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The big four bank has set up a $50 million special purpose vehicle with SME lender GetCapital to help fund more loans to small business.
Speaking to The Adviser, the CEO of GetCapital, Jamie Osborn, confirmed that the bank had agreed to set up a special purpose vehicle (SPV) to act like a senior debt facility to help GetCapital “lend more money to SMEs in Australia”.
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The SPV will be used to provide more loans to SMEs through the GetCapital brand, which offers loans of between $5,000 and $500,000.
Mr Osborn said: “We foresaw the facility coming and had already moved on price. On equipment finance products today we start at 6.95 per cent, and with our working capital loans we’re not far off where the banks are on their secured working capital loans.
“So, this helps us support greater volumes in that space, and I think what you are going to see, and we’re starting to see it already, is SME lenders starting to find their exact positioning in the marketplace.”
Further, the GetCapital CEO went on to say that he believes that bank funding could open up the SME lending space further.
Mr Osborn noted that NAB had been the first bank to back a range of similar projects, such as Afterpay and zipMoney.
“In all those cases, it was NAB that backed them as the first bank funder. When the bank funding comes in, the market considerably opens up for each of the players and we think that is where we are at with the SME lending space.
“We are at that tipping point where bank funding coming in is likely to really accelerate the growth in the sector.”
Indeed, the specialist lender has been on a growth path, recently announcing that it had experienced a 318 per cent year-on-year growth in loan volumes following record-setting months in May and June 2018.
It has now exceeded $250 million of total aggregate loans written and aims to reach its goal of $1 billion of funded loans by 2020.
Call for extension of CCR
The CEO of GetCapital added that one of the issues with SME finance is the difficulty in underwriting loans, but that new initiatives such as comprehensive credit reporting (CCR) could help in this arena.
He explained: “These are not homogenous entities like you would find on the consumer side. While it is actually fairly straightforward to do a consumer lend, when you are looking at stuff that isn’t backed by property and you are trying to analyse a business, that puts them in a very very different category from an underwriting and data analytics point of view.
“So, we and others, in our direct space, spent a lot of time trying to figure out through technology and people how to do that well.”
He continued: “There are lots of good things happening in this space and I think most of these things are going to support better lending.
“For us, access to data is key, so things like comprehensive credit reporting and open banking, those things are great initiatives that help us understand the customer better and ultimately make a better lending decision which leads to a better-functioning credit market.
“We’ll be pushing to try and get CCR extended to businesses as quickly as possible.”
Other SME lenders, such as OnDeck, have voiced similar wishes for CCR to be extended to business to better understand the credit profiles of business customers.
Australia’s comprehensive credit reporting (CCR) regime came into force on 1 July, requiring the big four banks to share 50 per cent of their data within 90 days of that date to all credit reporting bodies they had an existing agreement with on 2 November 2017.
Within 90 days of 1 July 2019, the same banks will need to supply credit information on their remaining accounts to the same credit reporting bodies.
The type of information to be provided includes the number and type of credit accounts held.
