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Short-term lending is worth the effort for brokers

by Andrew Littleford8 minute read
Short-term lending is worth the effort for brokers

Writing a short-term loan is commonly viewed as complex and often placed into the 'too-hard basket'. The more pertinent consideration should be whether the return is worth the effort.

Diversification into short-term lending provides a highly profitable alternative income stream and has a significant return on time invested. Transactions are generally finalised within three to 10 days, with the broker paid on the day of settlement. Depending on the associated risk and duration, this is typically around a $5,000 commission for a $250,000 loan.

Market potential also affects the scale of return. Globally, short-term lending is a growth industry. In Australia this corresponds with a rapidly evolving SME sector that continues to demonstrate strong demand for short-term loans. Such loans provide an often-crucial cash injection to enable businesses to expand and/or bypass cash flow issues. That can include paying creditors, purchasing stock, paying the ATO and GST, providing working capital or bridging finance. Assuming rates are competitive, such loans provide a positive alternative to clients who may not meet institutional lending standards.

The upside of the NCCP legislation and the growing presence of professional lenders with corporate models is that the industry is becoming much more streamlined and brokers can now be completely assured of writing compliant short-term loans.

It's worth keeping in mind that short-term lending is in the same gene pool as mortgage lending, so the process is essentially the same. Having said this, like any niche market, it requires an understanding of both product and processes in order to maximise opportunities.

Short-term lending provides a direct opportunity for brokers to boost their bottom line, expand their client base and strengthen their service offering. We encourage brokers to realise the potential of this growth market and its lucrative opportunities with confidence.

 

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