SME lending options are on the rise, but how do you access them?

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While many SME owners worry about their access to finance, a surge of new lenders and products is rapidly expanding the options available. And brokers have an important role to play for businesses, says the Productivity Commission.

Changes to lending markets over the past decade mean there’s now a wide range of business finance options that don’t require property as security, according to a new report by the Productivity Commission.

However, a lack of awareness of these new finance options is one of the biggest hurdles preventing SME owners from accessing them.

This is where a broker with up-to-date market knowledge can play an important role for your business, explains the Productivity Commission.

“SMEs may not be aware of all their lending options and may not feel confident about new options. Brokers can help match them with appropriate lending options,” the Productivity Commission says.

“These options include borrowing against alternative collateral – such as vehicles, machinery and intangible assets (for example, invoices and other expected receipts) – and unsecured lending.”

Why are more SME finance options emerging?

Changes to prudential rules have made lending to SMEs less attractive for the major banks, but at the same time, created opportunities for new and established non-bank lenders, says the Productivity Commission.

This has resulted in a broader range of lending options beyond traditional property-secured loans for SMEs, especially with the emergence of fintechs and more accessible borrower data.

“Combining new data sources with innovative analytical tools (such as artificial intelligence and machine learning) has given many lenders the information and confidence to lend to SMEs without the security of property,” adds the report.

However, while most SMEs are aware of banks as a source of finance, awareness of the newer options is more limited.

How we can help your business

As brokers, we’re constantly upskilling and learning to make sure we stay abreast of the finance options and players in the SME finance space.

“Brokers are expected to have current market knowledge and participate in ongoing training to stay informed about new lenders and products,” explains the report.

“For example, aggregators and industry associations hold various educational events – including conferences, workshops and webinars – to improve brokers’ understanding of SME lending options.”

And it’s for this reason that the Productivity Commission highlights the key role brokers can play for busy SME owners.

“By connecting borrowers to lenders, brokers can play an important education role, particularly for those SME customers that do not have the time or inclination to undertake detailed market research,” says the report.

So if you’re in need of finance for your SME business, but don’t know where to start, get in touch today.

We’d love to run you through the growing number of finance options available for SMEs like yours.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Is a home loan lending crackdown on the horizon?

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The federal treasurer has given the strongest indication yet that a home loan crackdown is coming, stating that “carefully targeted and timely adjustments” may be necessary to avoid troubled waters. So what could a potential lending crackdown look like?

Lending standards and fast-rising property prices have been hot topics of late.

Interest rates are at record-low levels, and the typical Australian home has seen its value increase more than 18% over the past year – the fastest annual pace of growth since the late 1980s.

It’s a recipe that’s making financial regulators a touch worried that some homebuyers are starting to stretch themselves too thin and borrow more debt than they can safely afford.

So federal treasurer Josh Frydenberg recently met with the Council of Financial Regulators – which includes APRA, ASIC, the Australian Treasury and the RBA – to discuss the state of the housing market.

“We must be mindful of the balance between credit and income growth to prevent the build-up of future risks in the financial system,” Mr Frydenberg said in a statement.

“Carefully targeted and timely adjustments are sometimes necessary. There are a range of tools available to APRA to deliver this outcome.”

What could this possible crackdown look like?

Here’s an interesting stat for you: almost 22% of Australians have a mortgage debt that’s more than six times higher than their annual income, according to the latest data from APRA.

That’s up from 16% just one year ago.

The fact APRA mentions that particular stat gives us a pretty good clue as to what one possible lending crackdown measure could be.

“Most analysts expect that this time, APRA will target debt-to-income ratios, probably by limiting the proportion of loans that can be made above six times an applicant’s household income,” explains the ABC.

It’s also worth noting that Mr Frydenberg and APRA are not the only ones to publicly indicate that change could be on the horizon – the RBA expressed similar concerns about the increase in housing prices and housing debt just days ago, too.

“Even though the banks have strong balance sheets and lending standards are being maintained, there is a risk that in this environment, households will become increasingly indebted,” RBA assistant governor Michele Bullock wrote.

“A high level of debt could pose risks to the economy in the event of a shock to household incomes or a sharp decline in housing prices. Whether or not there is need to consider macro-prudential tools to address these risks is something we are continually assessing.”

Want to know how a potential lending crackdown might affect you?

It’s worth reiterating that we still have very limited information available about what financial regulators have in mind for any potential lending crackdowns.

What we can do, however, is help you assess your potential debt-to-income ratio on any property purchase you currently have in mind. And we can also help you determine your borrowing capacity in the current lending landscape.

So if you’d like to find out more, get in touch today. We’d be more than happy to run you through it all in more detail according to your personal circumstances.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Only half of SMEs have recently been able to secure full funding: report

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Almost one-in-two SMEs have applied for new funding in the last six months, a new report has found, and of those SMEs only half were successful in obtaining the full amount they were seeking.

If you haven’t already figured it out over the past 18 months, small and medium-sized business owners are a pretty resilient bunch.

You know that classic 90’s Chumbawamba song: “I get knocked down, but I get up again…” Yeah, life as an SME owner can be a little like that at times.

In the latest round of knock-downs, a survey of 1750 SMEs nationwide, conducted by East & Partners and Judo Bank, found that 48.1% of SMEs had applied for new funding in the last six months.

And of those SMEs, only 50.4% were successful in accessing the full amount, 22% were partially successful, and 27.7% were unsuccessful.

What else did the SME funding report find?

It seems the bigger you are, the better your chances of securing funding.

Twice as many businesses in the $1 million to $10 million turnover range were unsuccessful in their application for funding (36.5%), compared with just 15.9% in the $10 million to $50 million turnover category.

And difficulty accessing new funding is especially pronounced if you work in the retail space, with 44.4% of retailers unable to secure new funding compared to a mere 8.6% of builders.

SMEs are primarily borrowing for working capital (91.1%), investment in new plant and equipment (48.1%), and COVID-19 related provisions including bridging finance (45.6%).

One-in-four SMEs also want new funding to hire more staff (25.9%).

How we can help your business

Times are tough for many businesses, there’s no doubt about that.

So if you’re an SME owner in need of funding, get in touch today and we can take the lead on helping you source finance.

The sooner we can discuss your options with you, the better placed your business can be to get through 2021 and thrive beyond.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Top 5 property investor trends for 2021-22

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With house prices going gangbusters in the first half of 2021, is it still a good time to buy property? The majority of investors think so, according to the latest annual survey. And investors have their sights set on one city in particular.

The 2021 PIPA Property Investor Sentiment Survey, which gathered insights from 800 property investors across the country in August, found more than 76% of investors believed property prices in their state or territory would increase over the next 12 months.

That’s up strongly from 41% this time last year, when COVID-19 had some investors a touch nervous.

“When we think back to last year, which was a time of much fear and uncertainty, it’s clear that property investors and the market, in general, has weathered that turbulent period better than anyone dared to hope,” said PIPA Chairman Peter Koulizos.

Here are the top five trends the PIPA survey identified.

1. Most investors believe it’s a good time to invest

This year’s survey found that nearly 62% of investors believe that now is a good time to invest in residential property, which is a tad down from 67% in 2020.

PIPA says that dip in confidence may be due to the high property price growth this year as well as significant lockdowns taking place at the time of the survey.

2. The sunshine state looks to be the property hotspot

This year’s survey produced the biggest ever margin when it came to the location investors believe offers the best potential over the next year.

“A staggering 58% believe the sunshine state [Queensland] offers the best property investment prospects over the next year – up from 36% last year,” Mr Koulizos says.

New South Wales came a distant second at 16% (down from 21%), and Victoria was third at 10% (significantly down from 27%).

Brisbane also beat its capital city counterparts, with 54% of investors believing it has the rosiest outlook.

Mr Koulizos says the boost could be to do with Brisbane being named host of the 2032 Olympic Games, and significant upcoming infrastructure spending.

“All of these factors, as well as the affordability of property in southeast Queensland and strong interstate migration, are some of the reasons why investors are so optimistic about market conditions there,” he adds.

3. Regional and coastal markets continue to grow in demand

While investors still believe metropolitan markets offer the best investment prospects at nearly 50% (down from 61% in 2020), regional and coastal markets are closing the gap.

A quarter of property investors now favour regional markets (up from 22%), while 21% of survey respondents have their eye on coastal areas (up strongly from 12% last year).

4. Fewer investors looking to sell

The lingering impacts of the global health emergency – as well as robust price growth over the past year no doubt – mean fewer investors (59%) are looking to sell a property this year compared to last year (71%).

“Part of the reason for the uplift in property prices over the past year has been the continued low levels of supply in most locations around the nation,” Mr Koulizos notes.

“With a decrease in the number of investors indicating they intend to sell over the short-term, it seems unlikely that this boom market cycle is going to change anytime soon.”

5. Almost three-quarters of property investors use a mortgage broker

Just 17% of respondents secured their last investment loan directly via a bank, while 4% used a non-bank lender.

The vast majority (72%) of respondents secured their loan through a broker, a slight increase on last year’s figure of 71%.

And 72% of respondents said they’d use a broker to finance their next investment loan.

It just goes to show that it doesn’t matter how far you are on your property journey – whether you’re a first home buyer, refinancer or savvy property investor – we can help you every step of the way.

So if you’re looking to add to your property portfolio, looking for a change of scene, or keen to crack into the market, get in touch today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Refinancing figures are on a record-breaking run: here’s why

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With interest rates at record low levels, the number of homeowners refinancing skyrocketed to an all-time high in July. Today we’ll run you through why so many people are refinancing, and why you should consider doing so too.

We’re currently seeing more people refinance their home loans than ever before, and the latest ABS figures out this week prove we’re not imagining things.

Refinanced home loans reached an all-time high of $17.2 billion in July, which is a 6% increase on June.

It’s also more than double the value that was refinanced exactly two years prior in July 2019.

So why are homeowners refinancing in record numbers?

For starters, the RBA cash rate is at an all-time low of 0.1% following six rate cuts in three years.

As such, competition amongst lenders is fierce, with many offering record-low home loan rates in a bid to win over as many customers as possible.

In fact, RateCity reports the number of variable rates under 2% on its database has jumped from 28 to 46 in just two months.

Borrowers are also opting to lock in their interest rate too, says the ABS, following reports that lenders have started increasing the rates on 3-5 year fixed-rate loans.

“Borrowers are seeking out lower interest rates, particularly for fixed-rate loans, and cashback deals across a large number of major and non-major lenders,” says ABS head of Finance and Wealth, Katherine Keenan.

COVID-19 is likely increasing the number of homeowners refinancing, too.

With many households and businesses around the country doing it tough right now, one simple way to reduce your monthly mortgage repayments is by refinancing.

How we help you refinance the right way

Now, fixed-rate loans and cashback deals might look super appealing at first glance, but they might not always be the best fit for your situation.

And that’s why it helps to have someone like us in your corner.

We can help you go through the fine print, fees and limitations that might exist within these loan options.

We can also help you determine whether a fixed, variable or split loan is better suited to your needs.

The other thing we’re great at is negotiating with your lender.

Your current lender won’t automatically give you their lowest rate going. You’ve got to ask them for it.

And you’ve also got to make it clear that if they don’t reduce your interest rate, you’re willing to find another lender who will.

This can be both intimidating, not to mention time-consuming and frustrating if they don’t want to play ball.

But lucky for you, we can do the leg-work for you.

So if you haven’t refinanced in the past few years, get in touch with us today and we could help you save thousands of dollars in interest repayments on your mortgage.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.