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Small businesses and the self-employed are the backbone of the Australian economy, yet when it comes to financing needs, they can find themselves neglected and ignored, writes Bluestone Mortgages national sales manager Royden D’Vaz.
The big banks are loath to deal with financing requirements that fall outside of their usual business lines, and many mortgage brokers are more focused on chasing the so-called ‘prime’ mortgage dollar than embracing the possibilities on offer in specialist lending.
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The problem is exacerbated if borrowers are credit-impaired, new arrivals to the country or owners of a start-up business, without a long credit history.
According to Rakis Panayi, director of mortgage manager Premium Capital Finance, and Chrish Samuel, managing director of Finstar Home Loans, their successful growth trajectory has been built on helping small businesses find specialist lenders ready and willing to do business with their clients.
Specialist lending is a large and growing market
Premium Capital Finance changed its business model three years ago to focus solely on specialist lending, and it hasn’t looked back.
Mr Panayi said many brokers may not understand the size of the market on offer. In fact, he said, in most streets in most suburbs in Australia, you will find someone who is credit-impaired and who may believe that finance is out of reach.
“The good news is that’s not true,” Mr Panayi said.
“For example, we work very closely with specialist lender Bluestone Mortgages, which treats every individual loan on its merits, takes the time to understand the client and has a range of different options depending on the individual circumstances.”
Big banks often don’t really understand the challenges facing the self-employed and small business owners, particularly when it comes to cash flow.
On the other hand, specialist lenders can help businesses with complicated serviceability issues, for example if they are under arrangement with the Tax Office and are struggling to find the cash they need to grow.
In most cases, specialist lenders can pay out the tax debt (which big banks typically won’t do) so that the business owner can establish cash flow, unencumbered by monthly commitments, and focus on making their business profitable.
Mr Samuel said that many small businesses and self-employed people don’t know where to start when it comes to their financial needs, and that often their accountants are not familiar with the options available.
That’s why it’s important for brokers to develop referral relationships with accountants, particularly those with small business clients.
And there’s another, long-term benefit to helping small businesses solve their problems.
Mr Samuel said that clients who require specialist help tend to remain loyal to the broker who helps them, even when they become ‘mainstream’ borrowers.
If you take the time to solve their problems – and not just with their home loan – you can become a one-stop shop, helping them with everything from asset finance to short-term finance, business funding, lines of credit, commercial property loans and insurance.
And if you can successfully position yourself as a broker with a deep knowledge of the specialist lending market, other brokers will pass off their more ‘difficult’ clients to you – to your benefit.
Specialist lending can form the basis of a long-term growth strategy
The bottom line is that brokers looking to build a long-term viable business are unlikely to find success if they confine themselves to prime home loans.
By helping a worthy but neglected segment of the market, you are far more likely to develop a long-term, diversified business model, with loyal customers who trust you to help them with their financing needs.
