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A new borrower cohort of ‘established businesses’ is increasingly seeking finance from brokers. We sit down with Roberto Sanz, the general manager of sales and partnerships at SME lender Prospa, to find out more.
Q. We’ve just started a new financial year. Are there any opportunities in the market that brokers should be targeting?
This is the time of year for businesses to plan ahead. We use this critical time at Prospa to do our planning and budgeting, and to identify opportunities and invest for the new financial year.
Many small-business owners are finding it more complex to navigate the process of qualifying for finance and they’re turning to brokers for advice. At Prospa, we have seen an increase of 20 per cent more brokers referring customers year on year.
One of the segments that we have identified that are increasingly turning to brokers for advice is what we have defined as the ‘established small business.’ These are businesses that are turning over $100,000 per month on average and they have a credit score of 550 or above.
During the past 12 months, traditional lenders have been reviewing their lending appetite and turning away from these small and medium businesses. We have proactively started targeting this segment – and with our broker partners – are educating this segment on the advantages of alternative lenders and the value proposition that alternative lenders bring to the table. We have also reassessed and updated our pricing to deliver a more competitive offering.
The results are mind blowing. We’ve managed to grow this particular segment by 19 per cent year on year, but, most importantly, we’ve also seen an increase of 27 percent more brokers referring this particular segment. We do expect that these established small businesses will continue to rely on brokers for advice in the next 12 months (and our research states that 33 per cent of established small businesses intend to borrow for business expansion in the next 12 months) so there’s a lot of opportunity for brokers.
Q. Can you give me some examples of SMEs you have funded recently?
We recently funded a poly welding business that had a new contract starting in four weeks’ time and they needed funding to secure and kickstart the contract.
They were a strong profile customer (though they also had a small amount of tax debt) and were bankable, but the banks couldn’t turn around the application in the time frame that they required.
We helped them secure a $100,000 Prospa Business Line of Credit that would allow them to kickstart their job in four weeks’ time.
We also recently funded a recruitment services company that provides services to a mining company. They had a 30-day gap between having to pay salaries to the skilled workers and collecting payment from the mining company. We managed to help them secure a $100,000 Prospa Small Business Loan.
And we also helped a manufacturer of bakery machinery access funds to purchase a new piece of equipment at auction. We supported them with a $500,000 Prospa Business Loan Plus for the purchase of it, which didn’t require any property security upfront because they had a clear exit strategy (a sale leaseback with another asset finance lender).
Q. What tips would you give brokers looking to write more SME finance this year?
It starts with the triple A’s:
Awareness – Only 52% per cent of SMEs are aware of alternative lenders. This lack of awareness means that many businesses are unable to realise opportunities to improve their cash flow and drive growth.
Appetite – We need to understand what problem we are solving. Brokers are SMEs themselves, so they can reflect and think through the challenges that they come across in their own businesses and see whether the right lending product could help them solve it.
Access – Identify what the most important thing for your client is (is it speed, pricing, low repayments, security etc) and that will help you to access the right finance from the right lender.
SMEs continue to show resilience and adaptability and they are taking proactive measures to overcome some of these challenges. Gaining access to the right funding solutions that suit their businesses needs can make all the difference. Research has shown us that 54 per cent of SMEs say that they will need to invest further into their business to generate future cash flow so now is the perfect time for brokers to be speaking to their clients about the different funding options available to them.
Tune in to hear more!
You can find out more about how brokers can tap into the SME lending opportunity and how Prospa is supporting brokers to write business finance in the In Focus podcast here:
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