SMEs double demand for non-bank lending

by Miklos Bolza24 Mar 2017
The number of businesses planning on using non-bank financing has doubled in less than three years, setting the stage for brokers to diversify into this space.

The latest SME Growth Index by specialist finance provider Scottish Pacific shows that 22% of small and medium business owners are thinking of lending options outside of the banks. This has doubled from 11% found in round one of the Index conducted in September 2014.

Along with this, there has also been a decrease in the number of businesses planning on lending from the banks, which fell from 38% in round one to 29% in the most recent survey of more than 1,200 SMEs across Australia.

“I think there’s certainly a greater awareness by the business owners that there are alternatives to the banks,” Peter Langham, CEO of Scottish Pacific, told Australian Broker.

“If you look at the non-bank lenders that have emerged such as the various fintech-type organisations – whilst their volumes might not be that high – they certainly got a lot of column inches in the papers to make people aware that there are alternatives.”

Scottish Pacific itself has just made the move to become an ASX-300 firm and has invested more on spreading this awareness around its products, Langham said.

This growth has also been spurred by an increasing number of mortgage brokers looking at alternatives to property financing, he added.

“Certainly Scottish Pacific, and I know others, have been talking more and more to brokers about the facilities that we have so that they are aware of them when talking to their clients.”

In the 30 years Scottish Pacific has been offering alternative lending options, the firm has built its broker network, ensuring brokers understand how its facilities support client relationships whilst being easy to handle.

“We’re not asking the brokers to put credit submissions together or even be accredited with us. We do all the due diligence,” he said. “So it’s relatively easy for them to pass on a referral to someone like ourselves.”

Currently Scottish Pacific has more than 3,000 brokers on its database. Out of these, around 400 brokers receive commissions from the lender every month, Langham said.

“The way we remunerate brokers is with an upfront and trailing commission.”

For brokers keen on diversifying into SME lending, this is a great opportunity to become a trusted advisor to clients while broadening their set of financiers and products, he said.

“Brokers can be viewed as the traditional bank manager who has a relationship with the client. The advantage the broker has is they have a whole swag of – not just products that they can offer their clients – but many more different suppliers.”

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