SME Lending Education
Corporate insolvency reporting provided by the Australian Securities and Investment Commission (ASIC) continues to show that variable and inconsistent cash flow is one of the main contributing factors to SME failures. Given SMEs represent more than 95% of all Australian businesses, the economic ramifications of this are sizeable and assisting SMEs in times of cash flow pressure is crucial. With the right financing options, solutions and advice, many SMEs can stay open for business.
As outlined in previous Business Finance Certification articles, the landscape in the SME lending space is rapidly evolving. APRA’s tightening of credit standards and the subsequent retraction in borrowing against residential property have forced SMEs to look for alternative strategies to fund growth, leverage opportunities and mitigate the downtimes.
Opportunities for Brokers
For brokers, their businesses are evolving as well. On the one hand, the traditional residential lending environment is becoming more restrictive. Whilst the outcomes of royal commissions, industry forums and parliamentary reactions are yet to be fully integrated, change is inevitable. On the other hand, business lending is a growing industry and brokers that can diversify their offering into this space will open up great opportunities.
Small banking sector research, indicates that 40% of Australian SMEs say they are looking for a trusted adviser. Finance professionals are well-positioned to meet such needs. They can relate, as usually, they are small businesses themselves. And they have existing relationships, built on helping SME proprietors with their residential lending needs.
For brokers and finance professionals to be seen as appropriate solution providers for SMEs, they will need to have deeper conversations to understand how clients’ businesses work, appreciate the nuances of business operations and industries they work in, along with their potential needs.
As brokers commence their diversification journey, training and education are key. Whilst coming from a strong base, enhanced skills, knowledge and understanding are the main drivers for brokers to be market leaders in the SME advice and lending arena.
Soft skills, like knowing how to position a conversation, and operational process efficiency, demonstrate capability and capacity for brokers to work with SMEs.
However, the biggest educational requirement for holistic SME lending specialists is in understanding the following areas.
Understanding financial statements and being able to recognise the financial strengths and weaknesses of a business are foundation tools for business finance professionals.
Commercial and Business Loans
Structuring finance applications for building purchases, refinancing, construction and the future development needs of businesses. In conjunction with this, undertake development feasibility studies and recognise and mitigate transactional risks.
Asset and Equipment Finance
Distinguish between the different options for the business lease and purchase of equipment and other assets. Demonstrate the cash flow benefits and productivity gains from leasing, in consideration of a business’ resources and unique circumstances.
Cash Flow Financing
Learning the range of relatively new cash flow finance products and how they can be used by businesses to improve their viability and enhance profitability.
In conjunction with industry experts, elevateB has developed a self-paced, online, interactive Business Finance Certification. This program will provide you with the knowledge and skills required to become a successful business finance professional and work in the SME space. In addition, it provides business strategies and soft skills to assist you to better market and deliver your existing and new-found client offerings.
For more information on the Business Finance Certification, click here.