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Bibby Financial Services says brokers should offer debtor finance as a way to create a point of differentiation to the banks.
The firm’s managing director, Mark Cleaver, told The Adviser that growing SMEs are crying out for an alternative solution like debtor finance – something brokers can provide.
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“One of the things that SMEs have actually told us is that actually accessing alternative pieces of information is of growing importance. Where can they get that from? They can get it from a broker,” he said.
Mr Cleaver noted that debtor finance isn’t of particular interest to the banks, so brokers could see a boost in their business by choosing to explore this space.
“Our industry isn’t well known because the banks are not really heavily invested in it,” he said.
“One of our big challenges is to help independent brokers really understand how the products work so they have a better alternative, in the right set of circumstances, to offer to their clients.
“It’s clear from [our research] that SMEs are looking for advice, and while they can go to the internet, I still think quite a lot of people have a preference for having a chat, and I think that’s what brokers are there for – to impart their knowledge and their wisdom, and say ‘there are other routes available’.”
Mr Cleaver said there are two common misconceptions surrounding debtor finance that need to be cleared up.
“The principle misconception is about price. Immediately people say it’s very expensive, and that’s not actually the case,” he said.
“The other misconception is that it’s for companies who are in trouble – but now with the SME sector, the banks aren’t investing in a lot of people to understand how businesses operate, so what happens is you make an application, it goes into credit scoring, and if it’s not quite right, it’s a no unless you’ve got a property to secure the loan.
“What we find is it’s best for growing businesses. If a business is growing, it might need 100,000 working capitals this month but next month need 110,000, then 120,000, then 130,000 because it’s growing. Therefore, the amount [the business] needs to borrow should grow as well.”
Mr Cleaver said Bibby Financial Services can assist brokers looking to make the move into debtor finance.
“I think our absolute key point of differentiation here is – without trying to sound cliché – we don’t transact over the telephone. We go out, sit down and really understand the specific needs of the business,” he said.
“We have 15 BDMs adopted all over Australia, so when a broker picks up the phone and says ‘I’ve got a client here who’s got a cash flow problem – can you go out and talk to them about your solution?’, that’s what we do.
“We get out there and within 24-48 hours and get them to talk about their business, what their business needs are and try and tailor-make a solution.”
Mr Cleaver added that Bibby does not tie its customers into a fixed-term contract.
“If they foresaw themselves having a cash flow problem for six months, that’s fine – we’ll help them for six months. If they have it for six years, we’ll help them for six years. There is no fixed-term with Bibby,” he said.
