The non-bank lending sector is back – bigger, leaner and more competitive. Now a real alternative to banks, the sector offers numerous options for brokers. And The Adviser is proud to announce 2014’s winners of our Non-Bank Lending Awards
A WORD FROM THE EDITOR
Australia's non-bank lenders have always punched above their weight, taking on customers the majors passed over long ago, growing books without any of the marketing spend of the ‘big guys’ and offering a real lending alternative that’s meant greater competition, cheaper lending and more choice. What’s more, the non-bank lenders have always enjoyed a far more aligned relationship with brokers than the big banks.
And to acknowledge the sector’s resilience and contribution, The Adviser, in conjunction with Advantedge, is proud to announce the winners of our inaugural Non-Bank Lending Awards for 2014. Based on feedback from the broking community, just under 500 brokers took part to give their opinions on which non-banks have the best proposition. The resutls are in, and all is revealed in the coming pages.
Not long back, the sector – and many of its customers – was being pasted by the GFC when the global capital taps got all but turned off. However, with monies flowing again, rates low, and a keen interest in the sector as bona fide, legitimate lenders, non-bank lenders have bounced back stronger than ever.
One non-bank lender whose model all but dried up in 2008’s credit crunch is lending and asset management firm Bluestone. But now, with capital flowing again, Bluestone is re-entering the lending market with the company’s GM, Peter Wood, seeing real opportunities in the mortgage origination and specialist space over the next year and beyond.
“We live in the space the banks don’t,” says Mr Wood of non-bank lending. “We specialise in non-conforming or specialist loans, people with credit issues, the self-employed who don’t have financials, and we believe there’s a big market for that. Prior to the GFC, the market in Australia was worth about $5 billion a year; post-GFC, it’s obviously died away because the capital markets weren’t conducive to writing those sorts of loans.
“It can be hard for non-bank lenders with stock standard loans where there are no credit issues and you’re competing with the huge marketing machines of the big banks. But over the past 12 months, the non-banks have taken market share through the way they approach the value proposition, technology and service levels.”
Mr Wood, however, stresses that non-bank lenders aren’t just for loans the majors won’t touch, rather they’re an important alternative to the big players.
“When you think of the speed to their clients, turnaround of the transactions, the ability for the broker to deal directly with the decision maker at the lender, catering for different solutions, non-bank lenders offer a real alternative for brokers,” he says.
BEST CUSTOMER SERVICE
According to Pepper – winners of this year’s Best Customer Service category – where a lot of lenders fall down in the service department is they’ll take care of the broker or the borrower but rarely put the effort into both. “That’s how you need to think,” says Pepper’s director of sales and distribution, Mario Rehayem, “that you have two customers to service. If the borrower’s unhappy, they’ll be jumping down the throats of the broker for recommending that particular lender. You ignore one to the detriment of the other.”
Mr Rehayem says Pepper has worked hard to build a customer service mentality into staff and into the fabric of the business, and they take customer gripes, criticisms and feedback seriously. “All businesses will say they listen to their customers, but it’s how you respond to the feedback, that’s the crucial part,” he says.
Pepper also proudly flies the flag for non-bank lending, taking on customers others won’t. “You’re your bank’s best friend until some major life event occurs,” says Mr Rehayem, “and then they don’t want a bar of you. Our customers are very loyal; they’ll say Pepper really helped them out when they were ignored by just about everybody else.”
One broker who cast her vote for Pepper in the Best Customer Service category was Naomi Randell from Sydney’s Global Capital Corporation. “You can just call them up and run any scenario past them and they’re very knowledgeable,” Ms Randell says. “They’ll give you a yes or no straight away and always give you clarification to why that is. You just don’t get that level of service from a lot of other lenders.”
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BEST TURNAROUND TIMES
If there are two areas where non-bank lenders can shine against the banks it’s in personalised service and the speed of turnaround times. And, according to voters in this year’s Non-Bank Lending Awards, when it comes to turnaround times, there’s no one quicker than the good folk at Homeloans.
And the award comes as no surprise to Homeloans’ general manager sales Greg Mitchell, who says it’s worked hard to streamline the borrowing process with the recruitment of larger credit and BDM teams and by improving everyday processes.
“Over the past 15 months, we’ve bolstered our credit teams and refined the processes carried out by our decentralised credit assessment operation,” Mr Mitchell says. “This has enabled a more consistent approach between states and the ability to allocate deals to assessors based on their workload as opposed to merely the state of origin of the application.”
One broker who’s keen to declare he voted for Homeloans in this year’s awards is Neil Caswell, director at Queensland’s Finance For You. “Clients want to know immediately,” he says of Homeloans’ turnaround times. “You don’t want clients sitting there wondering if a loan is going to be approved. [Brokers] put a lot of effort in up front, getting the application ready, getting all the supporting documents, getting it submitted, and Homeloans appreciates that and responds accordingly.
“If you submit a deal and you honestly believe the deal is there, you can mitigate it, they are more than willing to listen to the circumstances of that mitigation,” he says.
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MOST INNOVATIVE PRODUCTS
Pepper's Mario Rehayem says you can offer all the innovative products in the world, but if brokers aren’t interested in selling them or customers are rejecting them it can fast descend into an exercise in banging your head against a brick wall.
“We listen to our brokers, to our customers and tailor our products to suit their demands,” he says. “Sure, any product needs to be economically viable for us and it has to tick all the boxes from an National Consumer Credit Protection requirement, but most Pepper products are borne from customer demand.”
Mr Rehayem says Pepper’s point of difference is that it has no attachment to any mortgage insurer. “Sure, there are other players out there who have a similar offering,” he agrees, “but I think Pepper is way ahead of the curve. But it all gets back to service – you can have the best product in the world, but if you’ve got poor service and you have a reputation for poor service, no one’s going to take it up anyway.”
Global Capital’s Naomi Randell was one broker who voted for Pepper in the Most Innovative Products category: “We deal a lot with low-doc loans, and the fact you can just provide an accountant’s letter is just fantastic,” she says. “A lot of other lenders require a lot more information and that can be a pain for the client if they have to go back and forth and keep coming up with more and more documents.”
BEST BDM SUPPORT
Listen to Pepper’s Mario Rehayem and its BDMs are the lifeblood of the business. The gong for Best BDM Support is just reward for the effort the company has focused in that area of the business.
“We’ve designed the Pepper business around the BDMs,” Mr Rehayem says, “and by that I mean there are a lot of lenders out there where the BDMs are the face of the business, where their job is to build the business, increase market share, but then they’re so bogged down by the admin, the paperwork, they just can’t do the job effectively. But we know good salespeople don’t want to deal with all that, so Pepper’s response has been to give them ample support internally so they can do what they do best – chase the business and build the relationships.”
Mr Rehayem says that, in a lot of cases, brokers’ only contact with a lender is through the BDM and so they expect them to do everything – all the backend work, the credits, the settlements – and then complain about the service because the BDM is so time poor. “Not for Pepper,” he says, “our BDMs’ job is to go out and build relationships with brokers and let the backend take care of itself.”
Global Capital’s Naomi Randell is one broker who voted for Pepper in the Best BDM Support category and she says: “They seem to have a strong credit background, which means they’re very knowledgeable and, from my experience, I’ve found a lot of BDMs out there are just trying to sell you something. It’s all sales, sales, sales; while with Pepper they actually seem to know their products and what they’re talking about.”
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BEST FIRST HOME BUYER LENDER
With rates at record lows and house prices seemingly setting new records with monotonous regularity, it’s culminated in one thing – a fearsomely tough market for people trying to buy their first homes. However, one lender who’s keen to net first-timers is Perth-based Homeloans, the inaugural winner of the Best First Home Buyer Lender award.
Homeloans’ general manager sales, Greg Mitchell, says the company has identified first home buyers and tailored products to suit them. “Our MoniPower product enables owner occupiers to borrow up to 95 per cent of the purchase price,” he says. “The product has outstanding features, including the capitalisation of the LMI premium and the use of a secured VISA card priced at home loan interest rates to assist in the payments of fees associated with the purchase of a new home.
“Post-GFC, a lot of lenders have tightened their 95 per cent leads, with many pulling away from it, but at Homeloans we have always had this feature, prior to, during and post-GFC,” says Mr Mitchell.
One broker who uses and recommends Homeloans’ MoniPower package is Queenslander Neil Caswell. “I’ve used it for clients that the majors would not even touch,” Mr Caswell says. “The majors can have a fear of new home buyers, that they’ll go belly-up. But most first home buyers have backers, have parents who support them; they work very hard to keep the mortgage going. The majors can just be a little too onerous, but with Homeloans they treat you like a person, not some number in a queue.”
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BEST INVESTOR LENDER
A pillar of the Pepper business has always been investor lending, meaning it was ideally placed to take advantage of surging demand for its products over the past 18 months. In fact, Pepper’s Mario Rehayem reports that its investor lending has doubled year-on-year for the past three years, such has been customer demand – primarily for investment properties, but also shares.
“I think brokers see Pepper as a good investor lender because a lot of lenders shy away from it, it can be seen as too high risk,” says Mr Rehayem. “But the investor market has proven crucial to the Pepper business and we’ve found our products suit the investor market.”
Pepper investor loans come with the option of 40-year terms, no mortgage insurance and a flexible cash-out policy. And Mr Rehayem says he sees no let-up in demand from the investor market for Pepper’s products. “Last year was particularly exciting for us and I certainly see that continuing for at least the next 18 months,” he proffers.
The overall view of respondents to The Adviser’s poll was that Pepper would go that “extra mile” to get a borrower over the line, which traditional lenders would baulk at early in the process. Matt Fernihough of Melbourne’s Mayfair Loans was one broker who nominated Pepper in the top spot. “When all the majors said it couldn’t be done, Pepper found a way to make it happen,” he says.
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BEST SELF-EMPLOYED LENDER
According to Pepper’s Mario Rehayem, self-employed lending is another area of borrowing quickly consigned to the ‘too hard’ basket by many lenders. An unfounded reputation of risk has meant lenders who do target the self-employed often do with great success.
“It’s an integral part of Pepper’s business,” he says, “and it’s actually one of the more enjoyable and rewarding parts to be involved with, watching these small businesses evolve and do well.”
Mr Rehayem argues banks often “cherry pick” who they’ll lend to, leaving “really good, high calibre clients who are being ignored”.
He says Pepper’s alt doc product is ideal for the self-employed borrower because they can use three different sources of income variation, which opens up a number of borrowing options. “We understand the self-employed market and we’ve seen how tough these guys had it during the GFC, but for those who came out the other side their businesses are stronger than ever, so why should they be prejudiced because of reputation or that they don’t have their financials in order.”
Scott Kirby, a finance broker with Melbourne’s Structured Group, was another broker to put Pepper in the number one spot for Best Self-Employed Lender. “Pepper has good flexibility with its credit policy and good access to decision makers. It’s very collaborative in the approach of the assessments,” Mr Kirby says. “There’s always a bit of caution around self-employed lending and Pepper is just more receptive to those sorts of loans.”
BEST SMSF LENDER
WINNER: LIBERTY FINANCIAL
Arguably the fastest growing sector for brokers over the past 18 months has been the self-managed super fund (SMSF). Some brokers have been quick to adapt while others have largely ignored it, preferring traditional routes of finance. One non-bank lender firmly in the ‘early adopter’ category has been Liberty Financial; deserved winners of this year’s Best SMSF Lender category.
According to the company’s chief operating officer James Boyle, it was Liberty’s aggressive innovation early in the piece that attracted many brokers. “We saw an opportunity and we moved quickly because we understood that’s what brokers wanted,” Mr Boyle says of SMSF lending. “It’s a terrific opportunity for brokers to offer clients a new product and, for sure, some brokers haven’t involved themselves in it yet and, for sure, it does require some sort of application. But there’s no question that SMSFs offer significant growth opportunities for investment vehicles, and the lending within SMSFs has certainly been growing well above your standard home loans for investment purposes and owner occupiers.”
Neil Cato, a finance broker with Sydney-based Perception Finance, voted for Liberty in the Best SMSF Lender category. He says: “Liberty just makes SMSF lending simple. There’s great assistance for the broker and the borrower and they just take the confusion out of the entire process. The BDM support is outstanding with returned calls and a very high knowledge of scenarios.”
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BEST COMMERCIAL LENDER
WINNER: LIBERTY FINANCIAL
According to Liberty Financial’s James Boyle, the big banks “have done a pretty ordinary job” of looking after a lot of smaller businesses that are exposed to certain industries, which has meant a real opportunity for Liberty. “We try and review every situation on its individual merits,” Mr Boyle says, “rather than making one credit decision, and the net result is that we’re able to help brokers help their customers more often than not.”
He argues that banks will happily loan to well-established businesses with strong cash flows that have shown to be largely immune from any post-GFC fallout. However, Liberty, he says, has found its niche among smaller ‘mum and dad’ businesses that occasionally struggle but are “fundamentally good businesses run by good business people”.
“The banks will look at industries as a whole or look at regions and make their lending decisions based on that. I think some businesses often find themselves getting poor service from banks for no other reason than the industry they’re in,” says Mr Boyle.
A close finalist in the category was west Sydney-based Iden Group. Company director Barrie Gaubert says of the nomination: “We’re able to offer brokers and customers a more personalised, positive experience. We also offer some very creative points of difference in our product range. Iden also does not compete with brokers via a direct channel or an online channel or a branch network. We are in a people business and we are very fortunate to have some amazing people here at Iden who love what they do in helping customers with their finance needs.”
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BEST CASH FLOW LENDER
WINNER: SCOTTISH PACIFIC
As the old joke goes, how do you stop a Scot from being seasick? Lean him over the side of the boat with a 10 pence coin between his teeth. But debunking the idea that the Scots can be ‘careful’ with money are the very generous folk from Scottish Pacific, winner of the Best Cash Flow Lender category for 2014.
Scottish Pacific has had a presence in Australia for a quarter of a century and specialises in cash flow finance primarily for small businesses hamstrung by 60- or 90-day customer invoices. Within 24 hours of receiving an invoice, Scottish Pacific will pay 80 per cent of the approved invoices, less fees, and the remaining 20 per cent when the customer pays the invoice in full.
Speaking on his company’s win in the Best Cash Flow Lender category, Scottish Pacific’s CEO, Peter Langham, says he is delighted with the accolade. “Brokers are a key source of new business opportunities for Scottish Pacific and we always recognise that they have a choice when looking for cash-flow solutions for clients. The award is an endorsement of our staff’s commitment to working very closely with brokers throughout Australia to make sure we are continually delivering to our mutual clients’ needs.”
One broker who’s a flag-waver of Scottish Pacific is Sam McCarthy, managing director of Brisbane-based Dirigo Group. Mr McCarthy says Scottish Pacific specialises in young, growing, but asset-poor small businesses. “If you don’t have property to put up as security then a lot of the banks won’t touch you,” he says. “But Scottish Pacific is just so responsive. The turnaround is quick, they go the extra mile, they’ll assist any way they can. They’re in the space the banks aren’t interested in – small businesses with less than $25 million a year in turnover without any property assets. It’s these guys who are often pushing the proverbial uphill if they want to get any sort of finance approved.”
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BEST EQUIPMENT AND LEASING FINANCE LENDER
WINNER: LIBERTY FINANCIAL
According to Liberty’s James Boyle, one of the real issues surrounding non-bank lending is that brokers who use it often believe it’s merely for home lending. “It’s terrific to hear that brokers have voted Liberty Best Equipment And Finance Lender,” he says, “because that shows brokers see us as more than just a one-trick pony, that we have options in things like commercial loans, motor loans, as well as home lending.”
Mr Boyle says brokers should seriously look at other lending streams to customers if they want to diversify their businesses. “Liberty has a very fast motor lending business,” he says, “and we’ve been giving brokers who choose to operate in that space a lot of choice. Why shouldn’t a broker who’s done a customer’s home loan sort out the finance for a vehicle too? It’s an ideal marriage.”
And it’s this sort of innovation that Mr Boyle believes should attract more brokers to consider non-bank lenders. “It’s non-banks that have bought innovation to market and brokers who take them to customers, so what I would say to brokers who aren’t using non-bank lenders is to have a think about what’s best for their customers and the industry because the alignment of non-banks to brokers is much truer and much more reliable than the alignment of banks to brokers,” Mr Boyle says.
One unabashed fan of Liberty’s equipment and leasing finance is Greg Thorne from Illawarra Home Loans. Mr Thorne says Liberty “provides the flexibility to finance clients who may have paid defaults, casual employment and also afford longer terms for older vehicles.”
BEST SHORT-TERM LENDER
In 12 short months, Sydney-based Assetline has become one of the industry’s most innovative lenders and The Adviser’s inaugural winner of the Best Short-Term Lender award.
The brainchild of Steven Beinart and Nick Raphaely, Assetline is an online personal-asset based business providing customers with short-term loans – from $1,000 to $1 million – secured against valuables such as precious stones, gold, art, antiques, cars, even fine wine collections. Assetline’s catchphrase is “You worked for your asset, now let your asset work for you”, and loans tend, on average, to be no longer than three months with interest rates starting at about 1.5 per cent per month (depending on size, complexity and length).
Assetline boasts 24-hour turnarounds and there are no income or credit checks required. Ideally the asset held as surety needs to be 50-70 per cent greater than the value of the loan.
Speaking of Assetline’s win, Steven Beinart tells The Adviser: “As a relatively new market entrant, we fill an unmet need in the short-term lending market. Australians own a vast array of personal assets but, in many cases, never consider they could use them as collateral for a loan. We’re accessible, flexible, with no early repayment penalties – and fast. We think this combination has strong appeal to brokers and their clients.”
One broker who’s fast become a fan of the Assetline model is Phil Riches from Finance On The Coast. “It’s refreshing and fast,” he says of the Assetline model. “We believe there is strong demand for what Assetline offers and expect many new and existing clients will greatly benefit from its service.”
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