An SME lender has identified opportunities to capitalise on changes in the credit space amid ongoing concern over the availability of credit in the sector.
The continued decline in residential dwelling values has prompted some lenders, including ING, to make changes to credit policies pertaining to finance for SMEs.
Last month, ING announced that it will no longer accept residential property as security for residential loan applications being used for business purposes.
The lending policy changes have come amid growing concerns over the availability of credit in the SME space, with some reports suggesting that the funding gap may be as high as $83 billion.
Such concerns, which have been compounded by credit tightening measures off the back of the banking royal commissions, have prompted calls for reform, which include proposals to broaden the definition of a small business and provide additional tax relief to the sector.
The Federal Parliament has also approved legislation to establish the Australian Business Securitisation Fund, designed to provide additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.
However, speaking to The Adviser, Greg Charlwood, managing director of Australian Invoice Finance, said that his business is looking to capitalise on the void left by incumbent banks in the SME space.
“We’re here to support the businesses that the banks won’t support,” he said.
“For a lot of SMEs, overdrafts are funded via equity through their property, and as we know, that’s similar to lending against residential property, and we all know that banks have become a lot tighter in that space.
“There are still a lot of businesses out there that have overdrafts secured by residential property, but the equity in those real properties has been reducing in the last year.
He added: “That’s creating a great opportunity for non-bank lenders that understand the SME space and are willing to support them.”
Mr Charlwood added that alternative finance providers place greater focus on developing an understanding of their clients’ businesses and fostering longer-term partnerships.
“The banks, even with bigger businesses, don’t really get to know [businesses] that well, but for us in the SME space, we spend so much time getting to know our clients to understand what their customers are all about and what the issues are,” he said.
“We spend a lot of time talking to them before we approve facilities, and we continue talking to them very closely after we’ve approved facilities.”
[Related: Bill to establish $2bn SME fund approved]
Charbel Kadib is the news editor on The Adviser and Mortgage Business.
Before joining Momentum Media as a journalist in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.
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