Blue sky thinking

With new ownership, new products and new rates, Bluestone's Royden D’Vaz, talks about bringing new lending solutions to a broader customer base

A tightening of lending conditions isn’t the best news that a borrower – or broker – can receive. Beyond personal lending, the negative effects can echo through the economy for years as they did when the post-GFC credit crunch hit the US, UK and Europe. A decade on, house prices, economic growth and even public spending are still muted.

In Australia, where pace and sentiment have dampened somewhat in recent months, the impact is now being felt in the housing market, with the combined capital cities recording their first decline in property values since 2012. Add business lending to the mix and even the Reserve Bank is braced for a decline in GDP within a year.

However, for every door that closes another door opens, and for the alternative, non-bank lenders, business is booming. Australia’s alternative finance market experienced year-on-year growth of 136% from 2015 to 2016, and in the three years to 2017 small business lending by the non-banks doubled. According to KPMG, “Australia is fast becoming a regional leader” in the alternative finance space.

Currently, Australia’s alternative finance market is the second largest in the Asia-Pacific region behind China. Figures published by KPMG valued the Australian sector at US$610m in 2016, with sharp increases across balance sheet business lending, P2P lending and invoice trading of 80%, 250% and 16% respectively.

“What I’m really happy and excited about is that the non-bank sector is really making an impact and increasing their market share,” says Royden D’Vaz, national head of sales and marketing at Bluestone.

“We are doing really well and brokers like dealing with us. In the past we haven’t had that opportunity to compete or be spoken about in the same context as the mainstream lenders, but now we have better rates, better ability to serve the customer, and we are giving brokers and their customers outcomes they are looking for,” he says.

These trends aren’t exclusively pegged to the banks’ lending criteria. Even before credit started to tighten, borrower profiles were changing drastically – and rapidly – and therefore swathes of applicants no longer fit the typical vanilla loan profile.

Data published by the ABS confirms the number of sole traders and gig economy workers is rising steadily, and while these self-starters do not lack ambition, they often lack the paperwork required to give their enterprise or personal life a cash boost.

In addition, people experience unplanned life events such as divorce, illness and bereavement – which can negatively impact a borrower’s credit score.

“People just want to be understood and have someone take their situation into consideration. Brokers should embrace this growing part of the market and help these customers find solutions by becoming familiar with the products that we provide,” D’Vaz says.

Getting down to business

The last 12 months have seen major developments at Bluestone. In February, New York-based Cerberus Capital Management acquired Bluestone APAC, consisting of Australia, New Zealand and the Philippines – along with its $6bn loan book.

Giving Cerberus a foot in Australia’s lucrative lending market, the deal also paved the way for Bluestone’s diversification from specialist lending to near prime.

Marking its entry into the space, Bluestone launched the Crystal Blue portfolio in April of this year, comprising full- and alt-doc products geared to support established self-employed borrowers and PAYG borrowers with a clear credit history.

“Near-prime borrowers are those that don’t fit the mainstream lenders’ criteria and have a clear credit history, and in the last few months the criteria of mainstream has tightened,” D’Vaz explains.

“The opportunity has always been there; it is just that the solution comes from a different angle now” Royden D’Vaz, national head of sales and marketing, Bluestone

“It’s for people with unusual income; it’s for people who have been in employment for a short amount of time or who are self-employed. Any unusual policy item where a customer doesn’t fit the credit score cards or the lending guidelines of the majors or the mainstream lenders, they have to give it a crack with us.”

For an alternative lender that built its name in the specialist space, the move into near prime is a significant expansion of both the operations and values of the wider brand. To grab the industry’s attention, the lender cut rates by 225 basis points across the entire product suite.

“There are a lot of people who have been with their banks for many years, coming out of their interest-only [term] or their investment lending, and the banks aren’t willing to redo their loans for them. Brokers should know there are options available for these borrowers, and we want to position in that space,” says D’Vaz.

So high is demand from near-prime borrowers that Bluestone is now breaking its own monthly volume records in a week, and because record results demand record investments, focus is now falling on showing the world that Bluestone means business.

In April, the lender moved into new offices in central Sydney and is now focused on expanding the team in order to meet the growing demand for its products. To date, three new BDMs have joined both the NSW and Victoria teams, and one new BDM has been appointed in Queensland. The head count of the credit team has also increased, and there are plans for further growth. From there, D’Vaz says it is likely the next development will see Bluestone move into auto, equipment and commercial finance.

“The volume is coming in and we’re focused on getting the near-prime message out. We can’t lose the momentum, we can’t let the back end fall away, because then we’re sending the wrong message,” D’Vaz says.

“There are many things we are working on. We want to make sure that whatever we do is fully scoped and fully resourced, and that’s very important.”

High-touch philosophy

Helping brokers get a handle on near prime, Bluestone has taken the decision to make its underwriters, as well as BDMs, available to answer questions, field queries and “walk brokers through the process”, D’Vaz says.

“Brokers are starting to see more of our type of deals every day; the onus is on our teams to remove any fear, uncertainty or doubt they may have, if they haven’t dealt with us in the past.”

Under what D’Vaz describes as a “high-touch” model, the aim is to nurture collaboration between lender and broker and give brokers a second chance at customer satisfaction when their clients are declined elsewhere.

“Brokers can call our underwriters, explain and clarify parts of an application, and the underwriter can mostly mitigate their concerns on the spot. Then the broker can go back and tell the customer what is happening with more detail than before. If you ask us what our unique proposition is, I would say it’s that,” D’Vaz says.

“The way we deliver our products to the borrower is so important to make the broker look good in the customer’s eyes.”

Offering such clarity at a time of almost overwhelming levels of change in the broking industry is invaluable, to say the least. Observing growing fatigue and information overload following the royal commission and Sedgwick report, D’Vaz maintains that the focus for brokers moving forward should remain on customer outcomes, clear communication, and their own continued education regarding the products and solutions in the marketplace.

His message to the industry is clear: “The opportunity has always been there; it is just that the solution comes from a different angle now. Brokers need to be aware that there are other lenders who will do a deal.”