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Business isn’t always easy for Australia’s small and medium-sized enterprises (SMEs). But if there is a quality that characterises this sector, it’s resilience. We sit down with Guy Callaghan, CEO of Banjo Loans, to unpack key insights from the latest SME Compass Report and learn what brokers can do to support the engine room of the Australian economy.
Q. What challenges have characterised the SME sector in recent years?
It’s been a perfect storm for SMEs in Australia.
During COVID-19, nobody knew what was going to happen. The economy basically ground to a stop. Businesses had to pivot suddenly to online revenue and really drive that. It seemed like we were coming out of it, but then the economy turned and, for a lack of a better word, tanked. We had 13 interest rate rises over a couple of years. Inflation was going through the roof. So, SMEs have been doing it really hard.
Q. How have these challenges been reflected in the most recent SME Compass Report?
Inflation is still the number one concern forwith SMEs.
One of the big things SMEs did when inflation was kicking in (around 2023, when we had the rate rises) was increase their prices. That was their natural reaction to try and counter what [was] happening with their supplier costs going up. In the last 18 months, [SMEs] have realised the consumer can’t take [price rises] anymore and their revenue is flowing away because of the drop in demand.
Instead, they’re doing smart things like seeing where they can cut costs. They’re looking at how they can use technology better. They might be looking at their location, their premises, and seeing how they can do that better. They’re looking at ways to be smarter with their staff.
So, they’re changing away from price rises to what they can do internally to help them survive and get to the next stage.
Q. What other barriers have stood in the way of SME growth?
Interest rates going up [had] slowed down SMEs’ access to funding. The cheapest funding out there is through the banks, but the banks have got tougher because the economy is a lot tougher. So, they are giving less money out to the SMEs and access to funding has been tough.
Slower payments are something [else] that we’ve seen. Debtors are taking longer to pay, so SMEs are having to be smart around getting on top of their cash flow.
Q. Why is the SME segment such a compelling opportunity for brokers?
I think the home loan market has flatlined for quite a while now, so there’s needed to be a bit of diversification.
Brokers are fantastic at relationships… they do such a great job in the market. They’re personal people and they want to hear about the businesses. So, brokers are filling the hole where the banks have traditionally been.
Q. How can brokers use their networks to win more deals with SMEs?
Australians love a relationship. That’s how we run business. It’s how we thrive.
When you get to know people on a deeper level, get to know their real pains, their fears, what’s keeping them up at night, then you can understand their financials.
And it’s not that hard. It’s not rocket science. But if [brokers] can take that extra step, it’s just going to come back to reward them so much.
Q. How have lenders such as Banjo Loans filled a gap in the market for SMEs?
When we started, 10 years ago, there wasn’t really a market for non-bank lenders with SMEs. But it’s built to a stage now where it’s such a vibrant competitive market that’s really looking after SMEs on the commercial side of things. It’s a clear option for them now.
A broker becomes really important in the relationship with clients, just understanding where they can go and what they can do. I think a lot of SMEs still don’t know what’s available.
We want to be the favourite non-bank business lender in Australia. We want people to come back to us and use us again and again and again.
Q. What gives you cause for optimism about the SME sector?
The one thing we know is that [SMEs] are such a resilient lot.
They’re really positive, and they look for ways in which they can not only survive but grow, prosper, and drive their business to the next level.
For all that we’ve seen and all the hard work [SMEs] have had to go through, they still [see the world as] a glass three quarters full, – which is awesome for the economy.
Tune in to hear more!
Find out more about what Banjo Loans is doing to help brokers better support SMEs in the In Focus podcast episode, ‘How to steer your SME clients to growth’, here:
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