Service in a time of uncertainty

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Non-bank Prospa has a top-notch service record, but more importantly it understands what service means for SMEs and the brokers who help propel them forward

IT SEEMS pretty clear now that more brokers are riding a growing swell of non-bank lending to SMEs as the residential property market continues to underwhelm. But the extent of broker participation in non-bank lending is sometimes a surprise. Roberto Sanz, national sales manager at SME lender Prospa, has a flair for the dramatic and occasionally asks conference attendees what percentage of Prospa’s total transacting partners they think is made up of mortgage brokers. The typical audience response is somewhere between 5% and 10%.

Prospa is Australia’s number one small business online lending specialist providing market-leading capital products and solutions to help Aussie small businesses grow and prosper. Established in 2012, Prospa ensures applications are simple and funds can be accessed within 24 hours. Its cash flow products and services allow small businesses to grow and take advantage of opportunities to run their businesses or help them pay for goods and services.

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Roberto Sanz, Prospa

“This current calendar year to date, mortgage brokers make up 54% of our transacting partners,” Sanz says.

Roberto Sanz, Prospa

Awareness of alternative lenders in Australia among SME owners has risen in tandem with this broker patronage. Prospa research shows that SME awareness now sits around 54%, a vast improvement from levels in the mid-teens six or seven years ago. There are many reasons for a business owner to consider a non-bank over a mainstream bank, and the long-term momentum is slowly moving away from using traditional finance providers. Some of the reasons include the increasing difficulty SMEs have in getting a loan from a bank, partly due to regulatory changes or the time handicap involved in going to bank. A lack of collateral can often sink a business loan application at a bank, but this may not be the case at a non-bank. Whether an SME decides to take up the alternative finance option or not often comes down to the level of service provided. “A key driver for consideration of an alternative lender over an established institution is the quality of the overall customer service,” Sanz says. Prospa has a strong record in this area: it is ranked as Australia’s number one online lender to small businesses with an ‘Excellent’ 4.9/5 TrustScore on Trustpilot.

But what exactly does ‘service’ mean for an SME customer? “From June data we know they’re looking for flexibility in repayment options, speed of access to funds, and ease and speed of the application process,” Sanz says. For a broker, it goes without saying that providing good service to SME customers isn’t possible if the lender you are using is dropping the ball in any of these departments. Other factors that might be important when choosing finance could include the security needed, if any; the length of the loan; the interest rate; and whether there is a strong understanding of the customer’s business. “We also know more and more small business owners are looking to their brokers for information to inform their decisions on borrowing products, with 21% of SMEs specifically seeking out their advice.” While the non-bank can uphold its side of the service equation by providing a simple application process, offering flexibility and ensuring a fast turnaround, the broker plays a key role in rounding out that service when it comes to the more personal aspects of the relationship. “The mortgage brokers who make up 54% of our referred business this year are doing three things well: building awareness, creating appetite and providing access,” Sanz says. “We know they understand where the appetite for funding is because they’re consistently identifying their clients’ additional needs.”

Businesses in this group may be looking for a reliable funding partner and needing to engage expert advisors to introduce better systems for managing and growing their operations. Brokers will need to have a clear understanding of what such businesses require at each stage of growth to reach the next stage, while also having a view on the competitive landscape. Among businesses overall, intent to borrow is highest in sectors such as hospitality, at 24%, and wholesale trade and warehousing, at 32%. Prospa data also shows that the number of SMEs using lending products to finance working capital has steadily risen over the last year as the economy has transitioned away from COVID-related government support measures. People are looking at all options to accelerate their businesses, and savvy brokers are positioning themselves as true financial advisers in the SME lending space by partnering with Prospa.

“A key driver for consideration of an alternative lender over an established institution is the quality of the overall customer service”

More and more small business owners are looking to their brokers for information to inform their decisions on borrowing products, with 21% of SMEs specifically seeking out their advice”

Non-bank Prospa has a top-notch service record, but more importantly it understands what service means for SMEs and the brokers who help propel them forward

The economy over the last year has proved a complex beast, with some sectors faring better than others. “Brokers need to understand their customers’ cash flow cycles, identifying the pain points along the way,” Sanz says. “Can their customer realise their opportunities with a Prospa business loan or reduce cash flow gaps with a business line of credit?” Prospa research shows that 41% of SMEs with annual revenue of less than $100,000 are currently planning to use external funding to maintain cash flow, while 33% of those with revenue of between $500,000 and $2.5 million will use external funding for business expansion. Indeed, this medium-to-large group by revenue is far more likely than businesses bringing in less than half a million dollars or over $2 million to be interested in borrowing funds.

At the same time, quarterly data from Equifax shows there was a drop of 1.3% in overall business credit demand in the three months to June. This dovetails with CreditorWatch data showing more B2B trade payment defaults, lower average values of business invoices, and rising insolvencies, particularly in the construction and retail trade industries. “Small business confidence is declining with increasing fears and concerns around the macroeconomic environment. We know that the higher inflation and interest rate environment has negatively impacted business demand and put strains on SMEs’ supply chain and cost of materials and goods,” Sanz says. It’s at times like these that brokers can make all the difference to SMEs by providing good advice and top service. “As we look forward, we know that there remains a large proportion of SMEs whose funding needs are underserviced.” Regardless of where the economy heads, Prospa is a safe option for brokers and the people they serve. “Prospa remains in a safe, resilient position despite challenging market conditions,” Sanz says. “We remain committed to providing our customers and partners access to flexible funding solutions that match business needs and support small businesses.”

More and more small business owners are looking to their brokers for information to inform their decisions on borrowing products, with 21% of SMEs specifically seeking out their advice”

A higher profile for non-banks

Defining service in alternative lending

Where is the demand?

Defining service in alternative lending

Where is the demand?

Defining service in alternative lending

Where is the demand?

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Published 18 Sep 2023

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Prospa Trustpilot score

Source: Trustpilot

4.9

WHAT SMEs ARE USING LENDING PRODUCTS FOR NOW

Maintaining cash flow 36%

Buying equipment 34%

Purchasing inventory 27%

Paying invoices 22%

Business expansion 21%

Financing working capital needs 18%

Purchasing real estate 12%

Consolidating borrowing 9%

Source: Prospa

Roberto Sanz, Prospa

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Roberto Sanz, Prospa