Brokers key to mitigating debt stress for Aussie businesses

How brokers can transform debt into opportunity

Brokers key to mitigating debt stress for Aussie businesses

News

By Mina Martin

In November, Australian businesses faced a daunting increase in financial pressures, with insolvencies climbing to 70% above the historical average.

This surge in financial instability highlights the growing need for strategic debt management, particularly for small to medium-sized enterprises.

The crucial role of brokers in debt management

Peter Arnold (pictured above), director at GAP Business Loans, stresses the significant impact brokers can have in alleviating financial stress for businesses.
 

“For many of a broker’s clients, their financial obligations are not just numbers on a balance sheet,” Arnold said. “They represent livelihoods and the survival of their businesses. This is where brokers play an important role.”

Strategic deleveraging and debt optimisation

Arnold said that brokers can aid businesses by facilitating strategic deleveraging, which involves a carefully planned approach to optimise debt structures and alleviate financial strain.

The process begins with a comprehensive review of the client’s debt portfolio, identifying opportunities to improve terms and conditions across various loans and credit facilities.

Solutions for effective debt management

One effective strategy highlighted by Arnold is debt consolidation.

“By consolidating multiple debts into a single loan with more favourable rates or terms, you can significantly reduce monthly repayments and free up cash flow,” Arnold said.

He said that non-bank lenders, like GAP Business Loans, often provide more flexibility than traditional banks in these scenarios.

Additionally, Arnold suggests leveraging untapped equity in business assets to restructure unsecured debt into secured loans, potentially lowering monthly costs and freeing up capital for reinvestment.

The broker’s role in negotiation and education

Beyond finding immediate solutions, brokers also play a crucial role in negotiating better rates and terms due to their market knowledge and relationships. Moreover, ongoing education and support from brokers are vital.

“Debt restructuring is only part of the equation; the goal is to prevent clients from falling into the same cycle of stress,” Arnold said.

Regular financial reviews and proactive debt management can help prevent minor debt issues from becoming severe.

Long-term financial empowerment

Ultimately, Arnold believes that a good broker doesn’t just solve immediate debt problems but also empowers clients to build a more secure financial future. This involves equipping them with the necessary knowledge and tools to manage their finances effectively and make informed decisions.

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