The SME is set to grow in the coming months. The March SME Growth Index shows there are extensive opportunities for brokers in this sector. Therefore, mortgage brokers who are earnestly seeking working capital alternatives can expand their offerings to this sector across Australia.
The SME Growth Index Survey Findings
- 90 per cent of over 1,200 SME respondents said cash flow had an overall negative impact on their revenue in 2017 even though two-thirds responded that their cash flow had improved when compared to 12 months ago.
- There is a continual, consistent trend that SMEs are moving away from bank lending for funding their endeavors.
24 per cent of SME owners who plan on expanding in the next 6 months say they intend to fund their growth via their primary banking institution, while 22 per cent will use other alternatives instead of banks.
SMEs Alternative Funding
The top five alternative funding choices of SME owners include:
- 77% Debtor Finance at 77 per cent
- 23% Merchant Cash Advances
- 10% P2P Lending
- 9% Crowd Funding
- 5% Other Online Lending Options
Mortgage Brokers Can Broaden Their Offerings
These SME Growth Index survey results show the open opportunity for brokers to broaden their product range, which will expand their range of products for every client.
A good place to start with new clients is to focus on the best solution for them that don’t include conventional bank lending and options that are not connected to real estate security. Their real estate assets can be utilized through other financial products.
The good news is that because of working capital solutions like debtor and trade finance, asset finance and progress claim finance, mortgage brokers aren’t required to be a specialist to offer them. They simply need to recognise which options are suited to each client.
Identifying the Opportunities
Brokers can identify such opportunities through asking the right questions about clients’ businesses. That is the start to identifying what source of finance will match their needs.
Mortgage brokers may encounter clients who have experienced substantial growth in a short time frame, or those who have obtained several new sales and they feel overwhelmed by worry over how they will afford filling these orders.
Brokers will also find opportunities for SMEs with seasonal challenges, those seeking mergers and acquisitions or management buyouts, or those seeking to boost business succession strategies.
One question is all it takes for a mortgage broker to grab these opportunities: “Is your business growth being set back by your lack of working capital alternatives?”
Be sure to bring all their options to the table, even if your client is there only to ask about an overdraft or loan. They may not be aware of better alternatives for working capital available to them.
Finally, make sure your clients are informed about the cost of a lost opportunity. SME funding alternatives are more attractive to SME business owners once they realize the opportunity cost, the ability to grow as quickly as their business does, and the speed of being approved they offer.
Speak with various alternative lenders to get a feel for their stability in good and bad times and which ones can/will work with your clients for the best outcome. You will also learn how they see your role as a broker in the process. Determine if they consider you just a referrer or a viable partner in the process.
The time will come when your SME clients will thank you for opening their eyes to better funding options that broaden their range of working capital.
First Choice Mortgage Brokers are a Sydney Mortgage Broker operating under the Australian Credit Licence Number: 382370