Hayne report could boost commercial finance opportunities

As the industry nervously awaits Commissioner Hayne’s final report, many have been looking for insight on what his recommendations could include. From a ban on trail commissions to a revision of how living expenses are calculated, it often feels like nothing is off the cards.

However, SMEs are likely to be hit just as hard as brokers, according to Scottish Pacific CEO Peter Langham.

Ahead of Commissioner Hayne’s final report – due to be handed to Treasury “by February 1” – Langham has shared five predictions for the future of SME lending, and there are plenty of opportunities for brokers to leverage.

“The best way for SMEs to get suitable advice on the many options available to them is via commercial finance brokers, which means there’s potential for mortgage brokers to move into commercial finance,” says Langham.

Langham’s predicts:

1. Business owners will need to seek out alternative financiers to the banks. The best way for SMEs to get suitable advice on the many options that exist is via a commercial finance broker.
2. The royal commission has caused volatility in the property market, so the credit squeeze will be on for any business owner unwilling to look beyond property security.
3. Business owners will need a long-term working capital alternative to property security as, generally speaking, unsecured loans are not suitable. It’s worth noting that 76% of growth SMEs who look beyond the mainstream banks, choose debtor finance.
4. Many SME owners have stayed with the banks out of habit. Now, they may be more likely to seek other credible funding options. The range of choice is good for SMEs when it comes to funding, so long as they are making informed choices – and are aware of the benefits and risks of the products now available to them.
5. There will be increased opportunities for brokers moving forwards because SMEs will need more guidance. There’s also the potential for mortgage brokers to move into commercial finance – according to MFAA data, there has been a near three-fold increase in brokers writing commercial loans since 2015, but it’s still only a fraction of the total industry.