Sydney commercial finance broker Rachel Hind knew she had to act when she talked to many small business owners who didn’t know where to turn to access loans following a COVID-19 lockdown.
When a coronavirus outbreak forced residents of Sydney’s Northern Beaches into lockdown for three weeks over the Christmas and New Year period, Best Capital founder and CEO Rachel Hind wanted to help.
Hind has more than 25 years’ experience in the finance industry, having worked in senior roles at ANZ, Westpac, Lloyds Bank, Barclays Bank and Lehman Brothers. She is also an accountant and lawyer. Her brokerage, Best Capital, specialises in commercial property, equipment and asset finance, as well as residential loans.
A Northern Beaches resident herself, Hind made it her mission to visit 28 businesses in 28 days in February, to find out how business owners were coping and off er advice on how they could bounce back.
Hind was surprised by what she discovered: half of the businesses did not know where to get a loan other than from their own bank. So she organised Business on the Beach, a networking event at St Matthews Manly last month, inviting local SME owners to connect with 11 lenders, including Westpac, BOQ and Judo Bank, as well as non-banks ScotPac, BizCap and Lumi, in order to learn about their finance options.
The event was also supported by NSW MP for Manly James Grin, Northern Beaches Mayor Michael Regan and Deputy Mayor Candy Bingham.
Warren Hogan, Judo Bank’s economic adviser and managing director of EQ Economics, provided an update on the booming Australian economy (see story on page 10). Hind also spoke to the audience about the findings of a Lend national survey of small businesses.
“Over 40% of people did not know where to go for funding outside of their existing bank,” she said, while her own feedback from the Northern Beaches showed it was 50%.
“Two out of three said they are looking to change their funding mix this year to grow – they need more funding to grow. COVID was pretty crappy for most businesses; 2021’s looking great – I want to grow, but where do I go?”
Hind said a quote from ScotPac’s SME Growth Index survey summed it up well: “Those small businesses who have in place a clear strategy and who have secured appropriate funding will put themselves in the strongest position for what 2021 will bring.
“That aligns with the stats, with the feedback I had and with market research,” said Hind. “Funding and cash flow is key.”
She highlighted how lenders could support SMEs.
“Lenders can help you buy equipment, help you pay wages, pay debt, refinance existing debt; they can help you buy your trading premises, which is happening a lot right now. In a lot of instances, it’s actually cheaper to buy your trading premises than actually lease it.
“They can help you buy stock, pay suppliers and help with your working capital.”
Hind said a lot of businesses in the Northern Beaches told her, “Yeah, that’s great, but there’s quite often barriers to getting funding – all the policies, it’s just too strict and complex”.
Other barriers mentioned were the time it took to get a decision on funding, and concern about having to put up their own homes as personal security.
Hind said there were key moments when businesses needed finance, for example when they were falling behind on payments, such as ATO or super; or had to turn away future orders due to an inability to cope with growth; or they were relying too much on personal funds such as overdrafts and the equity in their homes.
A panel of six bank and non-bank lenders explained how their loan products could assist small business owners with their finance needs. The panellists were BizCap co-founder Abraham White; ScotPac Business Finance BDM Kamsen Rajah; Lumi founder and CEO Yanir Yakutiel; Judo Bank national partnerships director Angelina Bernal; senior partnership manager, Westpac commercial introducer Richa Bhargava; and BOQ head of commercial broker Karen Carter.
Hind presented a case study to the panel – a large cafe with business-to-business and consumer customers in need of a cash injection. In 2019, it had made a good profit, but in 2020 it experienced a net loss, while 2021 was looking good with 40% revenue growth.
“Monthly turnover’s going good; it’s got future orders, a good pipeline and good revenue growth,” Hind said.
The cafe’s unpaid invoices and supplier costs had risen, and it was looking for a quick cash flow injection, preferably via an unsecured loan. There was also the potential to buy the business premises instead of leasing it. Hind asked the lenders what products they could offer to help the cafe.
White said BizCap would recommend a cash flow loan based on providing up to 90% of the business’s revenue.
“We do non-asset-backed loans from $5,000 to $750,000. The client may need it for the short term based on the fact that they have these huge invoices that aren’t being paid on time,” White said.
BizCap also offered early payment discounts for paying off loans in two to six weeks.
“Also, we can do add-ons, so four to six weeks after we fund them initially we’ll give them more money on top,” White said.
Yakutiel said Lumi was also a cash flow lender with a suite of products it could offer the customer. He suggested a term loan to pay off initial outgoings such as invoices.
“We also have a line-of-credit product where you can be approved for a facility and you can draw in and out, which is like an overdraft. The customer can use the funds they actually need at any point in time and only pay interest on the funds drawn.”
Lumi offers both secured and unsecured loans, and Yakutiel said it was up to the business owner to realise the total assets they had and settle on the best funding solution.
Rajah said ScotPac could provide invoice finance to help with cash flow and turn unpaid customer invoices into a source of funding. It could offer a line of credit with no property security required for amounts ranging from $10,000 to $150m.
“By looking at your interims or your management accounts, it’s considering your current and future performance, including money owed to the business,” Rajah said. “ATO debt is not a problem; we can help fund that too.”
Bernal said Judo Bank’s lending book had tripled from $1bn at the start of 2020 to more than $3bn now, and it understood how businesses had been affected by COVID-19.
The cafe scenario was not a typical one for Judo, but it had a broad set of guidelines and could offer different options, including a line of credit for cashflow, a finance facility for kitchen equipment, and a business loan to buy the trading premises. Loans ranged from $250,000 to $20m.
“Collateral is not key for us, so it’s more about understanding the client themselves, their experience in the industry, their capacity and their cash flow,” Bernal said.
Carter said BOQ had a passion for small business, with branches owned by individuals and business owners across Australia. “We are looking to expand our branch network, which is a key point of difference when you consider there are a lot of branches being shut down.”
BOQ could offer a funding line with a term of 25 years.
“We can go up to 80% [LVR], up to $3m for a commercial property, give five-by-five interest-only term to help with the cash flow. We would help with the equipment finance.”
Westpac works with business customers as their trusted adviser, Bhargava said. “We want to be their business partner, so your success is our success.”
Westpac could offer the cafe a range of solutions, she said. It has a debtor finance facility, leveraging up to 85% of the debtor book.
“A client can upload an invoice, and within four hours we can pay 85% of the invoice; they pay the supplier, the supplier is happy, and maybe they get better terms with the supplier and increase their profit margin.”
Westpac also has an overdraft secured by property and could help SMEs buy their premises, as well as purchase equipment unsecured.