A short-term business lender has reported seeing a 64% year-on-year increase in its short-term 2nd mortgage loans.
Semper Capital said most of the uptake has come from SMEs, which are particularly sensitive to cash flow at this time of year.
Director at the group, Andrew Way, said the increase was attributed to its recent 4% rate reduction to the 2nd mortgage bridging loan, bringing the rate to 11.99%.
SMEs have also used the facility to make capital purchases to optimise tax breaks before June 30 or pay down ATO debt to avoid getting into arrears.
Fellow director Kieran Gill explained, “Recent loans include providing funding to help an interstate bakery address ATO and rental arrears due to the owner’s ill health.
“The six-month loan of $670,000 will ward off liquidation and give him space to reactivate operations to full capacity now that he’s recovered.
“Similarly, we had a developer who just signed a seven-month loan of $580,000 to payout outstanding ATO debt caused by poor accounting, and to aid in the acquisition of land that could not be obtained through a traditional lender.”
The rise in debt vulnerability results from the ATO’s recent legislation that enables tax debt to be disclosed to Credit Reporting Bureaus in the effort to encourage payments to be made in a timelier manner to retain a good credit rating.
Gill said, “This is putting the heat on businesses to actively seek financial alternatives to repay imminent ATO debt to avoid the penalty of a downgraded credit rating.”
Short-term lending continues to experience rapid growth in the wake of tightening criteria from traditional lenders.
Way said, “SMEs continue to demonstrate heighted demand for alternate funding solutions. We encourage brokers to actively initiate discussions with their SME clients to ensure they’re aware of the financing options available.”
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