The association has urged brokers to upskill to “properly” service the SME market, which it said is growing frustrated with major lenders.
The Finance Brokers Association of Australia (FBAA) managing director, Peter White, said that the small-to-medium enterprise (SME) market represents a significant opportunity for brokers, but suggested that brokers would need to acquire greater knowledge to service the segment “properly”.
“The big banks have lost touch with small-to-medium business customers,” Mr White argued.
“These clients require flexibility and support, but instead they are being assessed with rigid credit guidelines and offered bank products that don’t meet their needs.”
Mr White noted that “many” brokers have already been undertaking independent professional education to improve their knowledge around and better understand business balance sheets and profit and loss statements, which he said is essential to meet a “widening” gap in the finance market.
“The government’s current decisions around responsible lending ensure easier access to credit by SMEs, many of whom brokers already deal with through home mortgages.”
Mr White pointed out that small businesses often use their homes for security when securing a business loan, and they are more likely to default to the institution with which they bank.
“Many business owners are not aware of the significant increase in fintech and non-bank lenders, but unless finance brokers understand this market – and this includes the ability to comprehend business accounting practices – our industry won’t be able to take full advantage of it,” he said.
Mr White said that the FBAA is interacting with Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson to explore avenues for brokers to better assist SMEs.
Speaking about the potential for brokers to service SMEs, Mr Billson told The Adviser: “There are so many different finance options for small business nowadays.
“Accredited brokers are uniquely placed to help their small-business clients find the product that suits their needs. Small-business owners are time-poor and need quality and reliable advice so they can access the right-fit finance they need to grow their business.”
His comments have followed the release of research commissioned by Judo Bank in March, which revealed that one in four SMEs was unsuccessful in obtaining finance.
Furthermore, 21.0 per cent of SMEs cited cash flow management as a key hurdle they are currently facing.
The funding gap for SMEs with a turnover of between $1 million and $20 million widened by $4.6 billion to $94.3 billion since 2019, according to the report.
In addition, one in five SMEs reported no interaction with their bank whatsoever during the coronavirus pandemic lockdowns, while only 15 per cent of SMEs who had had some form of contact with a banker at one of the major banks described the interactions as “high quality”, and 54 per cent said their interaction was low frequency and low quality.
Recent research from Prospa indicated that one in four small businesses intends to take out a borrowing product this year, which the lender said provides a growing opportunity for brokers.
Commenting on the Judo Bank research, Mr White said: “These figures confirm that there is a huge market being taken for granted by the big banks, which finance brokers can tap into through offering quality service and knowledge.”
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.
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