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Small business lending specialist Eamonn Keogh shares some words of wisdom on the sector and how resi brokers should approach it.
What’s the one thing that all small business lending clients have in common?
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The key issue is access to funding for their business in a timely fashion. Rates and terms are all important aspects of the loan facility. However, it is the ability to actually obtain funds as quickly as possible that is their main goal and also their biggest hurdle.
What are some of the misconceptions resi brokers may have of small business lending?
I think the biggest misconception is that a business application will take the same time as a home loan. The average business loan process is about three months or more compared with a normal home loan taking one month. I am currently finalising a business application that has taken 12 months.
Can you tell us how this particular application played out?
It’s for a medium-sized trading business which had split banking that hadn’t been reviewed for some time. The client has been in the current business for nine years and generated more than $12 million in turnover.
I held an initial meeting with them to ascertain their main objectives and preferred outcome. Following that meeting, I provided the client with an information request document outlining all of the information I would need to assess their lending requirements and provide my best recommendations.
Upon receiving the information, I conducted a full review and provided recommendations on how to improve cash flow outcomes, achieve cost savings and structure flexibility.
I then provided the client with a full relationship report (application pack) to be signed off before submitting it (along with an official tender of all business) to four lenders on their behalf, seeking indicative offers for presentation to the client.
Once the offers were received, I collated the data in a document to represent each offer fairly and without bias. Each offer was rated based on a number of factors including cost, loan term, security structure, response time and ongoing loan conditions. Client was given this document to review and come to a decision on the best offer for them.
Once the client confirmed their lender of choice, formal approval was sought and we started to address the numerous bank conditions, such as business valuations, property valuations and vetting of trust deeds.
This application has taken 12 months and some variations were made during this time. The client decided to go with ANZ, as they were the quickest to provide an indicative offer and were also very competitive from a cost perspective. The biggest advantage was the significant cash flow benefits provided by the new offer.
What does the future hold for the small business lending landscape, and where do brokers fit into this?
I think the small business lending space will continue to be difficult for clients moving forward as compliance requirements increase and economic conditions remain volatile. It is because of this that it is more important than ever that small business clients have the support and guidance of an experienced and knowledgeable business broker.
