More brokers turn to Plan B and diversify

Brokers repositioning to offer a broader range of lending lines is driving business towards non-banks, which have the expertise to help them think beyond housing and leverage new opportunities

IN THE aftermath of the GFC, non-bank lending in both the housing and business sectors fell for a few years on a six-month annualised basis. But in the post-pandemic economy, non-bank loans for housing are dropping, while business credit growth is skyrocketing. What gives? Non-banks are seeing a surge in broker channel demand for alternative finance solutions outside of the housing sector as more brokers diversify their offerings in response to market incentives. “Cost of living pressures have led to customers looking for a single, trusted source of information who can help them meet all their lending needs,” says John Mohnacheff, group sales manager at Liberty. The slowdown in the housing market, alongside a switch towards refinancing, has provided an opening for brokers to explore previously neglected lines of business. “The shift towards refinancing has prompted brokers to thoroughly review all personal and business finance commitments, including commercial facilities and asset finance requirements, essentially giving brokers the chance to expand their knowledge and generate more opportunities,” says Peter Vala, general manager for partnerships and distribution at Thinktank. “We have observed a continuing rise in residential brokers using Thinktank for commercial loans, encompassing the range of purchase, refinance and equity release transactions,” he says. “Additionally, there's been a significant increase in activity for commercial self-managed super funds.”

Diversification outside of home loans can mean offering a range of other lending types, from commercial to asset finance to small business to personal loans. Having multiple product lines under one roof means that borrowers who are looking for a range of lending options don’t have to be sent down the road. “A broker who can service unique customer situations with a diversified and flexible product offering can be a strong drawcard,” Mohnacheff says. The broker also stands to benefit by adding armour to their business against a downturn in one part of the lending market. “By positioning brokers as all-round finance experts, they can add value to their loan portfolio, ensuring long-term sustainability, and create lasting customer relationships.”

“Alternative lenders will continue to play a vital role in delivering flexible options. It’s more important than ever to support customers’ varying needs, including those who don’t fit the traditional lending mould,” Mohnacheff says. “Our ability to offer comprehensive and tailored finance solutions supports brokers to help customers achieve their goals – even if they have a less than perfect credit history.”

Close to one in three mortgage brokers now write commercial loans, which is broadening the lending options available to borrowers just as regular banks tighten criteria, credit enquiries from businesses surge, discretionary spending wavers and COVID-related government support ends. As the broker channel expands outside of housing, it’s important that vulnerable borrowers don’t fall overboard.

As a leading Australian non-bank lender, Liberty offers innovative solutions at competitive prices to support customers with greater choice. Over the past 25 years, this free-thinking approach to loan solutions has seen more than 700,000 customers get financial across a wide range of home, car, personal and business loans, as well as SMSF lending and insurance products. Liberty remains the only non-bank lender with an investment-grade credit rating offering custom and prime solutions to help more people get financial.

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Thinktank is an independent non-bank financial institution specialising in the provision of commercial-property mortgage finance up to $4m and residential-property mortgage finance up to $2m in the Australian self-employed, PAYG and SME sector. Since 2006, Thinktank has provided over $6.5bn of commercial, residential and SMSF lending solutions, which have enabled thousands of borrowers to achieve their goals of acquisition, refinancing and equity release. Thinktank offers a range of lending solutions, including Full Doc, Mid Doc (Alternative Income Verification), Quick Doc and SMSF loans.

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Diminishing returns on the back of shaky property markets is one reason borrowers have to seek broker advice, but the key concern in the current economy is inflation, which is still very high by historical standards. One recent survey shows that more than 80% of Australians have made personal, financial and lifestyle sacrifices over the past year due to cost of living pressures driven by inflation and rising interest rates. It is uncharted territory for many, and keeping up with the evolving conditions requires expert advice across all types of lending, not just housing. “Borrowers need a broker they can trust to deliver flexible solutions as market conditions continue to change. This demand for dynamic and encompassing loan options has generated more opportunities for brokers willing to explore new opportunities,” says Mohnacheff.

John Mohnacheff

Liberty

Industry experts

John Mohnacheff is Liberty’s knowledgeable and charismatic group sales manager. With over 30 years of insurance, banking and finance experience, he is committed to improving the sales habits and disciplines of the entire group sales team. Before joining Liberty, Mohnacheff held executive roles at Westpac and Bank of Melbourne. He has a Bachelor of Business and a Master's in Marketing from the University of New England, as well as a Postgraduate Diploma in Organisational Behaviour from the University of NSW.

Liberty

John Mohnacheff

Liberty

Industry experts

Liberty

John Mohnacheff

Peter Vala has extensive experience in residential, commercial and development finance. He specialises in strategic implementation, leads the Thinktank relationship manager team, and works closely with brokers and aggregators.

Thinktank

Peter Vala

accelerate their business, some brokers have already seized the opportunity to position themselves as lending experts within the space.” Asset finance for both new and used construction equipment is expected to see continued strong demand. Funding for hiring or training staff and for general business expansion is also increasingly sought by businesses seeing potential for growth. “Another notable trend is the growing number of individuals utilising a self-managed superannuation fund structure when acquiring commercial properties, instead of using a special purpose vehicle [SPV] or a unit trust,” Vala says. And then there is a perennial need for cash flow finance in the current interest rate environment. “As the environment changes and overheads increase, self-employed and business customers are searching for ways to keep the cash flowing. Many of these customers need a more comprehensive and flexible solution, which traditional lenders may not offer,” Mohnacheff says. Ensuring clients can maximise their borrowing power in challenging times is a sound basis for brokers to conduct a fresh financial health check. “Brokers have been focusing not only on the rate but the surplus cash flow a customer has available each month mainly through refinance or consolidation strategies,” Vala says.

John Mohnacheff

Liberty

Industry experts

“Collaborating with knowledgeable relationship managers helps brokers efficiently evaluate the viability of a loan up front, saving valuable time and resources that can be redirected towards more promising opportunities”

Peter Vala, Thinktank

One area that's been in the headlines recently is vehicle finance. New-vehicle sales in May totalled 105,694 units, increasing 28% from April and marking the highest-selling May ever, according to ACA Research. While some of the surge can be attributed to long-delayed purchases on the back of supply issues, some is also due to spiking business-vehicle sales before the end of the financial year. “Following lengthy supply disruptions in the motor industry, vehicle demand in Australia remains solid,” Mohnacheff says. “With many consumers looking for more options to

If one thing is certain, it’s that uncertainty in the economy will continue. Many banks and economists predict ongoing cost of living pressures, along with the possibility of further interest rate hikes in Australia. Even so, what we’re going through now is not a second GFC. Ultra-low interest rates during COVID caused a headlong rush into housing, which market mechanisms are now rather uncomfortably digesting, but the overall financial system is in a much more robust condition than it was in 2008. The very strong appetite for business loans at non-banks is perhaps more of an interesting phenomenon than a flashing red warning light, especially given the better regulation of non-banks today, higher levels of trust, and the fact that their share of total business credit in Australia is still only about 8% of all business lending. The latest data from the MFAA shows the number of brokers diversifying into commercial lending has surged, passing the 6,000 mark for the first time in September last year – a jump of 16% year-on-year.

Liberty

John Mohnacheff

Peter Vala

Thinktank

Peter Vala

Thinktank

Peter Vala

Barry Saoud joined Pepper Money in July 2021 as general manager, mortgages and commercial lending and is responsible for its strategic direction and operating performance across product, credit and settlements sales functions for Australia and New Zealand mortgages, commercial loans, personal loans and direct sales. With over two decades’ experience in financial services, Saoud has worked in numerous areas across legal, company secretary, sales and product management roles with the likes of Aussie Home Loans, GE Capital, HSBC and Norton Rose Fulbright. Saoud is a passionate leader with proven ability to grow businesses and exceed targets through innovative strategy and effective execution.

Pepper Money

Barry Saoud

Thinktank

Peter Vala

John Mohnacheff is Liberty's ebullient and charismatic group sales manager. With over 30 years of insurance, banking and finance experience, he is committed to improving the sales habits and disciplines of the entire group sales team. Before joining Liberty, Mohnacheff held executive roles at Westpac and Bank of Melbourne. He has a Bachelor of Business and a Marketing Master’s from the University of New England, and a Postgraduate Diploma in Organisational Behaviour from the University of NSW.

Liberty

John Mohnacheff

“[The] demand for dynamic and encompassing loan options has generated more opportunities for brokers willing to explore new opportunities”

John Mohnacheff, Liberty

The all-rounder broker

A market in flux

The all-rounder broker

A market in flux

Published 24 Jul 2023

Peter Vala

Thinktank

4,000

3,000

2,000

1,000

Jan 2023

Feb 2023

Mar 2023

Apr 2023

May 2023

Source: ACA Research

Sales of business vehicles spiking

5,000

6,000

3,966

Dec 2022

Brokers need to arm themselves with the right knowledge before jumping in. Commercial lending may be different to writing home loans, but non-banks have robust support tools and people in place to guide new players as they find their feet. “Are there nuances in a commercial loan?” asks Mohnacheff. “Yes. But if you’ve been doing home loans for a number of years, writing a commercial loan may not be difficult.” Lenders like Thinktank and Liberty offer training sessions, as do most aggregators. These sessions are a great place to begin building a knowledge base and getting some practical tips.

Getting ready to find a new customer segment

“It's valuable for brokers to engage with fellow brokers to discuss the outcomes of different credit applications. During these discussions, they can share insights on key risks identified in submissions and explore potential mitigations to address those risks,” Vala says. A strong relationship with a lender can also help prioritise the loans that are most likely to succeed. “Collaborating with knowledgeable relationship managers helps brokers efficiently evaluate the viability of a loan up front, saving valuable time and resources that can be redirected towards more promising opportunities,” Vala says. Building a strong reputation in your local community can prove invaluable. “When it comes to seeking new clients, relationships are key,” Mohnacheff says. “By affiliating themselves with local accountants, financial planners or even experienced business bankers, brokers can create a mutually beneficial flow of customers.”

Vala also recommends cultivating accountants as key contacts. “Brokers should leverage their existing network of self-employed clients and ask for introductions to their accountants.” According to some measures, accountants are relied on for assistance by clients looking to secure finance around twice as often as traditional banks and nearly four times as often as lawyers.

But the main things customers in areas like commercial and small business lending want revolve around the basics: they are looking for a simple process that cuts through the red tape; for help in securing a good rate; and for a lender or product that works for them. It all comes back to the economy. The pandemic housing boom was a head rush, but waiting for those days to return is hardly proactive, especially when a number of structural factors suggest that inflation, and by extension interest rates, may stay higher than historical averages for longer than some expect. In a quickly changing market, more Australians require alternative lending solutions and the flexibility of borrower-specific product offerings – and demand shows no sign of receding. “Non-banks are generally more agile to market needs, and we expect the sector to continue to innovate and grow,” Vala says.

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Thinktank is an independent non-bank financial institution specialising in the provision of commercial-property mortgage finance of up to $4m and residential-property mortgage finance of up to $2m in the Australian self-employed, PAYG and SME sectors. Since 2006, Thinktank has provided over $6.5bn worth of commercial, residential and SMSF lending solutions, which have enabled thousands of borrowers to achieve their goals of acquisition, refinancing and equity release. Thinktank offers a range of lending solutions, including Full Doc, Mid Doc (Alternate Income Verification), Quick Doc and SMSF loans.

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Light commercial

4,516

4,528

5,040

4,236

5,432

20,000

15,000

10,000

5,000

17,702

13,406

15,892

14,761

13,535

11,957

15,000

12,000

9,000

6,000

14,381

10,308

13,140

11,349

10,884

12,813

3,000

Source: Banjo SME Compass Report 2023

How brokers can support businesses to overcome financial challenges

Broad type of support

Specific support by % of brokers rating it as important*

Simplifying/reducing admin/saving time

Making process easy 31% Guidance around finance type 29% Navigating application process 24% Reducing admin/paperwork 26%

Finding a suitable interest rate 31% Finding the right finance term 28%

Rates and terms

Finding the right lender 30% Finding the right product/solution 29%

Product/lender introduction

None of these 28%

*Multiple answers were allowed

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