The number of brokers moving into commercial and alternative lending is expected to intensify, according to small business lender OnDeck.
More brokers will diversify into the SME loan space due to increased competition in traditional markets and growing demand from clients, the lender’s head of sales Michael Burke said.
“Brokers are not only looking to move into online lending because of the speed and ease of doing business it offers, but because their time-poor customers are demanding a more convenient solution involving faster turnaround times.”
Burke was hired in February this year to expand the lender’s broker channel. He said a growing number of mortgage houses were looking at ways to diversify their product offerings.
“As a result, brokers have to expand their offering to include residential, commercial, asset, equipment finance and more,” he said.
Online lenders such as OnDeck save brokers time and effort which can be used to process more complex transactions with the larger banks and diversify in a more strategic manner, he added.
As well as providing a digital platform to facilitate the loan process, OnDeck’s underwriting policy also helps ease the broker’s burden, Burke told Australian Broker
“We only require three months of bank statements up to $150k and out to a term of 24 months. What you’ll typically find is that within this space, a lot of funders have quite a light credit process up to about $50k but beyond that it becomes quite a traditional underwriting.”
This can involve a great many documents including finalised accounts from this financial year, a set of comparatives from the previous financial year, a set of management accounts, and more.
“So the list goes on,” Burke said. “Whereas a broker dealing with us – all they’ll require for $150k is three months’ worth of bank statements to make a business assessment.”
OnDeck’s accreditation process for brokers falls under the Funding Advisers Program (FAP) which boosts credibility in the industry and enhances the lender’s customer experience.
FAP was OnDeck’s entrance into the Australian broking marketplace, Burke said, with the lender keenly aware of the role played by brokers within the commercial space.
“Approximately 70% of SMEs within the Australian market facilitated funding via a broker or intermediary so we knew that it was a big market.”
OnDeck’s formal accreditation agreement must be read and signed by the broker prior to writing any loans, and details the lender’s commercial guidelines.
“On top of that, we do a number of searches just to validate and verify who they are, how long they’ve been in business, what other accreditations they have, are they with any of the association bodies? We like to understand what accreditation they hold with other financiers as well to ensure that we’re dealing with established and reputable partners.”
Training and compliance is also provided at this time which helps brokers operate in line with OnDeck’s guidelines and expectations.
Specialist lender to tackle channel conflict
Brokers to benefit from cross-lender L&D platform
P2P lender reaches 2,000 brokers