The head of the FBAA has noted that more mortgage brokers are writing and learning about business finance following the royal commission, with Aussie statistics also showing a growing trend in asset finance deals being written.
Speaking to The Adviser at the Industry Commercial Masterclass in Sydney on Thursday (27 June), hosted by the FBAA and Vow Financial in partnership with La Trobe Financial, the managing director of the Finance Brokers Association of Australia (FBAA), Peter White, said: “A couple of years ago, the FBAA and Vow Financial got together to structure and build this event. It’s not for our brands, it’s for the whole industry.
“There were so many issues in the commercial lending space back then. People thought it was an easy thing to do, that it was a tick and flick and then they expected to get paid a lot of money for it because the deal size is generally bigger [than a mortgage].
“So we thought that we have to help people gain better skills in doing this, how to write better executive brief summaries, how to actually put the application together, but even before they start doing that, how to actually talk to the client,” he said.
Mr White said that the need for education in commercial finance was particularly pertinent given that the “diversification conversation has expanded a lot since the royal commission”.
“Mortgage brokers were looking around and thinking how to diversify their businesses and cover more of their clients’ needs during the royal commission. It’s a trend we’ve seen continue. So we’re helping educate everyday home loan brokers to understand what is available in this segment of the lending market, how you go about writing business finance, and what is happening in that business person’s industry that you need to know.”
Mr White suggested that brokers with restauranteur clients need to understand “why bums on seats are so important”, while those with developer clients need to be well versed in “pre-sales about or GRVs [gross realised values]”, and brokers that have hotelier clients will need to be across “vacancy rates and understanding the relevance and the percentages that impact them”.
“Because at the end of the day, if you can’t build that relationship and rapport with that business person, they’re not going to give you that business.”
The head of the FBAA concluded: “The end of financial year always sees a big push [in SME finance] because people try and get things finished because there are tax implications. But this is a market where brokers have only a very small percentage of penetration, so there is a huge opportunity to do a lot for clients.
“The important thing is to know the client, know the business, know the lenders… because there are so many options in business and commercial lending, brokers need to understand what they are after, and what lenders have particular appetites for, because that will have really huge benefits as to their niche in the business and lending community.”
Asset finance expected to grow
Mr White’s comments come as Aussie Home Loans revealed that it also expects demand for asset finance to grow dramatically over the next financial year from individuals, the self-employed and small-business owners.
The major brokerage brand first launched into asset finance in 2016, following growing demand, and has said it expects to double the volume of asset finance loans in 2019-20. The brand has reportedly seen nearly 1,000 loans written by its brokers since its national launch last year.
Mr David Smith, chief customer officer at Aussie, said: “We are seeing increasing demand in car and equipment finance, especially in the lead up to June 30, 2019, as small businesses gain a tax break with asset purchases under $30,000.
“Aussie stores are now investing in dedicated asset finance brokers, who are benefiting from the increased confidence that was generated in the business sector following the recent federal election result and cash rate cut,” he added.
Mr Smith continued: “We are finding strong demand from motor vehicle customers who are enjoying the fact that we offer a range of lenders and options instead of being tied to just one financier, as often happens with car dealers.
“Many of those taking up asset finance with Aussie are home loan customers, who have used and trust our model to provide them with competitive financing options for their businesses, investments and residential needs,” he concluded.
Find out more about writing asset finance deals in The Adviser Live – EOFY Special: Asset finance in focus webcast, the Elite Broker podcast with asset finance broker Josh Ugo, or learn some of top tips on writing asset finance.
You can also find out more about asset finance, and SME finance more generally, in the June edition of The Adviser magazine, out now. A feature from the magazine, focusing on understanding cash flows, is available online.
[Related: Understanding cash flows]