Quick fix

Short-term loan periods typically range from three to six months and application turnaround times can be just 48 hours.

The types of client that require a short-term loan vary, but they all have one thing in common: they need a quick fix to end an urgent problem. So, who better than a broker to provide this solution?

Broker benefits

Diversifying into short-term lending gives brokers greater access to clients and consequently, more client retention opportunities.

If you’ve assisted a borrower in one of their times of greatest need, why wouldn’t they stay with you once the short-term loan period ends and greater refinancing is required?

When executed successfully, any alternative solution will result in increased revenue and a competitive edge. Yet what many brokers fail to realise is that short-term lenders do most of the work, enabling an easy referral and pay cheque for brokers. Best of all, there are typically no clawbacks.

House & Home Loans owner Rael Bricker is one successful broker who sees the opportunities. Mr Bricker has offered short-term solutions for 10 years and says they help clients who don’t fit the traditional banking mould.

“The most common use for short-term lenders is in a soft property market, where people are trying to sell high-end property, particularly retirees who are downsizing,” says Mr Bricker.

“They have, from a bank lending perspective, no income or their income is super. They’re downsizing from a $1.5 million property to a $600,000 property and their $1.5 million property hasn’t sold but they need to settle on their new place.

“They realise that yes, they will pay a more expensive rate, but it’s [only] for a three or six-month period and the consequences of them not settling are worse than that.”

Identifying leads

Interim Finance is one of the nation’s top short-term finance providers.

The group’s managing director, Andrew Littleford, encourages brokers to tap into the opportunity within their own books.

“Don’t just regard your database as a farming ground for home loans when it’s very likely that a good portion of your client base are SMEs and, by definition, have ongoing cash flow/ capital requirements,” Mr Littleford says.

“Stock purchases, expansion, tax payments, equipment etc are all common and good reasons why these facilities may be appropriate,” he explains.

“These requirements may be big or small, but may not necessarily warrant a full refinance of their residential property to accommodate this temporary requirement.”

These shorter term loans are generally approved within the day and can take as little as a week to settle – something major banks often can’t do, or have little interest in doing.

There’s a direct and immediate opportunity for brokers to diversify into this lucrative sector and subsequently expand their client base and strengthen their service offering.

Key players

Voted Best Short-Term Lender in The Adviser’s 2015 Non-Bank Lending Awards, Assetline is a force to be reckoned with. The group currently has a dozen broker referral partners, describing them as the company’s “lifeboat”.

Assetline executive director Nick Raphaely says while short-term lenders are not always a suitable solution, “there are definitely times [when] we can save the day”.

“A property developer came to us through a broker and he had to settle on a property which he was going to develop into 15 apartments.

“He’d gone to the bank and the deal was bankable but it got lost in the bank, so he stood to lose the deposit if he couldn’t fund the settlement,” recalls Mr Raphaely.

“When he came to us, we were able to loan him $3.5 million dollars because we felt comfortable with the [client], we liked the project and most importantly, the broker gave us confidence that he would be able to get the takeout finances.

“If it wasn’t for a short-term lender, in that scenario the deal would’ve died, the guy would’ve lost his deposit – which was over $100,000 – and it would’ve been catastrophic.”

DJ Capital is another short-term lender making waves in the broking world. The firm's senior lending manager Bradley Murphy says approximately 70 per cent of the business is made up of broker referrals.

“There really is no set type of client in need of a short-term lending solution,” Mr Murphy says. “Enquiries come from all business sectors, including personal finance enquiries.”

Choose wisely

Brokers are advised to pick their short-term lending partners carefully. They may all offer similar products, but it’s really worth digging a bit deeper to identify their unique selling points. After all, they could become a key business partner.

Mr Raphaely says the group has one major point of difference when compared with other short-term lenders: “We lend against the broadest range of assets in the market,” he says.

“Even though we go head-to-head with the property guys every day, we also have that extra arrow in our quiver which is the ability to ascribe value to the luxury assets. The fact that we can consider both often enables us to get deals done that others can’t.”

DJ Capital’s key point of difference its ability to provide efficiency throughout the whole process, according to Mr Murphy.

“Our systems are more efficient than the major lenders and we are able to approve and settle loans in a significantly shorter timeframe,” he says.

House & Home Loans’ Mr Bricker adds that brokers have nothing to lose but quite possibly something to gain by diversifying into short-term lending.

“I just think it’s a valuable tool for brokers to have in their arsenal,” he says.

“You’re always going to have those out-of-the-box circumstances where if you pull a rabbit out of a hat and find a solution like this, it’s very good for your own profile and credibility.”

Interim Finance’s Mr Littleford says his company provides best-in-market rates, flexible products and quick turnaround times.

“Whether it’s capitalising on an opportunity or sidestepping a potential problem, Interim Finance can provide financing that meets the specific requirements for this growing market,” he says.