Business loan rejection causing SME cash flow issues

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More than one-in-five SMEs are having cash flow problems due to business loans being rejected, according to new research.

The report, by market analysis firm East & Partners on behalf of Scottish Pacific, also shows just one in 10 SMEs believe they are on top of their cash flow.

One of the main culprits?

More than one-in-five business owners cite being rejected from a lending product as the main reason for their cash flow issues, the report states, and a similar proportion of SMEs were unable to take on new work because of these cash flow problems.

“[This] is a massive wake up call to SMEs and their advisors to make sure they are funding their business in a way that optimises cash flow,” says Scottish Pacific CEO Peter Langham.

“A business struggling with cash flow can only stretch working capital so far before something has to give.”

Other major cash flow issues

Business owners see government red tape and compliance as the biggest thorn in their side, with almost three-quarters naming this as their greatest cash flow issue.

Other major cash flow problems stem from suppliers reducing payment terms and customers paying late.

Australian SMEs seeking other lending options

Another interesting tidbit arising from the report is that – for the first time – Australian SMEs are more likely to use a non-bank lender, ahead of their main bank, to fund their 2019 growth plans.

The report shows that over the next six months, 19% of SMEs intend to choose a non-bank lender to fund their growth, compared to 18% of SMEs who intend to stick with their main bank (down from 38% in 2014).

According to East & Partners Head of Markets Analysis, Martin Smith, the rising demand for non-bank lending options to fund new growth investment reflects the reality that there is now a broader array of non-bank lending alternatives to match business owners’ funding requirements.

Still a long way to go

While SMEs are now increasingly looking to lenders beyond the main banks, Scottish Pacific CEO Peter Langham says many SMEs fail to take advantage of the alternatives available to them.

“When it comes to funding growth, overwhelmingly SMEs opt to put their hands in their own pockets – 83% of business owners say this is how they plan to fund revenue growth,” Langham says.

“Some business owners remain unaware of funding alternatives.”

Get in touch

If you’re an SME owner experiencing cash flow problems, or looking to fund your business’s growth, then get in touch.

We’ve got a number of lenders on our panel and would be happy to run you through some options to help secure your business now and into the future.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.

Home-ownership within reach: will you qualify for new buyer scheme?

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Imagine buying your first home with only a 5% deposit and not having to pay lenders mortgage insurance (LMI). Well, that dream is one step closer to reality after the government introduced legislation to implement the First Home Loan Deposit Scheme.

Currently, people with a deposit of less than 20% usually have to pay LMI.

But under the scheme, some first home buyers will be able to borrow up to 95% of the value of their property without forking out for LMI.

The result: first home buyers stand to save up to $10,000 in LMI, allowing them to enter the property market earlier than they would have otherwise.

Now, the scheme is due to commence on 1 January 2020.

But here’s the catch: it’s limited to just 10,000 first home buyer loans each year.

That number is less than 10% of the 110,000 Australians who bought their first home in 2018.

So who gets dibs?

When the Coalition announced the scheme prior to the last election it warned that in order to be eligible first home buyers could not have earned more than $125,000 in the previous financial year, or $200,000 for couples (and both need to be first home buyers).

The recently introduced legislation further stipulates that there will be dwelling price caps which will differ from state to state, as well as between city and regional areas.

These caps haven’t been quantified just yet. But the keyword is that the scheme will be limited to ‘modest’ dwellings.

“Setting caps on the value of properties that can be purchased under the scheme will be a key lever used to constrain potential demand. It will be necessary to set these caps so that only modest properties in regional towns and capital cities can be purchased,” the legislation reads.

“This will also help to target access to the scheme to those first home buyers in more genuine need of assistance.”

So, while we don’t know what these caps are, it’s fair to say that you’re not going to be able to use the scheme to turn a 20% deposit on a $300,000 unit into a 5% deposit on a $1.2 million house.

Who will do the assessing?

To implement the scheme, the National Housing Finance and Investment Corporation (NHFIC) will contract with a panel of lenders, and smaller banks and non-bank lenders will be prioritised to encourage competition.

Participating lenders or mortgage brokers will then assess scheme eligibility alongside normal considerations such as loan serviceability tests.

An alternative model being considered is to have borrowers apply to the NHFIC directly to confirm eligibility. Approved borrowers would then approach a participating lender (directly or via a mortgage broker) to obtain the loan.

What next?

Well, preliminary consultations were initiated in late-May and involved a large number of meetings with a broad range of stakeholders, including lenders (large and small), LMI providers, industry associations, mortgage brokers, and consumer advocates.

Further consultation will continue on the legislative framework before the scheme’s eligibility and operations are fully revealed.

Want to know more?

If you’re a first home buyer looking at cracking into the property market in 2020 – or know someone who is – then get in touch.

Rest assured that we’ll be closely watching how the First Home Loan Deposit Scheme develops and will be able to help you get your application in pronto.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.

Has the tide turned? Household lending surges

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Lending to Aussie households spiked 3.9% in July, the strongest growth seen since October 2014, according to the Australian Bureau of Statistics (ABS).

The bumper month follows a 1.9% rise in June 2019, suggesting the tide has finally started to turn in the lending market.

“Whoa. Quite the surge in housing credit in July,” remarked CoreLogic’s head of research Tim Lawless, “haven’t seen numbers like this since 2015/16”.

Lending for investors rose 4.7% in July with rises across all states and territories, while lending to owner-occupiers also recorded substantial gains at 5.3%.

Meanwhile, home loans to first home buyers rose 1.3% in July. This is the fourth consecutive month of growth for this segment.

Why the surge?

The rise came the same month that the prudential regulator, APRA, eased loan serviceability standards.

Essentially, APRA stopped telling lenders to assess whether borrowers could afford their repayment obligations based on a minimum interest rate of 7%.

BIS Oxford Economics’ Maree Kilroy adds that investor sentiment also received a boost following the Coalition government’s federal election victory, and pointed to back-to-back rate cuts in June and July.

“After withdrawing from the market for several years, investors have reacted positively,” Kilroy says.

Lawless agrees that the surge is due to “two rate cuts, easier credit, sentiment boost post-election and removal of macro-prudential”.

And his colleague, Cameron Kusher, suggests this might only be the beginning.

“Importantly this is only to July. We could see these figures go much higher by the time we are right in the middle of spring,” Kusher says.

Get in touch

As Kusher suggests, this might just be the beginning of a lending surge.

Spring usually brings plenty of new properties onto the market – everything looks nicer in spring!

So if one of them happens to catch your eye, get in touch and we’ll be happy to guide you through the process of obtaining finance.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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 the housing market drought finally over?

Marge, Marge, the rains are ‘ere! Home prices have recorded their first rise since October 2017, with national dwelling values increasing 0.8% over August, according to the latest CoreLogic report.

Housing values across capital cities rose by 1%, with Sydney (1.6%), Melbourne (1.4%), Canberra (0.8%), Hobart (0.5%) and Brisbane (0.2%) leading the way.

While the lift in annual housing values is substantial, the recent growth is a continuation of the trend seen throughout the year whereby value falls were consistently losing momentum, and have now started to rise.

Indeed, while Adelaide (-0.2%), Perth (-0.5%) and Darwin (-1.2%) recorded losses, the figures are a substantial improvement on what the three cities recorded over the last quarter and year.

Likewise, while the combined regional figure was -0.1%, this was much better than the quarter (-0.6%) and annual (-2.9%) figures recorded for that market.

What’s driving the improvement?

The significant lift in values in August aligns with a consistent increase in auction clearance rates and a deeper pool of buyers at a time when the volume of stock advertised for sale remains low, says CoreLogic research director Tim Lawless.

“It’s likely that buyer demand and confidence is responding to the positive effect of a stable federal government, as well as lower interest rates, tax cuts and a subtle easing in credit policy,” says Lawless.

“While the recovery trend is still early, it does appear that growth trends are gathering some pace, particularly in the largest capital cities.”

Is a big bounce nigh?

Lawless says while he had previously believed the housing market recovery would be a “slow and steady one”, this might not necessarily be the case.

“With housing credit restrictions easing and mortgage rates likely to reduce further, this rebound could potentially turn into a ‘v-shaped’ recovery,” Lawless says.

“At the outset, it appears that a rapid recovery would confirm that low interest rates and a loosening in credit policy is reigniting some market exuberance.”

The spring selling season will be a timely test of the market’s depth.

“A key contributor to the housing recovery has been the increase in buyers, but also a lack of advertised stock. As stock levels continue to rise throughout spring, we will get a much better understanding of the depth of the current recovery,” Lawless says.

“As listing numbers and auction volumes rise, clearance rates may soften if buyer demand doesn’t lift to match the increase in supply.”

Interested in jumping in?

These latest figures indicate that the housing market recovery is underway, so if you’re interested in making a purchase, then please don’t hesitate to get in touch.

As mentioned above, spring tends to bring more properties onto the market, so if you’ve got your eye on one, let us know and we’ll be happy to help you obtain finance for it.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.

New code to protect Aussies buying solar panels

Ever thought about investing in solar panels for your home? If so, you’ll know it’s a big decision and there’s a lot to wrap your head around. Fortunately, the consumer watchdog is proposing a new retailer code to make solar purchases safer and easier.

Australia is the sunniest continent on Earth. Yep, even more so than Africa.

Which is why it makes sense that more than two million homes have already decked out their rooftops with solar panels.

Sure, the initial outlay is between $5,000 and $10,000, but solar installations usually pay themselves off in two to six years – and then they save you a whole lot of money on power bills in the long run.

The thing is, though, household solar can be tricky to research if you’re not familiar with the industry – not to mention all the potential government rebates and incentives you need to wrap your head around.

Fortunately, the ACCC is stepping in

The Australian Competition and Consumer Commission (ACCC) has proposed a new consumer code for retailers selling solar and energy storage systems, with a draft determination due on September 9.

The New Energy Tech Consumer Code (the Code) sets minimum standards of good practice and consumer protection and will apply to all aspects of customers’ interactions with participating retailers.

That includes their marketing, finance and payments, warranties and complaints handling processes.

“Products like solar panels or battery storage involve significant financial outlays for households,” ACCC Deputy Chair Delia Rickard explains.

“This Code aims to give consumers more protection and more information to help them make informed purchases.”

What will The Code cover?

Signatories to the Code must comply with obligations, including that they:

– avoid high-pressure sales tactics
– ensure their advertising is clear and accurate
– educate consumers about their rights
– provide clear information about product performance and maintenance
– take extra steps to protect vulnerable consumers
– implement effective complaints handling processes.

The proposed code will also effectively prevent signatories from offering finance through ‘buy now pay later’ arrangements.

Financing options

There are a number of state government programs across Australia that offer interest-free loans for eligible households in the solar space, including in NSW, Victoria, Queensland and South Australia.

If you’re not eligible for any of the above schemes, rest assured that there are other smart ways to finance the installation of household solar.

If you’d like to find out more, get in touch. We’d be happy to talk you through some of your options.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.