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Finance brokers are increasingly assuming a business advisory role as businesses grapple with mounting economic pressures, a non-bank lender has said.
Moneytech, a non-bank business lender, has noted a pervasive sense of overwhelm among businesses as they appraise their mid-financial year performance and contemplate securing financial aid to expand their operations in 2024.
“Finance brokers are increasingly taking on a business advisory role,” said Reece Ketu, Moneytech’s head of small business.
“Introduced finance applications make up 97 per cent of Moneytech’s finance applications and it’s clear finance brokers are well placed to assist business owners by finding the best facility to suit their requirements and also guiding businesses on short and long-term courses of action.”
This trend coincided with a survey conducted by online small-business lender OnDeck, revealing that 74 percent of small businesses are struggling to raise capital, underscoring the unequal playing field faced by Australian businesses.
The report emphasised the crucial role of capital as the “lifeblood of an enterprise” and highlighted that the inability to access capital on commercial terms could have enduring repercussions on small businesses.
Chris Slack, owner of The Finance Consultancy and recipient of the Finance Broker of the Year award at the Australian Broking Awards, highlighted the evolving role of brokers.
He stated: “The role of brokers is becoming less transactional and increasingly focused on liaising with accountants, lawyers, and lenders to deliver a finance solution.”
Moreover, Mr Slack pointed out that financially stable businesses with existing access to capital often engage brokers to uncover overlooked opportunities.
“Finance brokers are a great sounding board for business owners, as some may be reluctant to speak to their network for market insight,” Mr Slack said.
In addition, regional areas are feeling the strain, as indicated by the latest SME Sentiment Report by YouGov, commissioned by fintech lender Prospa.
The report revealed concerning signs of financial stress and “poor health” among regional small- to medium-sized enterprises (SMEs) in the lead-up to the holiday season. Small businesses, especially in regional areas, expressed heightened apprehension about their future prospects.
Broking industry urges lenders to improve credit scoring
Meanwhile, the broking industry is urging lenders and credit scoring companies to reform the ‘unjustified’ credit scoring criteria applied to SMEs undertaking multiple transactions.
Broking industry members argued that the current system unfairly penalises businesses requiring a large volume of transactions, impacting their creditworthiness.
Consequently, successful businesses with impeccable tax and repayment records are assessed as having poor credit, leading to higher interest rates or, in extreme cases, an inability to secure necessary financing.
Conversely, underperforming businesses with minimal credit prerequisites navigate the credit scoring system more easily, despite their weaker financial standings.
[Related: SMEs unfairly penalised by credit scoring system brokers warn]
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