Big on small business lending

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AMP Bank is leaning into small business lending with innovative changes to lending policies and the planned launch of a new digital banking experience in 2025

SMALL BUSINESSES are battling challenging conditions in 2024. With the Reserve Bank of Australia holding the cash rate at 4.35% since November 2023, an increase of 425 basis points since May 2022, many small businesses are bearing the brunt of efforts to bring inflation under control as consumers spend less and the cost of funding increases. “This is the fastest rate-hiking cycle in Australia since the late 1980s,” says Paul Herbert, AMP Bank’s head of lending and everyday banking distribution. “This means that small businesses are facing the headwinds of higher interest cost on their debt.” Credit bureau illion’s Commercial Risk Barometer found business failure risk eased slightly in the six months to June 2024, though the index was still 7% higher than in October 2023. However, only mature and larger businesses are rebounding, while smaller and younger firms continue to struggle.

AMP Bank is a non-major digital bank that has been operating for over 25 years, providing Australians with home loans, and deposit and transaction accounts. We take pride in our strong service aimed at making it easy for brokers to do business with us, and ensuring customers have a positive banking experience. At AMP, we’re here to help people create their tomorrow, and we value brokers’ role in achieving this, supporting clients to make some of life’s largest financial decisions.

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Paul Herbert, AMP Bank

An August 2024 SME Sentiment Tracker from market research firm Fifth Quadrant showed that only 32% of SMEs are focused on growth, down from 44% in February. Worryingly, 13% of SMEs expect to have difficulties making debt repayments over the next three months, up from 9% in April. AMP Bank’s forecasts suggest conditions will remain tough for small business owners for some time. “The economic environment is likely to remain challenging in Australia over the next 12 months, given that inflation is still elevated and interest rates are high,” Herbert says.

Paul Herbert, AMP Bank

AMP Bank is stepping in to ease the pressure on small business owners seeking finance. In July, the bank adjusted its self-employed income policy to reduce documentation requirements for small business owners prior to home loan approval, while increasing the value of a customer’s bonus and rental incomes that can be used for their loan assessment. The changes are aimed at simplifying and streamlining how brokers and their small business customers capture self-employed income. Brokers who submit a home loan application for a self-employed customer who has had an ABN for a minimum of two years now only need to supply the most recent tax return and Notice of Assessment for individuals, as well as the most recent tax return for all business entities. Provided a customer meets loan servicing requirements, no other financial statements are required. AMP Bank can also now apply 80% of a customer’s after-tax bonus income to an income assessment, regardless of the size of the bonus. Rental shading of up to 35% is now possible on residential investment properties in all zones, decreasing to 20% depending on the rental type. “We believe there is a significant opportunity for AMP Bank to help Australian small businesses with better banking products and services,” Herbert says. “Our self-employed income policy improvements simplify the borrowing experience for business owners, better reflecting their total income to unlock borrowing options.”

There are more exciting changes on the horizon for AMP Bank’s small business customers. In the first quarter of 2025, the bank will launch a brand-new mobile banking experience for small businesses, offering access to ultra-convenient digital banking across a range of the services small businesses need. “We think AMP Bank is well placed to disrupt the small business market and offer a compelling proposition that helps small businesses start, run and grow,” Herbert says. “We’ll do this via the delivery of a feature-rich, convenient mobile banking experience, leveraging simple everyday banking products such as transaction savings and payments and cards. But we’ll also be adding smart and secure digital tools, including integration to various services.” The mobile banking experience will be developed through a partnership with banking technology platform Engine by Starling, which will form part of what AMP Bank is calling a connected digital ecosystem for business. AMP Bank says one of the first digital bank integrations will be with business accounting software. The platform will also allow AMP Bank to deliver real human support for small business owners when and how they need it, via a 24/7 contact centre, including chat as well as phone services. “That 24/7 availability will allow us to be there when small businesses need us, not just in the hours that we choose to operate,” Herbert says. “All of this will be delivered through the power of their mobile phone.”

AMP Bank has noted that global central banks have started cutting interest rates. Herbert says that, should the RBA start this process in Australia in early 2025, as AMP Bank currently predicts, this would provide some support for consumer and small business incomes. “There are approximately 2.6 million businesses in Australia, which is expected to grow to around 3.5 million in the next 10 years,” he says. “Most of these businesses are in the sole trader and micro and small sub-20 employee part of the market, and we know they are underserved in terms of their banking needs. “There is significant opportunity to better support this market, both for banks and brokers.”

“The economic environment is likely to remain challenging in Australia over the next 12 months, given that inflation is still elevated and interest rates are high”

“We think AMP Bank is well placed to disrupt the small business market and offer a compelling proposition that helps small businesses start, run and grow”

AMP Bank is leaning into small business lending with innovative changes to lending policies and the planned launch of a new digital banking experience in 2025

AMP Bank sees brokers as essential to the small business and home loan lending ecosystem. The bank’s tailored business finance loan for brokers and advisers, for example, enables brokers to acquire or merge businesses using their current and/or future ongoing recurring revenue as security. “This makes it easier for brokers and advisers to grow their businesses,” Herbert says. The bank also maintains dedicated BDM and broker experience teams to support brokers. Recently, AMP Bank inked a partnership with tech platform Simpology. The deal will see the bank transform its end-to-end home loan application process, fast-tracking the ‘time to yes’ on loans, while providing a better experience and more application visibility and certainty for brokers. A complementary partnership with legal services provider MSA National, whose technology will be integrated with Simpology as part of the new loan application technology rollout, will see AMP Bank deliver an enhanced settlement experience for brokers and their customers. The new solution will be piloted later in 2024, with a launch planned for the second quarter of 2025.

Source: Fifth Quadrant SME Sentiment Tracker, July 2024

IN Partnership with

“We think AMP Bank is well placed to disrupt the small business market and offer a compelling proposition that helps small businesses start, run and grow”

PAUL HERBERT, AMP BANK

“We think AMP Bank is well placed to disrupt the small business market and offer a compelling proposition that helps small businesses start, run and grow”

Backing small businesses

A digital bank for small businesses

Elevating the broker experience

A digital bank for small businesses

Elevating the broker experience

A digital bank for small businesses

Elevating the broker experience

Published 16 Sep 2024

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How SMEs rate last year’s financial challenges

0–3

4–7

8–10

63%

28%

0–3 = Not at all challenging 8–10 = Extremely challenging

Small businesses, big future

Lack of access to finance hinders innovation

% of businesses, by employment size, that cite lack of access to additional funds as a barrier to innovation

Q: How would you rate the severity of your financial challenges over the past 12 months?

Source: Australian Bureau of Statistics, July 2024

18.2%

21.7%

17.6%

13.0%

19.1%

0–4 persons

5–19 persons

20–199 persons

200 or more persons

Total (all businesses)

Paul Herbert, AMP Bank

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