If you only used the treadmill at the gym, you’d maintain adequate fitness, but you wouldn’t meaningfully build and strengthen your body. Similarly, as a broker if you focus only on residential, you’re denying yourself the opportunity to put some muscle on your business.
SMEs (small to medium enterprises) are the beating business heart of Australia. According to the Commonwealth Bank, SMEs represent more than 95% of all businesses, employ around 45 per cent of all Australians, and account for approximately 35 per cent of our economic output.
It’s been estimated that up to 30% of a resi broker’s book is likely to be small business owners, who are highly likely to be under-serviced for their business finance needs.
Research recently conducted for Banjo SME Compass 2023 found that more and more SMEs are turning to finance brokers for evaluating and securing funding. Compared to the previous year, 10% more businesses say they sought help from a broker in 2023.
“This is primarily because there’s a growing awareness that brokers can help find the right solution and make the borrowing process as seamless as possible,” says Brendan Widdowson, Chief Commercial Officer at Banjo Loans.
According to John Sgambelluri, Partner at Accendo Financial, the time is ripe for brokers prepared to diversify. “There are around 2.4 million SME owners across Australia, yet only around 2500 brokers are commercial-facing.”
“A PAYG earner will take out an average of 5 loan products; an SME business owner will take out 17 loan products on average. This clearly represents a huge opportunity.”
While the data is pretty compelling, many brokers are unsure how to build their commercial confidence and competence to become a trusted business adviser to SME clients.
Getting started
To move into SME finance broking you’ll need an appetite to open more doors, grow the conversation with customers and understand their business needs. In return for your greater investment of time, knowledge-building and engagement with these clients, you’ll potentially reap far more significant financial and professional rewards than you would from home lending alone.
To equip yourself to move into this sector, you can:
Asking questions – the key to engagement
According to Brendan Widdowson, knowing what questions to ask a client to help understand their business is the key to developing strong relationships and engagement, and build ongoing opportunities from your potential SME clients.
“Ask your prospective SME client about what’s driving growth in their business. It’s a great way to uncover opportunities for funding,” he says.
John Sgambelluri agrees, “In an exploratory conversation with a potential SME client, a key question to ask might be, ‘If you had unlimited access to capital for this business, what would you do and why?’.
“From their answers, you’ll learn their propensity for risk, their goals and aspirations.”
“Business owners always need working capital: whether it’s to buy stock, get new vehicles, replace ageing equipment, extend or purchase their business premises, and so on.”
Other questions might include:
There’s a skill to asking these questions, and training will help you to build it.
Position yourself as a trusted adviser to your clients
“You have to partner with your SME client on their journey,” says Brendan Widdowson. “Use sources like the SME Compass to help you to understand the small business environment, and demonstrate that you know the pain points.”
For example, SME Compass found that half of all SMEs surveyed intend to leverage funding in the next 12 months to drive growth, especially metro-based businesses. Yet 1 in 2 SMEs face hurdles trying to get funding, most commonly the long decision times and strict requirements from the familiar, traditional lenders.
Another tip is, as you start to build your business with SME clients, use proof points in a more creative way. For instance, on social media channels, instead of talking about a loan product you sold, post a picture of a truck, or a 3D printer that you helped your client purchase.
The last word
If you’re still unsure, and feel that it might be risky to venture into SME lending, John Sgambelluri has a viewpoint.
“If you look at the emergence of AI (artificial intelligence), it’s probably going to change the face of residential lending by making it simpler and more automated. But you can’t have an algorithm for SME – you’re always going to need humans to service that area. It’s more of a risk to not venture into SME lending to grow your business.”
“The lagging indicator is that less than 30% of SME loans are written by brokers – that represents a huge opportunity.”
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