A better future

Beyond that, their financial situations, personal circumstances and reasons for needing finance are many and varied – like any other borrowers.

“A specialist borrower is not necessarily a credit-impaired borrower,” says Pepper’s director of sales and distribution, Mario Rehayem. “There is no general category for people who need specialist loans.

“Specialist borrowers, however, do find it difficult to obtain finance from traditional lenders.”

According to Mr Rehayem, people who use the non-bank sector for a specialist loan come from all kinds of backgrounds – and they are looking for a better future.

“At Pepper, we service a large spectrum of different borrowers; from [those with a] prime to slightly impaired credit history,” he says.

“These borrowers include those in full-time employment, small business owners, self-employed applicants, property investors, those who have been given a gifted deposit, those with past credit impairments and people who simply don’t conform to traditional lending criteria.”

What happened?

Fundsnational’s Giulio Avian says borrowers often find themselves in need of a specialist loan due to circumstances beyond their control.

“If a client doesn’t fit normal lending criteria, it is usually a by-product of something that’s gone wrong in their life,” he says.

“We’ve dealt with many, many clients over the years and we’ve found that somebody who is in arrears, has defaults or is financially struggling, has normally had something happen in their life which has resulted in the individual or the family being unable to handle their day-to-day affairs.

“Things like loss of employment, illness, breakdown in relationships, a couple of bad business decisions for small businesses and bad debtors can all contribute. ... Needing a specialist loan is not a reflection on the individual.”

When it comes to specialist borrowers, there is more than meets the eye, Mr Avian adds.

The market is filled with people who need help but feel helpless, he explains.

Recently, Mr Avian helped a client with $120,000 of credit card debt and a mortgage in excess of $600,000. The circumstances that had caused the borrower to spiral out of control are now taken care of and her employment is on track.

“But obviously she didn’t fit normal lending criteria,” he says.

The self employed sector

The self-employed sector is often described as the ‘backbone’ of the Australian economy. But given the nature of their business model, self-employed people are often out there on their own. So, what does this sector of the economy look like?

Mr Avian engaged a debt solutions company and negotiated the credit card debt down to $70,000. The borrower was refinanced into a Pepper loan and is now in a better position to meet her repayments.

“Here, you have someone who had no idea how to get through this. We identified that the client had something go wrong in the past, so by saving them $50,000 and getting them back on track, we changed their life,” he says.

According to Mr Avian, there are countless similar cases where people with a problematic past feel stuck because they can no longer meet traditional lending criteria.

“We had a similar situation where someone had high credit card debts and needed to be refinanced because they were struck down with cancer,” he says. “Really, really tough stories where we’ve been able to help people.

“When we do these things, we change people’s lives. That’s something that we take great pride in.”

Market outlook

“If the banks continue to tighten their credit policies, catering to specialist lending requirements will mean that you can help more clients, and that means your business will be better in the long run,” says Mark Haron, principal at Connective.

Mr Haron believes the specialist lending market will thrive in 2013, something with which Pepper’s Mr Rehayem agrees.

“Based on historical performance and two years of consistent growth, we are confident that 2013 will be another good year for specialist lending,” Mr Rehayem says.

“Brokers are receiving, and will continue to receive, better education on the benefits and opportunities in the specialist lending market.

“They are acutely more aware that the banks are tightening their credit policies and that they will need to diversify if they wish to continue to service a broad client base.”

The specialist borrower

There are no clearly defined circumstances that apply to all specialist borrowers. Both unexpected events and regular occurrences can cause people to require specialist loans, including:

• Bad business decisions
• Relationship or family breakdowns
• Mental or physical illness
• Credit card debts
• Self-employment
• A short-term employment history
• A lack of traditional documentation

Once you understand why the potential borrower is in their position, you are more likely to be able to analyse whether you can help them out of it.

Quick self employed sector statistics