Finding Commercial Lending Solutions an Increasing Priority for Brokers and Accountants
Australia's commercial lending industry has experienced steady growth over the past few years, with the latest data showing a positive trend in year-on-year growth. As businesses continue to experience challenging economic conditions, the demand for commercial lending has increased, leading to more opportunities for brokers and other finance professionals such as accountants to expand their lending repertoire.
The latest central bank data shows that total commercial lending is continuing to grow at a pace of more than 10% a year. Unlike residential lending that has taken a huge hit due to the ongoing RBA interest rate increases, demand for commercial lending is on the increase.
One reason for this is that SMEs, like individuals, are experiencing the challenges of rising costs and inflation.
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Products and services are now more expensive which means the business may require additional cashflow in order to purchase the products and services required to keep their business functioning.
In addition, supply chain issues have placed uncertainty in being able to access products and necessary business assets which means SMEs are needing to look elsewhere for alternatives which may come at a cost.
For developers, rising costs and supply chain issues have pushed out project budgets and timelines which means additional finance is often required and refinancing expiring loans has become commonplace.
Challenges in accessing finance
Despite the growth in commercial lending, there are some challenges that businesses may face when seeking funding. One of the main challenges is the tight lending criteria of traditional banks. Banks require businesses to meet stringent credit requirements, often having to showcase two years of profitability, which makes it difficult for some businesses to obtain funding. If a business has any kind of credit blemish or has lumpy cashflow, then a bank is very likely to say ‘no’ to any funding application.
Banks are also very slow to provide finance, sometimes taking months to approve a loan which can pose many problems for businesses with cashflow problems that need a quick finance injection to stay afloat.
Role of Brokers and Accountants
The rise in commercial lending is a trend brokers would want to capitalise on if they are looking to scale their business. In the current economic climate, there is no advantage in specialising only in residential lending. Doing so may mean missing numerous opportunities found in the commercial space. Therefore, it’s a must for brokers to diversify their services to cater to the commercial needs of SMEs.
Accountants, on the other hand, play a significant role in the success of their business clients. Aside from keeping track of expenses and managing taxes, accountants are expected to provide useful insights on important financial decisions their business clients need to make. Part of this means being able to find financing solutions for their clients.
Although both practices are different, finding finance solutions is a common denominator for success should a broker wish to diversify into commercial, or if an accountant wants to provide the most suitable finance solution to their business client.
Working with lenders that are able to find solutions for all your clients is also critical - this is where private lenders come in.
Benefits of Non-bank financing
Non-bank or private lenders offer an alternative to traditional banks for businesses seeking funding. They provide access to capital to businesses that may not meet the strict lending criteria of banks, such as business with lumpy cashflow or developers.
Non-bank lenders also offer faster loan approval times and more flexible loan terms, which can be beneficial for businesses that require funding for short-term projects. This has created a more competitive lending market, with businesses having more options to choose from when seeking funding.
Among the finance solutions private lenders may offer include bridging/working capital loans, establishment finance, equipment purchase loans, ATO tax debt loans, construction finance, completion finance, renovation/flip finance, and subdivision finance among others.
By providing multiple financing options to your business clients, you’re able to provide them better opportunities to select the solution most relevant to their current financial situation.
About PMA
Private Mortgages Australia offers short-term, flexible loans to business clients and property developers. Our credit team is readily available to accommodate brokers, accountants and borrowers alike.
We pride ourselves on our quick response time. We also provide generous referrer fees within 24 hours of a loan settling with no clawbacks!
If you are a broker and have a business lending scenario you would like to discuss, feel free to contact us or you can complete our Quick App form here (< 10 mins).
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