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Non-bank lenders like Banjo Loans have been taking the helm when it comes to helping SMEs access the finance they need. We sit down with Guy Callaghan, chief executive of Banjo Loans, to unpack findings from Banjo’s SME Compass Report and how it’s partnering with brokers to help small businesses navigate the changing environment.
Q. What do you think is attracting brokers to non-bank lenders like Banjo at the moment?
It’s a myriad of things. We’ve still got the advantage over the banks that we get access to so much data so quickly and that we can do analysis on the businesses a lot more efficiently than a bank can. So there’s that speed to market, there’s speed to the answer. Even if the answer is no, people want that quickly. We do unsecured loans as well, which the banks won’t do.
The broker can also talk to the credit person who’s making the decision. I don’t think you can get that in the banks; you’ve got to hunt around and then you’ll still get that email after eight weeks of waiting that says no! This way you actually talk to the person who’s making the decision.
Q. You’ve undertaken extensive surveys of the SME space for your SME Compass Report. What are some of the standout takeaways for you?
It’s been a hard four years for SMEs. but what we’re finding is that business owners, particularly Australian SME, entrepreneurial business owners, are a positive lot; they’re always looking for that next step – how they can survive and grow, while supporting their clients.
When we did the Compass in 2023, SMEs were planning for inflation by increasing prices. Now that’s stopped; they’re not looking to increase prices because they know consumers are starting to hurt out there. Instead, they’re looking at ways that they can save costs, whether that’s efficiencies in the way they run their business, enhancements to the product, or better technology.
Q. Are you seeing any common themes or patterns in why SMEs are needing finance?
We’re getting people who are coming for acquisition, we’re getting people who are coming for ATO debt payouts, we’re getting people who are coming for growth plans. There’s all sorts of different stuff that they require funding for, so there is not one area or industry that’s particularly strong.
But the one that is hurting at the moment is retail … because the costs are still getting them with staffing costs, with inflation (which has stopped consumers coming to them), and even with rental costs. Things are really starting to hurt them a fair bit. So, that’s probably the one industry I’d be wary of.
Q. Are you concerned that the SME Compass Report this year found that fewer SMEs are likely to use a broker this year than last year?
Not at all because it’s still really high … It went down 3 percentage points this year, but that’s nothing compared to where it was. Accountants are always the number one trusted adviser throughout the country. But what was pleasing in 2023 was the massive spike in people turning to their broker for information and becoming their trusted adviser. The broker is now the number two behind the accountant, which is a huge thing.
It puts responsibility on the broker to learn and understand their clients, to know what makes their business tick, to know what situation they’re in financially, and what’s going on in their world. If you get to know that, you’ve got a client for life who will trust you and come to you for every decision that they make.
Q. Have you got any top tips when it comes to brokers writing SME Finance for the first time?
Don’t be afraid to ask questions. Our BDMs are fantastic. Not only are they out there driving business for us but they’re also our first line of defence. They will engage with any mortgage broker and help them through the process. We’re also more than happy for brokers to talk to the decision-makers in the approvals team.
Go and ask them questions and they’ll help guide you through the process.
And don’t be afraid of raising any issues or any concerns you might have with a non-bank lender like ourselves, with the credit person, or with the BDM because we want to hear about that stuff. The more we know, the better!
Q. What new initiatives can brokers expect to see from Banjo this year?
We’re releasing a cash flow forecasting tool on our website. This is a value-add that any broker can use to go to a business and find out about their cash flow. It’s free to use as well.
We’re also increasing limits. Per ABN, we are going to go up to $2 million for our unsecured funding and we can go up to $5 million for a group of ABNs. That’s something we’re really excited about.
We’re also looking at increasing the tenure of the loans that we’re putting out to the market. It’ll cut down the repayment velocity so that each time they have to do a repayment, it will be less. It’ll hurt SME cash flow a lot less and get them in a position of strength.
Tune in to hear more!
You can find out more about Banjo’s SME Compass Report and how Banjo is helping brokers steer SMEs through choppy waters in The Adviser’s In Focus podcast here:
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