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The current economic headwinds have opened opportunities for brokers to diversify their offerings as the SME sector is neglected by mainstream lenders, according to non-bank and SME specialists.
The Commercial Finance Market Update webinar held on 24 March explored the current state of the commercial finance sector, touching on what the opportunities are for brokers going forward.
The webinar took perspectives from Matthew Porch (head of distribution at non-bank lender Aquamore), John Clifford (head of third party at SME lender Lumi), Trent Carter (co-founder of SME finance coaching company Accendo Financial), and Gabriel Barcia Isola (managing director at finance brokerage Velox Capital).
According to Mr Porch, brokers have opportunities in the commercial space to “utilise alternative finance now more than ever” as the major lenders pull back on the commercial sector and remain focused on the home loan market.
“Brokers have to diversify to survive. They will also need to keep a keen eye on their lender’s policies and get out of their comfort zone in respect of meeting new lenders and taking the time to understand their product suites,” Mr Porch said.
Mr Clifford stated there’s an opportunity for brokers to build stronger relationships with lenders that will survive as the possibility of a recession looms and brokers that are too focused on one lending space run a risk.
“If you were to take data from as far back as 40 years ago, 70 per cent of the major banks’ balance sheets comprised loans to business, with 30 per cent mortgages,” Mr Clifford said.
“Today, those figures have reversed — banks are more and more home loan lenders.”
As a result, there’s an opportunity presented to commercial and asset finance brokers to be a trusted intermediary, according to Mr Clifford.
“SMEs are the beating heart of the country both in terms of the number of people they employ, and the innovation they drive so there’s something wrong if the right level of capital isn’t deployed in this sector,” Mr Clifford added.
Mr Carter said no matter the economic cycle, “brokers should be able to respond with solutions”.
“In time of growth, we are there to assist in funding expanding footprint, acquisition of plant and equipment and having the cash to grow responsibly,” Mr Carter said.
“In downtime it is all about cost controls, getting access to capital when markets tighten and of course being opportunistic in a market when the competitors are withdrawing from the market.”
Mr Isola suggested brokers should “ramp up the advice piece” to customers to make broker-client relationships “stickier”.
He added that brokers should broaden their income streams to cover residential, asset finance, commercial finance, SMSF, and private lending.
NSW SMEs feeling the pinch
The webinar comes amid growing pressures on small business cashflow as costs increase.
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According to the latest round of ScotPac’s SME Growth Index, which asked Australian small and medium-sized enterprises (SMEs) to name the top three areas of rising business costs, 67 per cent of SMEs in NSW nominated higher wages, compared to 61 per cent for the rest of Australia.
Following this were compliance costs as the next highest rated cost by NSW SMEs at 60 per cent, compared to 53 per cent from other markets, while transport and logistics expenditure rounded out the top three areas of cost rises, with 51 per cent of SMEs listing this area as a pain point (although this was lower in NSW at 49.5 per cent).
[RELATED: NSW SMEs hit hardest by cost pressures: ScotPac]
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