Brokers add another string to their bow by educating themselves and branching out into the small business market, according to a leading industry body chair.
Peter White AM, Managing Director of the Finance Brokers Association of Australia (FBAA), told Australian Broker that mortgage brokers were missing a trick by not giving themselves the option of engaging in with SMEs.
“Brokers need to upskill their knowledge sets to ensure that they can adequately assist the small business person,” said White. “A lot of brokers are proactively doing this and taking further courses so that they can deepen their knowledge and understand how to read balance sheets and Profit/Loss statements. Most people can read P/L statements, but most don't really understand the detail within a balance sheet and how that affects the viability of a business. That's an important piece.”
“We're seeing a lot of brokers within the industry doing specialised courses in SMEs lending and that's the key thing that they need to do. In my past, both as a broker and as a lender, I used to specialise in business and commercial lending, and unless you can quickly build that rapport with the business person, they're not going to do business with you. If you don't understand their business and their financials, you'll lose them pretty quick. And from a lending point of view, lenders aren't going to want to look at transactions that don't tick the boxes from the financial position that they're looking for.”
Brokers need to educate themselves, and once they are up to speed, then they can thrive in the SME space by transferring their skills over from mortgages.
“Brokers have an ability to access a broad range of lenders and lending products that can tailor make a solution to the SME,” said White. “That becomes critically important. Most of the small business people are using the banks, and that might not be the most appropriate style of lending for them. A broker, armed with the right knowledge, could turn around and give them lots of options that might be far more suitable for their business to grow or sustain. It all revolves around that opportunity of choice and helping people to look beyond the tip of their nose.”
In particular, the change in the marketplace in recent years has given brokers the chance to offer more than ever to clients. In the last year, mortgage broker market share has risen to near-record levels, with many citing the willingness of brokers to embrace new technologies and styles of lending as a key driver for the channel.
“This is where the broker has the advantage,” said White. “The vast percentage of the brokers in the marketplace do home loans access a wide variety of lenders, including neobanks, fintechs and non bank alternatives. Brokers have that background and knowledge to effectively and efficiently work with that different lenders and see how those options can work in favour of the small business borrowers. The market has broadened and deepened.”
“Brokers have only a small penetration in the SME space in terms of market share, and the banks still hold the major domain. That's where the opportunities lie. Brokers just need to be aware of the client, their business is and what the opportunities are.”