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So, where do lenders get their money from?

15 June 2017,


One of the trickier parts of getting your head around lending options is understanding how the different models are funded. For specialised lenders like RedZed, we’re not just a little different to the traditional models – we’re a lot different. Which can feed some misconceptions about why different lenders behave in a different way. The truth is that when it comes to lending, traditional funding models don’t suit everybody. And so specialist lending has an important part to play in supporting Australians. In this post we explain the most common types of ways that lenders are funded and offer our take on the advantages of differing models.

Banking on it

The most common source of funds come from the banks. Banks are ADIs (Australian Deposit Taking Institutions). Simply put, the key difference here is that as an ADI, banks are able to accept deposits. This is a far cheaper source of funds than can be obtained from the money markets. Think about the interest rate that the bank pays you for your deposit, in many instances unless you take out something like a term deposit, they are paying very little. Now think about the cost of a home loan or a business loan with that same bank. Big difference isn’t there?

The downside of their large size however, is rigid structures that can’t support the detailed needs of many borrowers. Their processes are based on churning through thousands of clients and are unable to tailor solutions which means many people are left unserviced, in particular self-employed Australians looking to get ahead. It also means they have less flexibility with how they can assess loans.

Funding ambition

For a multitude of other lenders, money is drawn from a diverse range of sources. The biggest difference being that non ADI lenders like RedZed cannot accept deposits.  

The advantage of  here is that whilst our access to capital can be more expensive, we also have greater flexibility in being able to offer a tailored offering than takes into account the individual circumstances of a customer. We’re not bound by cumbersome structures, and so can provide one-on-one services guided by your personal circumstances and business ambitions. At RedZed, it also means you’re working with a panel of experts who have your success in mind. RedZed’s only accredits broker partners that have extensive industry experience and a track record of demonstrating the highest level of professionalism. Your application won’t be judged by the tick box criteria of a bank teller screen, but a real person with a keen insight into helping the self-employed succeed.

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