SME lending is a hot button issue at the moment, as the JobKeeper support subsidy ends and the new SME Recovery Loan Scheme kicks in across Australia.
With that in mind, Australian Broker sat down with some of the biggest names in SME lending to talk through the best options when dealing with small businesses.
Lenders have to be able to work with the unique conditions that SME have, said Liberty group sales manager John Mohnacheff.
“Supporting small business owners is an important part of that,” he told AB. “Often with complex lending needs, Liberty recognised the benefit of bringing greater options and more flexibility for this group early on, and we were one of the first to offer specialist solutions to SME borrowers.”
Accepting that SME lenders are also often self-employed is vital, too, according to non-bank Thinktank.
“We could see a clear opportunity to provide simple, hassle-free commercial finance under terms and conditions not dissimilar to that of residential home loans,” says Peter Vala, Thinktank’s general manager partnerships and distribution. “The success of this style of lending has also enabled us to grow and widen our product offering to now include all forms of SMSF lending and residential owner-occupied and investment loans.”
Fintechs can also provide assistance, helping SMEs to get funding quickly. OnDeck use data analytics and tech to make acceptance decisions in real-time.
“Traditional banks simply don’t cater very well to the SME sector,” said OnDeck Australia CEO Cameron Poolman. “Not only can the loan application process be arduous for small businesses, loan approvals can take weeks – a time lag that often sees SMEs miss valuable opportunities.”
Fintechs can also be on hand to loan where the big banks, in many cases, won’t.
“When Moula was founded in 2013, there was a massive gap in the market, with SMEs facing a 74% rejection rate for unsecured finance, which meant too many good businesses were getting knocked back for funding,” says Sam Sfeir, head of strategic partnerships at Moula.
“Where banks were relying on legacy systems, we saw an opportunity to underwrite based on a business’s data, not their assets, while offering more personalised service. We’ve since processed tens of thousands of applications with same-day decisions, and funded SMEs with over $500m.”
That said, big banks have to be able to deal with huge volumes and scale their operations to assist.
“We responded quickly and at scale with measures such as automatically deferring loan repayments for more than 80,000 customers,” said CBA’s general manager broker and agency sales, Ian Burnett.
“We improved speed to lending through our BizExpress lending platform, which meant we could quickly offer the federal government’s SME Guarantee Loan Scheme, and we’ve been the leading provider of loans, funding about half of all loans under the scheme so far.”
This is an extract from a story in the latest edition of Australian Broker. For the full story and more see the magazine which hits desks on Monday, 31 May.