One of Australia’s largest aggregators has launched a new funding product for brokers that allows them to secure working capital for their business by unlocking the value of their trail book.
Launched by Connective in partnership with BBBSA, the Connective Broker Funding program enables brokers under the aggregator to use their business and trail book as security to access working capital.
The specialist loan facility can then be used for a range of business growth purposes, including working capital, expansion capital, distress capital or capital return.
It is hoped to enable brokers to access cash flow without the need for personal guarantees or tendering assets, such as property, as collateral.
How it works
The funding is available to Connective brokers that own their full trail, have been in business for at least two years and have a trail of over $2,000 a month.
It can be for capital of between $30,000 to $750,000.
It is a fixed-rate term loan of between two and five years, where the rates are locked in.
The capital can be withdrawn in one lump sum or drawn over a period of time.
Although the rates are set on an individual basis, they are expected to be between 11 and 13 per cent. However, the longer the term, the higher the rate.
Connective has said that it will allow brokers to also leverage any inactive or old trail books they may have from before they joined Connective.
To apply for the Connective Broker Funding program, brokers submit a registration form and then receive a 30-minute call from BBBSA, after which an indicative offer is made. After receiving the trail and business case information, BBBSA performs a valuation on performance. Once finalised, an offer is made in writing. If accepted by the broker, the BBBSA does the paperwork and sets up the loan payments.
‘A dedicated type of funding, specifically crafted for brokers’
Speaking at a Connective professional development day in Sydney yesterday, BBBSA managing director Jeff Zulman said: “Australia has a very good, advanced banking system that understands very well how to securitise a mortgage in place against a property or another piece of hard asset. But, they are not particularly advanced in allowing people to use and monetise cash flow streams.
“We've had a breakthrough in the last few years and now the cost of funding has come down, it has become available.
“This has been on the drawing board for almost two years now, and it [provides] a dedicated type of funding, specifically crafted for brokers. It’s an opportunity to use on a standalone, limited recourse... your trail book as an asset that you can now monetise.”
Touching on the different ‘buckets’ that the capital can be used for, Mr Zulman said: “The first bucket for capital is available for people who need working capital; money to grow your business. Whether it’s to hire additional staff for marketing, if you wanted to lease a new premises and there’s a fit out, providing there is... something that correlates as to why it should add value to your business, you can access capital for that.
“The second bucket is for expansion capital, or what I call 'inorganic growth'. Not from writing more loans, but by buying a book or entering into a joint venture or something that allows you to expand the business outside of what you currently have.
“The third one is distress capital. Let’s face it, in life and in personal services business, people get divorced, people get sick, people die... Connective understands that if you can focus without the extra stress of worrying about the finances in your business, and you can get someone to help you to put that aside, you can be better in what you do — they can get more volume, everybody's happy.
“Finally, when you have to invest in your business and not necessarily yourself, that fourth bucket allows you to take a bit of respite and take some money out.”
Connective director Mark Haron, commented: “Our aim has always been to help our members establish a business that becomes a valuable asset. Our flat fee model means that our members own 100 per cent of their business and trail book, so Connective Broker Funding provides them the opportunity to re-invest that asset into their business growth efforts.
“Most of our members are business owners looking to succeed in a highly competitive, fast-paced industry. To achieve this, brokerages often require capital but securing a business loan can sometimes be a challenge. Connective Broker Funding gives our members another option to secure funds for their business, so they can keep doing what they do best – looking after the needs of their clients.”
[Related: Insight: Jeff Zulman - Book Buyers Brokerage]
Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers. As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast.
Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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