling businesses.

Running head: PRACICAL RESEARCH
Practical research
Name of the student:
Name of the University:
Author note

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Table of Contents
Chapter One: Introduction..........................................................................................................2
1.1 Introduction:.....................................................................................................................2
1.2 Research Problem:...........................................................................................................3
1.3 Research Aim:..................................................................................................................3
1.4 Research Objectives:........................................................................................................3
1.5 Significance of the Study:................................................................................................3
Chapter Two: Literature Review................................................................................................4
2.1 Importance of online lending for small business:............................................................4
2.2 Australian scenario of online lending:.............................................................................5
2.3 Motivation of online lending in Australia:.......................................................................7
2.4 Major online lenders in Australia and their growth path:................................................8
2.5 Chapter summary:..........................................................................................................10
Chapter Three: Research Method.............................................................................................10
3.1 Introduction:...................................................................................................................10
3.2 Research Design:............................................................................................................10
3.3 Research philosophy:.....................................................................................................11
3.4 Research approach:........................................................................................................13
3.3 Population and Sample Size:..........................................................................................14
3.4 Sampling Method:..........................................................................................................14
3.6 Data Collection Method:................................................................................................15
3.7 Data Analysis:................................................................................................................17

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3.8 Reliability and Validity:.................................................................................................17
3.9 Ethical Consideration:....................................................................................................17
3.9 Conclusion:....................................................................................................................17
Chapter Four: Findings............................................................................................................17
4.1 Introduction:...................................................................................................................17
4.2 Key Findings and Analysis:...........................................................................................18
4.2.1 Reason for failure of small business:......................................................................18
4.3 Summary of Finding:.....................................................................................................19
Chapter Five – Discussion, Conclusion and Recommendations..............................................20
5.1 introduction:...................................................................................................................20
5.2 Discussion:.....................................................................................................................20
5.3.1 Research Objectives:...............................................................................................22
5.3.2 Research Questions:................................................................................................22
5.4 Conclusion:....................................................................................................................22
5.5 Recommendations:.........................................................................................................23
Reference:................................................................................................................................25

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Chapter One: Introduction
1.1 Introduction:
Small business in Australia is accounted for generation of more than 60% of employment
and as per the Gross Domestic Product (GDP) of the domestic economy, it produces more
than 79.2% of the economy (Berryman, 1983; Storey, 2016). Thus, it is one of the sectors of
the Australian economy that possesses the magnanimous amount of importance. Fall in the
small business thus has mammoth amount implication on the overall economic performance
of Australia because reduction in the performance of the same can reduce the employment
and it will lead to fall in the income of the economy as well (Morrison et al., 2003).
Australian economy has been going through its 27th consecutive growth year and large
amount of its growth has been driven by the growth in the small lending business around the
economy (Kaplan et al., 2017). There are more than 9 reputed online organisation in
Australia that has aided the economy to revamp the growth pattern of the economy (Connolly
& Jackman, 2018). Rapid growth during the last one decade the regulation and the mode of
the business along with the easy availability of the loan through online lending channel is
now one of the main drivers of the Australian economy (Storey, 2016). This paper is aimed to
discuss the main reasons of the failure of the small business during the financial crisis
situation due to the lack of the financial aid. Many previous researches has shown that there
is considerable amount of lack in the case of the availability of the funds for the small
business due to their limited exposure (Ali & Banks, 2014). It leads to fall in the sales as well
as the revenue of the firm and under the dwindling marketing situation the firms fail to
operate. Thus there availability of the online lending specifically for the small business is one
of the main driver of the growth of the same in the Australian economy. However, there is
wide array of debate that whether implicating laws and regulation is beneficial for the online
lenders or not. Some argue that, implicating laws will deteriorate the performance of the

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online lenders, however, some others argue that it will lead to rise in the growth of both the
small business and the lenders under a streamlined and constrained path. Thus, this research
is aimed to trace whether it would be beneficial for the online lenders to have governmental
intervention as the policies or free market mechanism is more appropriate. This section of the
research will demonstrate the main research problem and develop the research aim. Moving
forward significance of the study will be analysed and then the study will move forward to
the consecutive sections of the study.
1.2 Research Problem:
In an equilibrium situation, small firms are subject to funding problems and in addition to
this, these complications may be intensified during the time of disequilibrium in the financial
markets (Storey, 2016). The main issue under this scenario lies in the fact that, when these
financial institutions fail, by which way can these small companies legally acquire financial
aid?
1.3 Research Aim:
 Are more regulations help small business in the context of online lending?
 Why does small business fail often?
 Has the government taken steps to help these struggling businesses?
1.4 Research Objectives:
 To determine how small business in case of the online lending can be beneficial with
the help of the regulations.
 To determine the reason for the failure of the small business.
 To determine the ways how the government has aided the small business to overcome
the struggling situation.

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1.5 Significance of the Study:
As it has already been mentioned that in case of the Australian economy, small business
is one of the main growth producers and it contributes the largest amount of share in the GDP
as well as in the case of the employment. Fall in the small business in the Australian economy
can bring in a crippling blow to the economic stability of Australia during a short run and
diverge the growth path of the economy during the long run. In the growth of the small
business, one of the main accelerator is the small business online lending that provides
necessary oxygen to the Australian small business (Brock & Evans, 1989). Now, though there
is a legitimate amount of governmental policies to control the online lending business, yet
there is ample scope to enhance the same. However, there is a considerable amount of debate
that whether the online lending for the small business can be enhanced by the growth of the
governmental intervention or it will act inversely (Rostamkalaei & Freek, 2016). Under this
situation, it possess paramount importance to trace the fact that how the governmental
intervention in the form of policy regulator can impact the growth of the Australian online
lending business. In addition to this, in various occasions, it has been seen that small business
often fail in absence of the financial aid from the governmental agencies during the period of
crisis (O’connor, 2017). Moreover, previous researches has showcased that changes in the
economic environment in which small lenders and the banks operate in the cross-border and
domestic consolidation of the banking industry, there is serious issues in the availability of
credit for the small business. It highlights the fact that small business are often
informationally opaque, thus they lacks in the case of the financial aids (Han et al., 2014).
Consequently, it has become one of the most important factor to discuss the details that can
influence the online lending which are potential to aid the Australian economy to revamp its
growth path with its transparent and streamlined process of financial aid to the small
businesses.

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Chapter Two: Literature Review
2.1 Importance of online lending for small business:
Business growth often requires some debt. This could mean expanding to new premises,
hiring staff, investing in new stock or being able to better manage cash flow. At some stage,
Australian business owners will seek funding from banks or alternative lenders in order to
take their business to the next level (Frye et al., 1997).
It’s important to understand the distinctions between a secured loan; one that is
backed by collateral such as property, and an unsecured loan which is not. Applying for an
unsecured business loan will not require you to tie the personal property to the loan itself.
However, you still need to meet income and credit requirements, and many alternative
lenders ask for a personal guarantee from the directors of the business (Mills et al., 2014).
Unsecured loans carry more risk than a secured loan, which is reflected in the interest
rate. A higher interest rate reflects the higher level of risk from the lenders perspective. 74%
of SME lending comes from the four major Australian banks. Even though the ‘big 4’ have a
stranglehold over SMEs when it comes to business finance, it’s clear to see why the
prevalence of online lenders is becoming a smarter alternative (Berger & Udell, 2002). A
recent study by East & Partners recognised the availability of unsecured credit, with no
requirement to mortgage the family home, is the most important factor for SMEs seeking
finance to fund growth. Furthermore, 67% of SMEs are willing to pay a higher rate to obtain
finance if they don’t have to provide real estate security (Robert et al., 2015).
2.2 Australian scenario of online lending:
The online small business lending market in Australia is growing at a faster rate than
the US market did at a similar stage of development. Speaking at the AltFi Australasian
Summit in Sydney, CEO Noah Breslow recently said it could reach more than $2billion in
annual originations by 2020. He said that despite over 6,000 banks offering small business

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lending options in the US, online lending to small businesses has flourished (Blanchflower et
al., 2003). Comparing the Australia with a more concentrated banking system, there is even
more opportunity for online lenders to provide innovative lending solutions to SMEs.
Recent research showcase that Australia has overtaken Japan to become the second
largest alternative finance player in the Asia Pacific region, second only to China. As per the
Breslow, in addition, increased access to data, supportive government initiatives and
favourable small business sentiment are all likely to lead to further growth for the industry.
Furthermore, the Government’s ‘Review into Open Banking’ and the introduction of
mandatory comprehensive credit reporting (CCR) will likely promote greater competition in
the Australian market (Tan et al., 2009). Yet despite the Australian market’s growth potential,
awareness of alternative finance sources still remains an issue, according to OnDeck’s latest
Small Business Owners’ Survey, commissioned by research firm YouGov Galaxy.
Only 30% of small business owners thought the number of lending options had
increased over the past five years, compared to 70% in the US (Berger & Frame, 2007).
Sixty-three percent of small businesses have been heavily reliant on traditional banks,
followed by 29% on specialist financiers, 27% on credit unions and 27% on family and
friends, to source finance (Fisch, 1998). The research also found signs of unmet demand, with
55% of business owners having been rejected for financing they requested. When it comes to
future borrowing plans, 33% of Australian small business owners planning to seek additional
finance for their business indicated that they would consider an online lender (Josee et al.,
2018). As per the Breslow, there is a real opportunity for the online SME lending industry to
increase awareness of the innovative products and services that are now available, as an
alternative to the traditional loans offered by banks (Breslow, 2018). After pioneering online
small business lending more than ten years ago in the US, it is encouraging to see many

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markets globally adopting similar alternative financing solutions. For OnDeck, Australia is an
exciting market to be operating in and we’re thrilled with the results so far.
OnDeck entered the Australian market in 2015 via a partnership with MYOB, a
leading accountancy software provider, to help close the funding gap between small business
financing needs and the availability of capital from traditional sources (Mark et al., 2017).
The business is also working with brokers and aggregators, including Connective Asset
Finance and College Capital. The AltFi Australasian Summit was held in Sydney on April 16,
with speakers and panel members from across the globe discussing trends in SME lending,
fintech and how the finance sector is changing (Pike, 2018).
2.3 Motivation of online lending in Australia:
Less stringent pre-requisites:
Unsecured business loans are designed to be easy to obtain. Most lenders will
consider the application if you’ve been running a business for at least 6 months, with a
minimum annual turnover $50,000. The business must be Australian owned and registered,
and you must use the funds for business purposes only (Anoosheh & Freel, 2016).
Fast application and approval:
With the advancement of finance technology, or Fintech, the speed and efficiency of
financial services are being disrupted in a big way. No longer do business owners need to
make appointments with their bank manager, fill out extensive paperwork and wait weeks for
a decision. Alternative lenders allow you to apply online in minutes, connecting the cloud
accounting software and online banking details to offer a responsible lending decision based
on the health and growth potential of the business. It’s fast, paperless, and you can apply in
the own time 24/7, 365 days a year. More often than not, you will receive a lending decision
within 24 hours (Andrea et al., 2015).
No guesswork, transparent repayment schedule:

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Alternative lenders are continually pushing for transparency in the industry. This
means the repayments (daily, weekly, and fortnightly) are spelt out up front. The interest rate
is determined upon approval, and the loan schedule will reflect a regular, even repayment.
This means you know exactly what you need to repay in advance; the rate or amount will not
vary for the duration of the loan.
Credit history is not the be all end all:
Again, the interest rate offered by an alternative lender is a reflection of risk the
lender is taking. An unfavourable credit history is not necessarily an automatic ‘no’. It’s quite
common for alternative lenders to offer loans to business owners that do not meet the bank’s
requirements. What this means is, businesses with a strong credit history are offered a more
competitive interest rate. Businesses with a tarnished credit history are still able to access the
finance they need for growth.
Focus on flexibility:
Unsecured business loans are flexible in more ways than one. Not only do you have
the power to choose the loan amount you desire for the time you need it, some lenders allow
you to repay early without penalty. At Sail, you’re able to repay the principle amount owed
on the loan after the minimum 3-month term (Rostamkalaei & Freel, 2016). Each lender is
different so you must do the due diligence to make sure this is an option for the business.
Some lenders will only let you repay after the half-way point of the loan, others will charge
fees or penalties to break the loan agreement. Make sure you know where you stand on early
repayments before signing the dotted line.
2.4 Major online lenders in Australia and their growth path:
Moula business loan:
Moula uses a unique platform that lets it analyse the business data in order to approve
the loan. Once you enter a few details and link the Xero account up, you can take out a loan

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for between $5,000 and $250,000 for a term of 6-12 months. There’s no time-consuming
paperwork and no upfront, ongoing or early break fees. To be eligible, you’ll need to have
been in business for at least 12 months, have a fair or better credit history and make at least
$5,000 in monthly sales (Moula, 2018).
Prospa Business Loan:
Prospa is Australia’s leading online lender to small business, offering fast and flexible
loans for any business purpose. This innovative Australian-owned lender focuses on
removing the obstacles that have made it difficult for SMEs to access funding. A director’s
guarantee is all that’s required as security, so there’s no need to put the house on the line.
What’s more, Prospa assesses creditworthiness based on the health of the business, not the
owner’s personal credit score (Prospa, 2018).
Spotcap Line of Credit:
If you don’t have any big assets to put up as security against a loan, the Spotcap Line
of Credit is worth checking out, since Spotcap offers Australia's only completely unsecured
business lines of credit and small business loans. If the key financial documents are
organised, you can apply for this line of credit in 5 minutes, and specialised credit assessment
technology will analyse the business. Once approved, you can have the funds in the account
in as little as 24 hours (Imtiaz, 2016).
GetCapital Line of Credit:
This innovative lender aims to revolutionise business finance with a revolving line of
credit facility for trade purchases. Once approved you can call on funds up to the approved
limit whenever you require. Interest rates are based on the business profile and you’ll only
pay for what you use. Get Capital has less onerous criteria than the banks and a simple online
application process. You’ll need an ABN plus a minimum of nine months’ business history
and $10,000 monthly sales (Desai et al., 2016).

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businessloans.com.au:
This efficient online lender offers fast business loans for any purpose, including staff,
bills or upgrades. Businessloans.com.au offers flat pricing for qualified customers, no hidden
fees, the ability to draw down on funds throughout the year and a handy redraw facility. The
100% online approval process is as simple as filling out some basic details and linking the
business data (businessloans.com.au, 2018). According to the same source, to qualify you’ll
need to demonstrate 2 years business trading history and $20,000 per month in sales.
2.5 Chapter summary:
From the above details it can be seen that the Australia over the years has become one
of the largest nations which is indulged with the online lending. Endeavour of the industry
over the years has aided it to become one of the largest online business lending market. There
are more than nine online lenders in the Australian market, and out of them five has been
chosen for this research work depending upon their magnitude of business. This section has
highlighted that the, Australian market over the year has potential to become the second large
online business lending market. Moving forward, this report will focus on the research
method and consecutive section of the same.
Chapter Three: Research Method
3.1 Introduction:
In order to perform a research and let it understandable by the readers, research
methodology is one of the essential steps. It acts as the path of carrying out research work and
the main steps that will be followed by the researcher to complete the research work a brief
overview is provided in this section. In this section problems faced by the research while
doing the study will be mentioned and ethical consideration in order to doing so will also be
depicted.

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3.2 Research Design:
Research design of this research work will be based on the research onion.
Figure 2: Research onion
Source: (Saunders et al., 2015)
The research online depicts the stages that need to be covered during the time of
research work. When the research onion is observed through the outer layer, then it can be
seen that all the inherent layers of the research onion unfolds to a greater details depicting the
details of a research work. Research onion acts as the index of the steps that the research has
been utilised in order to perform the research work (Saunders et al., 2015). In order to portray
the research design properly, following sections will provide details of the same:
3.3 Research philosophy:
There are three different types of research philosophy which are positivism
interpretivism and realism (Hunt, 2016).

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Figure 3: Different research philosophy
Source: (Created by Author)
In case of the statistical data and figures are utilised in order to perform a research, it
is called positivism. There is no relation between the human emotion and feeling with the
research work because research work that are based on the positivism are solely dependable
upon the either on qualitative method or on the quantitative method. The research is
completed largely based on the results that can be derived from the findings of the statistical
analysis (Eriksson & Kovalainen, 2015).
When it comes to the interpretivism, then research work is done on the social issues.
In this case, mentality of the researchers are attached with the people living in the society and
thus cultural importance takes place in such research works. Data and figure may not be
available in such research work because the emotion of the human being and the connection
of the mind of researcher with the cultural aspect cannot be measured (Ingram, 2014).
Thirdly, when it comes to the realism then both the human emotions and data is being
utilised in order to carry out the research work. In this type of research work, data is

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beneficial in order to know the accurate number of population who supports the fact and who
oppose the same. On other hand, human emotion in this type of research work provides
essential inputs in the form of further consideration of social phenomenon. Thus, realism is
one of the most complex form of research philosophy that includes both the positivism and
the interpretivism (Burrell & Morgan, 2017).
The present research work is based on the growth of the online lenders under the
governmental intervention, which is one of the social factor. Considering the definition of
different research philosophy, it can be said that the present research will be based on the
socialism. In this case some amount of statistical data with special focus on the theoretical
perspective will be utilised.
3.4 Research approach:
There are two different kind of research approach is available which are inductive and
deductive research approach.
Figure 4: Research approaches
Source: (Created by Author)
In case an individual provides a new model or theory and utilise the same in the
research work, then it can be considered as the inductive research approach. However, the

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researcher of the new model or theory has to make the newly derived model or theory central
of the research and perform the research work based on the same (Bryman, 2016).
On the other hand, in case the researcher utilise the finding of the previous research
worker, then it can be considered as deductive research work. Researcher who is using the
already verified and established theory for finding something new can utilise the number of
theories of the previous researches in order to make his or her new finding generally
acceptable (Eisenhardt et al., 2016).
Considering the ongoing research work it can be seen that it is not aimed to establish
any new theory or model, rather it utilises different available theories and model from the
available resources. Thus, it can be said that this research work is deductive approach of
research.
3.3 Population and Sample Size:
This research is aimed to trace whether there is any impact on the growth patch of the
online business lenders due to the government intervention or not. Thus, the research will
utilise the 5 available online business loan providing firms for the study. When it comes to
the online business lending, then there are 9 firms in total who provides online business
lending. Out of these 5 has been chosen based on their magnitude of business (Liu et al.,
2017).
3.4 Sampling Method:
There are two different types of sampling methods, which are non-probability
sampling and the other one is probability sampling. Both of them has different implication
and different usage.

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Figure 5: Sampling method
Source: (Created by Author)
In case a researcher carries out a research work without taking into consideration any
accurate number of participants, then the sampling done by the researcher can be considered
as the probability sampling. However, when a researcher carries out a research while
considering an accurate number of sample, then it can be considered as the non-probability
sampling (Edjabou et al., 2015). Considering the ongoing research work, it can be said that, it
has utilised the 5 online business lenders of Australia so as to trace the implication of their
growth under the governmental intervention. Though there are 9 firms, the researcher has
chosen only 5 due to the availability of data and the less number of market share of the
remaining firms.
3.6 Data Collection Method:
Data collection can be done in three different methods, which are quantitative data
collection method, qualitative data collection method and mixed method.

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Figure 6: Data collection method
Source: (Created by Author)
If the research work is based on the statistical data through the primary data collection
by the means of interviews, then it can be considered as the quantitative data. On the other
hand, if the researcher utilises the data from the previously available resources, then it can be
considered as the qualitative data collection method. Mixed method on the other hand is the
amalgamation of both the different type of data collection. It utilises primary data through
surveys and on the other hand it considers the secondary data from the previously available
resources (Palinkas et al., 2015). The researcher in this research work will utilise the
qualitative data collection method for the research work because it is based on the secondary
data collection. In addition to this, the business leaders whose interview and the statements
are being utilised in order to trace the implication of the governmental intervention on the
online business lending industry will be qualitative in nature and cannot be available in
quantitative form. Thus, qualitative sampling will be utilised for the analysis of the
phenomenon (Morgul et al., 2014).

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3.7 Data Analysis:
Available data and the statements of the business leaders of the selected brands will
be utilised for this research work and using the same, under the PRISMA flow chart
framework, this research will perform the data analysis.
3.8 Reliability and Validity:
Secondary data for this research work will be chosen from the business leaders of the
selected brands and the other data will be derived from the previously available research
works thus, data which will be used for this research work, will be reliable and valid in
nature.
3.9 Ethical Consideration:
Data collection is based on the secondary qualitative data collection methodology, and
the researcher while collecting data has maintained strict ethical consideration. Data collected
from the available resources and business leader of the selected organisation is retrieved from
the ethical acts and no unethical action has been done by the researcher.
3.9 Conclusion:
From the above analysis of this methodology chapter it can be seen that the research
work will utilise the secondary data and deductive approach for the research work. In
addition to this, as the data will be secondary, then it will be based on the qualitative data
collection method, which will aid it to find the desired outcome. Data being collected from
the online sites of the chosen samples, it will be valid and reliable in nature.
Chapter Four: Findings
4.1 Introduction:
This chapter will provide details regarding the data analysis of the selected brand and
depicts its key finding. For the further research it will utilise the PRISMA framework and
depending upon the same, researcher in this section will portray the finding.

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4.2 Key Findings and Analysis:
As per the PRISMA framework, 42 articles has been utilised in order to trace the
secondary data of the chosen firm and additionally there were other online resources that has
helped the researcher to trace the growth pattern of the firm under the chosen phenomenon.
Figure 7: PRISMA flowchart
Source: (Created by Author)
4.2.1 Reason for failure of small business:
As per the chosen literary evidences, it can be seen that, one of the main reason for
the failure of the small business lies within the lack of the funds.

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Figure 8: reason of failure of the small business
Source: (Mills & McCarthy, 2014)
As per the figure 8, it can be seen that various regulatory authority overseeing the
performance of the online lenders leads to failure of the same.
4.3 Summary of Finding:
From the above research it has been found that the regulations have permitted small
business online lending to flourish under the minimal oversight especially in the case when it
is compared to the level of existing borrower protection put in place for the consumers. These
argument from the firms is aimed to provide them a better transparent mechanism of lending,
rather, the online lenders argue that more overseeing on their operation by the firm has
influenced them negatively. An overriding goal of this research work is indeed the regulatory
actions proposed herein so as to ensure small business have access to the capital which is
required in order to create job and growth of the business. On the other side, the research has
also found that moderate amount of regulation is also beneficial for the growth of the lenders

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as well as crucial instrument for safeguarding the interest of the borrowers. As the online
lenders always argue in favour of less restricted market for their growth, they are less
encumbered by the rules from the legislative agencies, they are tends to experiment more
creative and automated underwriting process that allow them to disembark the loans at a
faster rate.
Chapter Five – Discussion, Conclusion and Recommendations
5.1 introduction:
This section of the research will draw the conclusion of the finding of the research
work and provide recommendations depending upon the same. while highlighting the
research objective and portraying the research question, this section will depict whether it has
gained the desired research aim or not and moving forward, depending on the findings, this
section of the research work will highlight the recommendation to gauge the or enhance the
situation of the phenomenon under research.
5.2 Discussion:
From the above research it has been found that the regulations have permitted small
business online lending to flourish under the minimal oversight especially in the case when it
is compared to the level of existing borrower protection put in place for the consumers.
Various development since 2016 in Australian economy has been suggested that may change
the rapid growth of online business lending market for the small business in the domestic
economy and additionally treasury department of the government begun to evaluating the
online market for the small business have been formed that has provided large amount of
impetus on the growth path of the same. moreover, from the literary evidences, it has also
been found that many online loan providers has argued in favour of streamlining and
clarifying of the existing policies to oversight the operation of the firm in order to restrict
their growth and safeguard the domestic economy from a Global Financial Crisis like

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situation in near future. These argument from the firms is aimed to provide them a better
transparent mechanism of lending, rather, the online lenders argue that more overseeing on
their operation by the firm has influenced them negatively. An overriding goal of this
research work is indeed the regulatory actions proposed herein so as to ensure small business
have access to the capital which is required in order to create job and growth of the business.
From the earlier chapters of the research work it has been found that there is significant gap
between the actual requirement of the small business and the availability of the funding for
the small business under the influence of the large market. Banking loan under $250,000 is
highly unavailable for the small business and the time of disbursement of the loan is one of
the critical factor that make it hard for the small business to avail the same. Under this
situation, online lending firm that have a streamlined and seamless clearance mechanism has
proved to be handy for the growth of the business.
On the other side, the research has also found that moderate amount of regulation is
also beneficial for the growth of the lenders as well as crucial instrument for safeguarding the
interest of the borrowers. As the online lenders always argue in favour of less restricted
market for their growth, they are less encumbered by the rules from the legislative agencies,
they are tends to experiment more creative and automated underwriting process that allow
them to disembark the loans at a faster rate. This fetches undisclosed fees and excessive
burden on the consumers leading to the death trap for them. In addition to this, without less
amount of restriction, online lenders seems to charge high cost for their loans. As per the
latest report, Annualised Percentage Rate (APR) of the online loans can be well above 50%
and can be as high as 300% making it one of the worst nightmare for the consumers. In
addition to this, APR is not only the cost of the loan because additionally there is high
amount of risk that raise the burden of the borrowers if they fails to understand the same
fully. Comparing the various online lending scheme is quite similar to comparing apples to

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apples that showcase almost no or no difference at all among the same. Moreover, there is
problem of double dipping that allow the borrower to charge additional fees when the loan is
renewed before the term of original loan is completed. Under the limited disclosure of the
borrower and controlled imbursement of the loan to the consumer, borrower can utilise the
loop hole of double dipping that can affect the consumer negatively rather than aiding him.
Now, there is always scope of hidden cost. Unlike the traditional banking, online lenders
charges some newer short term products and allow the consumers for earlier repayment that
entice them to become prey of double dipping. In some cases, it has also been observed that
modest discount is provided for early repayment of the loans and thus some amount of
unearned interest is charges as the prepayment penalty by the borrowers.
5.3.1 Research Objectives:
 Are more regulations help small business in the context of online lending?
 Why does small business fail often?
 Has the government taken steps to help these struggling businesses?
5.3.2 Research Questions:
 To determine how small business in case of the online lending can be beneficial with
the help of the regulations.
 To determine the reason for the failure of the small business.
 To determine the ways how the government has aided the small business to overcome
the struggling situation.
5.4 Conclusion:
From the above research it has been found that the online lenders grows at a faster
rate under the free market situation, however, limited control over the performance of the
same streamline the growth prospect. In addition to this, online lending under the light
governmental intervention faces much amount of exposure and it actually helps the firms

24PRACICAL RESEARCH
which are looking for the loans with least amount of paper work and at a fast rate. With the
growth prospect of the firms, under the limited governmental control restrict them to bring in
any subprime mortgage like situation which is one of the crucial factor that some amount of
governmental control is required on the same. Considering the research objective and the
research aim, it can be said that the research work has been largely successful to achieve the
desirable. From the above analysis it can be argued that, in Australian market one of the main
reason for the failure of the small business irrespective of the market growth lies with the
scarcity of availability of necessary fund. In addition to this, the research has also found that,
it would be ideal for the government to control the online lending market lightly, which can
provide essential boost to the growth of the economy and enhancement of the performance of
the small business too.
5.5 Recommendations:
Under the volatile market condition of the online lending firms in the Australian
market, some amount of the governmental control and legislation need to be formed. It will
aid the online lenders to control their growth path and streamline their performance and
additionally bring in transparency in the business operation. However, online lending market
in the Australian market it is also need to be more reactive and nimble on behalf of the
borrowers rather than the regulatory agencies so as to let the small business avail fund for
their growth. Under this complex situation of the online lending in the Australian economy,
following recommendation can be done:
 Recognize small business online borrowers same as consumers – the difference
between the securities for the consumer loans and small business and that leads rise to
the exploitation of the borrower. Thus, consumer and small business borrower need to
be bringing n under same protection mechanism, which will restrict their exploitation.

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 Going beyond the industry driven self-policing efforts – self policing effort by the
online lenders allow them to perform predatory pricing strategy that exploit the
borrowers by a large amount. However, industry driven policy under the moderate
amount of governmental policies can bring in the market in smooth performance.
 Developing broad principles rather than restrictive rules will be beneficial – rather
than restricting the online lenders to provide loans to the small business, government
should bring in broad principles under which the lenders need to operate. It would
help the small business to mitigate their funding crisis as well as allow the online
lenders to enhance their business too.

26PRACICAL RESEARCH
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