Getting into business

NAB Broker was the principal partner of both one-day intensive boot camps, which were also supported by Suncorp Bank, FAST, Bluestone Mortgages, Semper Capital, MyState and Thinktank.

Hosted by leading business coach and speaker Tony Gattari, the agenda included an in-depth look at the anatomy of SMEs, including what brokers need to know to win business from Australia’s self-employed borrowers.

An industry panel discussed the challenges and opportunities for brokers looking to enter the business lending space, followed by Better Business Summit speaker Adam Franklin’s engaging talk about how brokers can use digital marketing to target new clients in the SME community.

A broker panel included industry heavyweights Jeremy Fisher, Andrew Kelly and Greg Wells, who shared their respective experiences in business and commercial finance.

Addressing a roomful of brokers at the Sydney event on 27 October, NAB’s head of commercial broking, Chris Thomas, highlighted that brokers participate in 25 per cent of business lending transactions in Australia.

“Brokers are the trusted adviser to circa two million SME owners in this country as they look to seek and arrange their financing with banks,” Mr Thomas said.

“That is a growing trend. It’s a growing trend because of the same reasons you’ve been able to grow those relationships with the Australian consumer – you take your time to build relationships and your advice is trusted.”

What SMEs want

Brokers were given a unique insight into the characteristics of small businesses and the needs of self-employed SME owners at the Sydney event.

Craig West, executive chairman of the SME Association of Australia, pointed out that of the two million SMEs in Australia, 1.2 million of them have no employees.

These clients are always more complicated than a school teacher with a group certificate, Mr West pointed out.

“The number one problem with these small business owners is their financial records are not fact,” he said.

“It’s just like watching Disney: it’s a fantasy, it’s not reality. The first thing you need to know about SMEs is they’re more complicated.”

Mr West said that, for brokers, this should be seen as an opportunity rather than a challenge: “It’s a fantastic opportunity because most business bankers don’t understand this demographic of our small business.

“Of course there are great business bankers around the country, but the reality is these people need a trusted adviser to help them navigate this complicated pathway that we’re about to walk down – that should be your role.”

Growing businesses aren’t the only ones that need brokers, Mr West said, highlighting that more than half of the business owners today are over 50 years old.

“You think succession is a reasonable opportunity for finance? Absolutely, it’s huge, it’s massive,” he said.

“I’m working with at least 20 clients today in Sydney who are trying to exit their business and the only problem they have is funding.”

Part of this problem, according to Mr West, is that while the big banks advertise the fact that they have plenty of money to lend to small business, SMEs continue to struggle to obtain finance by going direct to lenders.

“A personal, unsecured credit card is the number one source of finance for small businesses,” Mr West told brokers.

“Guess what number two is: family, friends and fools – people that are silly enough to give them $50,000 unsecured, or whatever they need.

“They are the number one and two sources of finance for small businesses, mainly because they don’t know what to do, who to talk to and how to access finance anywhere else.”

Broker insights

In addition to hearing from keynote speakers and a panel of lenders, brokers gained valuable knowledge from their own peers.

At the Sydney event, 1st Street director Jeremy Fisher explained that he has only recently diversified into commercial lending.

“It’s only been the last few years that we’ve really focused on the commercial lending side of the business in regards to actually bringing it in-house,” Mr Fisher said.

“That has been quite a challenge, but also quite a successful move to actually up-skill ourselves in the commercial space. Within the office, there’s a couple of brokers who are doing commercial lending and the remaining brokers are referring to them effectively.”

While he also writes commercial loans, Mr Fisher admitted that the bulk of his business is still residential mortgages.

“To me, the biggest challenge is that it is a different space to residential lending,” he said.

“It’s learning how the lenders work, the new lingos, timing – things are a lot slower in the commercial world. It’s understanding that it’s very different than the residential space, but at the same time there are a lot of similarities. It’s still challenging and I’m still learning myself and may be for a long time, I think.”

Commercial lending is still a small proportion of 1st Street’s total volumes – somewhere between 10 and 20 per cent, Mr Fisher said – but it is growing.

“The 10 per cent could become 20 or 25 per cent,” he said.

“I’d be happy with that. I’m conservative by nature, so I do believe there’s a lot more opportunity out there as for how much.”

Towards the end of the day, brokers were given the opportunity to hear from Australia’s leading producers of commercial and business lending products.

A product-focused, ‘speed dating’ session involved short, sharp and interactive sessions designed to help brokers maximise their product knowledge.

SPEAKER HIGHLIGHTS: Craig West, executive chairman, SME Association of Australia

WHAT SMEs WANT:

“What is it that small business owners want, need and require to be more successful in terms of funding? Small business owners need a trusted adviser to rely on, and if funding is one of their biggest problems, that’s a great solution.”

MINE YOUR CLIENT BASE:

“Look at your client base. How many clients have you actually got that are SME business owners? Have you got an avatar of what they look like? What do they buy? What are they worried about? Then develop a strategy around that. Can you get closer to an accountant who works with small business owners? Rent office space from them, meet with them once a week, share clients – do whatever you’ve got to do to get involved.”

GENERATE REFERRALS:

“I reckon I personally give out 10 referrals a week to other advisers – accountants, lawyers, financial planners, mortgage brokers, banks, business coaches, marketing experts… doesn’t matter. I use a notebook and draw, in the bottom corner, a semi-circle and that semi-circle is for one thing: it’s for me to write in that little area who I should introduce this person to. I do it in every single meeting. If I go to a coffee meeting, I’ll put a little circle down there and by the end of that meeting I would’ve written a name in there and that name is someone that when I go back, those notes go to my PA and she will arrange the introduction. That is hugely valuable. Suddenly I’m giving out introductions left, right and centre. Why is that important? Because the thing that drives referrals in my business is the referrals I give out. The same thing will work for you, it’s not rocket science.”

Craig West is a strategic accountant with more than 20 years’ experience advising business owners. His company Succession Plus has offices in four cities across Australia.

KEY TAKEAWAYS

I think first and foremost you’ve got to set your mind with clarity on what you’re trying to achieve. If you don’t see commercial as something you are interested in and you don’t want to invest the time to do it properly, don’t do it. If you make the decision that this is something you want to focus on, then preparation is absolutely key. Business owners are time-poor. They do expect advice and they expect expertise, so that credibility word comes up immediately. It doesn’t mean to say that you have to have all the answers, but you need to surround yourself with people who can add strength to your credibility.

Chris Thomas, NAB head of commercial broker

The biggest mistake would be not doing anything about it. Work out where the opportunities are by firstly understanding your client base as it is today. You might have a theme in your portfolio around self-employed contractors. If you’ve got a theme of that, how can you as a broker meet their business needs? You can start to bring mortgage solutions to their employees.

Brendan Wright, FAST CEO

AS SMALL business people yourself, you really have a capability to establish a stronger, empathetic relationship with your customers. You can do that so much better than a lender can, so you’re in a really powerful position. A lot of small businesspeople don’t know who to go to, they don’t have a trusted adviser, so I just think that it’s a powerful opportunity for everybody.

Robynne Frost, Suncorp Bank national manager of small business and commercial 

BROKER PANEL:

Here's what Australia's leading commercial business writers had to say...

If you love what you do, you’ll do it well.

As far as percentages go between commercial and residential, this conversation five or six years ago, commercial wasn’t a big part of it because the banks were really quite tight on commercial.

That circumstance has changed now and the commercial appetite is there and it’s growing. Where it was 10 to 20 per cent of the business, now it’s 40 per cent.

The home loans are really good revenue. They are something that I enjoy doing, but I really enjoy the commercial piece. But you do have to put more time into it.

At the end of it, it’s also quite rewarding because a lot of the stuff I do is trading businesses. You get involved in the nuts and bolts. I saw a client … and she’s doing a home loan. All we were doing is refinancing a home loan and it was a really tough one and we got it done and she said ‘Would you mind talking to my boss?’ and we said ‘Yeah okay, what does he want?’ He was a doctor and he was after a $5 million home loan and a $2 million SMSF and it was just out of treating that girl with the respect that she deserved, she simply referred it on.

We’ve all got stories like that; we’ve just got to continue to do it.

Andrew Kelly, principal, Anasta Finance Consulting

I spent 25 years in the banking industry, so in 2001, I started as a broker and started as a commercial broker.

Back in 2001, there was a booming home loan market and not all banks paying their trail for commercial loans. So I’ve gone through this journey from 2001 to today, where it’s been about commercial being a major thrust into a model working with accountancy firms and that provides the broad choice of loans.

Half of our loans are commercial – that includes leasing – and the other 50 per cent are home loans.

We’re readily doing home loans and looking at a holistic approach with our referral partners, like a one-stop shop so we can do everything.

In terms of our volumes, we might do $300 million; $150 million would be commercial.

I run two offices with 10 people; five writers with 200 years’ worth of experience in financial services, so there is a lot of experience.

You look at specialisation within your team, but if anyone thinks of a doctor’s round where you do rounds to look at a patient, you do something similar in finance.

You gather those 10 people – and even remotely with two offices we do this via email – around scenarios, so we’re looking at a particular transaction and looking to get value from people within the team on that transaction, because not everyone has come across a certain deal.

My specialisation might be the higher-end construction type loans. I’ll do a lot of that sort of stuff. Others know the housing rates and know what’s going on there. So you’re looking at your team and seeing what experience they’ve got to add value to your business and get the right solution.

We do all types of finance. We do debtor finance; we do foreign exchange, interest rate risk management, right across the whole area of lending.

Greg Wells, director, Wells Partners Financial Brokers and Consultants