Securing finance is becoming tougher for small business clients, with both specialist lenders and brokers confirming they are increasingly picking up business in this area.
As banks tighten up on credit and pull back altogether on perceived riskier financing arrangements, like business borrowing to SMSFs, the options on the market have reduced to such a point that both the Productivity Commission and the Australian Small Business and Family Enterprise Ombudsman have told the government that the market needs more credit options to sustain viability.
This shift has created a perfect storm of conditions for specialist brokers like Standard Integrated Lending Solutions, which focuses on sourcing financing options for accounting and financial planning firms.
The firm, which launched two years ago, has had the lion’s share of its growth and market penetration come in from the last four months.
“We’re finding our clients, who are pretty safe operators, are happy to explore new options for their clients, like low doc options or structures which can cut out mortgage insurance,” partner at Standard Integrated Lending Solutions Tony Caine told The Adviser sister title Accountants Daily.
“For the accountants we work with, there’s fee pressure out there, and clients are pushing back on their fees. More and more, we’re seeing an appetite for options they might not have considered in the past.”
It’s a similar story for Banjo Loans, which has been capitalising the major banks’ struggle to categorise and ascertain risks in small business lending.
“A lot of the banks have struggled to service the SME segment on a competitive basis. Small business, in that segment, is not a homogenous group. Each business is different — the financial information isn’t as good as it would be for a large corporate, and the banks struggle with that,” Banjo Loans chief executive Andrew Colliver told Accountants Daily.
Mr Colliver was with NAB for six years prior to co-launching Banjo Loans.
“Those clients often don’t have relationship managers, and there’s no way of training the call centre managers they’ve got to understand each individual need,” Mr Colliver said.
In line with ASIC’s findings in its second survey of the marketplace lending industry last year, Mr Colliver said that, despite a shrinking market of traditional lenders for small business, demand is building for alternative lending options, which is partly motivating Banjo’s increasing push into the accounting market.
“We’re continually reaching out to accountants and brokers across the country to increase our market awareness. In fact, we’re visiting them across the country, and building and improving interfaces for accountants,” Mr Colliver said.
The comments come as non-major lenders see a surge in SME business lending. Earlier this month, short-term lender Semper Capital revealed that it had seen second mortgage loans surge by 64 per cent year-on-year, with the majority driven by demand from SMEs.
The theme of improving access to finance for SMEs has also preoccupied regulators and government officials recently, with the RBA hosting a roundtable discussion on innovations in small business finance in June, and the Australian Small Business and Family Enterprise Ombudsman putting forward eight recommendations to help address the “market failure” that is resulting in a limited supply of patient capital for growth for SMEs.
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