Despite what some people think, specialist lending doesn’t only cater to customers such as Uber drivers looking for residential loans – not after the 12 cash rate hikes since May 2022 have locked many borrowers out of a loan with a major bank.
In fact, commercial and small business loans via non-banks are becoming increasingly important, as those getting turned away from banks often qualify instead as specialist non-bank borrowers.
MFAA data showed that in the six months to September 2022, commercial loans settled by mortgage brokers hit their highest-ever value at $17.2bn, up 28.6% year-on-year.
Read more: Shifting sands spur borrowers to tap non-banks
“Commercial lending is on the rise and business owners are seeking trusted support to understand market challenges,” John Mohnacheff, group sales manager at Liberty said.
A growing number of SMEs, in particular, are making their switch to alternative loan options. At Grow Finance, for instance, there has been an uptick in sub-$150,000 low-doc lending and sub-$250,000 lends with the support of bank statements.
“Businesses are increasingly utilising overdraft facilities and other business loans to better manage cash flow, while supply chain issues have also resulted in increased demand for financing of used equipment and sale and hire back following the importing of machinery,” said David Verschoor and Greg Woszczalski, Grow co-chief executives.
SMEs are turning their back on regular lenders due to the continued difficulty in securing funds from major banks. The Banjo SME Compass Report 2023 found that the proportion of SMEs intending to fund growth with a bank loan this year fell to 24%, down from 40% last year.
“Working with credible, established, and transparent lenders is important to avoid boxing clients into potentially high-interest, inflexible loans,” Verschoor and Woszczalski said. “This is creating increased opportunity and demand for non-bank lenders that are renowned for flexible lending criteria and speed of funding.”
According to the Banjo survey, around 50% of SMEs faced hurdles when trying to access funding, with the time taken to reach a decision, overly strict lending criteria, and difficulty in obtaining a suitable interest rate identified as key constraints.
Other barriers cited included challenges navigating the application process and the customer’s previous credit history. While non-banks are known for having much higher interest rates than mainstream banks, this may be less of a factor this year.
“Non-bank lender rates are increasingly sharp, which is providing SMEs with greater choice and flexibility,” Verschoor and Woszczalski said.
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