Moneytech’s perfect storm

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There is no shortage of new initiatives at the SME lender, with 2023 looking to be a pivotal year in its upward trajectory

TO SAY Moneytech is on a roll might be something of an understatement. The non-bank, already well known for its trade and debtor finance services to SMEs, launched in April a new equipment finance line that’s seeing an explosion in demand on the back of easy-to-use tech, a robust distribution strategy and deep-pocketed funding from a big four bank. Now, Moneytech is on the verge of expanding its lending empire into business loans for commercial property. If the performance of the equipment finance line since launch is any guide, this new product looks set to turn heads in a big way too. “The purpose of the business loan could be twofold: one to acquire commercial property; the second could be to raise funds against an existing property that you own in order to facilitate a cash injection into your business,” says chief executive Nick McGrath. The application process for the new product is completely digital and incorporates a large number of automated checks that run in the background. These checks cover not only the borrower’s credentials but also those of the property concerned, including its zoning, postcode and use, before a custom price is generated along with indicative loan approval or declination. “Within a few minutes, [the customer] will be able to get a very clear understanding of whether Moneytech has an appetite to do that loan or not, so they’re not wasting a ton of time for themselves as the broker or for the borrower,” McGrath says.

Founded in 2003, Moneytech has rapidly evolved over two decades to secure its position as a pre-eminent provider of lending products for small to medium-sized enterprises, with over $2.5 billion in lending annually. Moneytech offers a diverse range of financial products tailored to the needs of SMEs. These include lines of credit, equipment finance, trade finance, debtor finance and term loans. We work closely with Australian brokers to understand the unique needs of SMEs and develop targeted, effective financial solutions.

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Nick McGrath, Moneytech

Perhaps the most remarkable feature is the accuracy of the assessment, a testament to the technology involved in the process. “When they get an indicative approval, it’s still subject to some items. But 90% of deals that are approved would proceed to settlement if the borrower accepts the offer,” McGrath says.

A potential borrower can’t turn around and reduce their deposit to 20% after indicating that they will put in 30%, for example, but the key point is that an indicative offer from Moneytech shows that the deal has legs in the real world. “[We] can be pretty sure that it’s a good approval, whereas a lot of other lenders will give an indicative offer that hasn’t done a lot of the credit checks,” McGrath says. With the possibility so low of having the rug pulled on a deal, some brokers might end up using the Moneytech portal simply as a credible test of where lender appetites are at for commercial property. But McGrath isn’t concerned. “Even if they use it as a bit of a tyre-kicking tool, it’s still of benefit to us because we can see that they’re in there fishing around … [If something looks solid, we can] give them a call and see if there’s a deal there.” The product will be a low-doc assessment for loans of up to $2 million, and McGrath expects it to be available around early October.

One reason why McGrath thinks the new line will be popular is the increasingly tough lending conditions being imposed on loans at mainstream banks. This is an underlying factor that’s boosting business at non-banks across the board in 2023. Another appealing point of difference, which is perhaps unique to Moneytech, is the fact that the non-bank already offers trade, debtor and equipment finance, and the brokers and customers using those lines will see the efficiencies of sticking with Moneytech for their commercial property needs.

In the world of business loans, it doesn’t get much easier. “A broker or an SME borrower only needs to come to one lender, with one application to fulfil all four products – and to make it even easier now for brokers, they can apply for all four products digitally on our application portal.”

“We’ve gone from three new clients a month in [equipment finance] to 60 new clients a month and are growing at 10 to 20 clients every month”

There is no shortage of new initiatives at the SME lender, with 2023 looking to be a pivotal year in its upward trajectory

There’s a lot going on at the SME lender, but the trajectory is definitely up

“Most non-bank lenders do one product only. But the average SME requires at least four products: trade finance to fund inventory, debtor finance to fund their invoices, property finance to buy property, and equipment finance to buy vehicles and yellow goods and trucks and trailers,” McGrath says. When an SME requires different kinds of financing, it’s common for them to apply to a range of lenders – one finance type per lender. “There’s a big burden on time and administration to do that,” he says. “Moneytech provides all four products, and that’s really what makes us different from other non-bank lenders.”

It seems hard to believe that just a few months ago McGrath could count the number of monthly equipment finance deals Moneytech was doing on the fingers of one hand. “We’ve gone from three new clients a month in that product to 60 new clients a month and are growing at 10 to 20 clients every month,” he says. Tracking the success of the line has become a bit nonsensical in terms of percentage comparisons, and McGrath has largely given up trying. “Because we’re coming off a low base, the numbers look ridiculous. Maybe 3,000% or something like that?” The cross-pollination effect is one reason behind the swift uptake of the product by brokers who were already using Moneytech for trade and debtor finance. Another is that more brokers are diversifying away from a reliance on residential mortgages as the cost of living and high interest rates gnaw at that market, and equipment finance is often thought of as a starting point for brokers looking to learn the commercial lending ropes.

“We found a bit of a gap we're getting a lot of application flow in that $150,000 to $250,000 space. It’s going really, really well for us”

NICK MCGRATH, MONEYTECH

Setting a new bar for indicative approval

Cross-pollination

Hitting the sweet spot with equipment finance

Cross-pollination

Hitting the sweet spot with equipment finance

Cross-pollination

Hitting the sweet spot with equipment finance

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Published 18 Sep 2023

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More indicative than average

Source: Moneytech

of indicative approvals from Moneytech would proceed to settlement if the offer was accepted

90%

increasing number of brokers moving into commercial lending

Number of mortgage brokers also writing commercial loans

6,000

5,000

4,000

3,000

2,000

1,000

Oct 17- Mar 18

3,668

+38.6%

-5.1%

+28.9%

+5.4%

+14.2%

Show YoY change

Show proportion of total broker population

3,481

4,486

4,727

5,396

21.9%

20.1%

27.4%

27.8%

29.0%

Oct 18- Mar 19

Oct 19- Mar 20

Oct 20- Mar 21

Oct 21- Mar 22

Source: MFAA

“The easiest product for a mortgage broker to learn and sell is equipment finance due to the simplified credit matrix,” McGrath says. But he also cites a number of other factors that have led to “a perfect storm”: the system is easy to use in terms of automated background checks being built into the application process; customer credit scores are not affected by these checks; Moneytech leveraged the launch of the product by coinciding it with accreditation with all of the major aggregators in Australia – thus gaining access to a huge stable of member brokers; and the lending amounts available for no-doc applications are higher than at many competitors. Many lenders cap the amount of a loan that can be issued without any documentation requirements at $150,000. Anything above this level at the typical non-bank normally falls into the full-doc bracket, where extra financial records are needed, making the application process more onerous. Moneytech decided to allow no-doc loans of up to $250,000 for its equipment finance, with full doc after that, up to $2 million. “We found a bit of a gap … we’re getting a lot of application flow in that $150,000 to $250,000 space. It’s going really, really well for us,” McGrath says. Who knew? Clearly, SMEs have an extra $100,000 funding gap that needs filling in a no-fuss manner, and brokers appreciate any product that reduces paperwork. The icing on the cake, and another factor that will underpin the continued success of the product line, is that Moneytech has secured a funding warehouse that will allow the cash spigots to flow freely. “We set up a funding facility with a big four bank which will give us capacity to write hundreds of millions of dollars’ worth of loans,” McGrath says.

“We found a bit of a gap ... we're getting a lot of application flow in that $150,000 to $250,000 space. It’s going really, really well for us”

Nick McGrath, Moneytech

It’s been a wildly successful year already for Moneytech, and it’s hard not to be optimistic about the future given that the property loan product hasn’t even launched yet. When it does, it will be all cylinders firing, but McGrath still sees room to squeeze out more from some product lines. “One thing that we do want to do on the equipment finance side is increase the [no doc] digital application process from [a cap of] $250,000 to $500,000,” he says.

Up and up

He expects this to be rolled out some time in the next 12 months, which will help keep the number of monthly loans for the line on its “ridiculous” growth path. With a trajectory this good, the sky’s the limit. “Moneytech is coming off a low base, and the market is huge,” McGrath says.

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