Prospa prepares for change in SME terrain

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As small businesses look forward to a different environment in 2025, Prospa is rolling out faster approval systems and expanded product lines to support SMEs’ strategic investments and growth

LIKE AT the beginning of a mass migration of animals, an unseen signal is passing through small businesses nationwide as the prospect of a seasonal change in business conditions becomes more apparent. Roberto Sanz, general manager of sales and partnerships at Prospa, has his finger on the collective SME pulse and can feel it quickening. He says more SMEs are moving on from “band-aid solutions” designed to keep businesses afloat over an interim period – short-term measures such as reducing non-essential expenses or switching to lower-cost suppliers. “Instead, we’re now seeing several businesses start to look ahead, turning to their broker to understand how they can plan for sustainable growth and build a cash safety net,” says Sanz. A survival-mode approach has given way to more strategic thinking, with businesses turning to brokers for advice on sustainable growth and building cash reserves.

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

In terms of cash flow management, SMEs are placing greater emphasis on financial flexibility and preparedness. Recent data suggests improvements in their cash position, though many still operate with thin margins. “Back in April 2024, our YouGov study showed that 61% of businesses held cash reserves covering less than two months of expenses, compared to the ideal three to six months. Thankfully, the October data shows that this figure has dropped to 44%,” says Sanz.

Roberto Sanz, Prospa

This shift towards better cash management has led to increased interest in flexible financing options. Lines of credit have become particularly popular as they allow businesses to access funds without taking on unnecessary debt. Some businesses are using these facilities to build cash reserves, while others are leveraging them for seasonal demands.

Economists are picking interest rates to fall in early 2025, a development that will mark a long-awaited end to a very bumpy period for SMEs in Australia. “The next 12 months could tell very different stories based on interest rates, the impact of income tax cuts and the unemployment rate. We expect all these factors will significantly contribute to overall business confidence,” says Sanz. As businesses position themselves for this development, Prospa aims to help streamline the lending process for both brokers and their clients. At the end of October, it launched Prospa IQ – an automated quoting system that provides real-time lending decisions, marking a shift from traditional waiting periods. Sanz emphasises the industry-first nature of the product. “There’s nothing else like it … with Prospa IQ, partners can generate on-the-spot quotes, backed by Prospa’s credit decision engine. The tool automatically analyses bank statements, credit profile and serviceability to determine the client’s borrowing capacity and provide accurate rates with no credit checks.” This technology allows brokers to manage client applications end to end, with real-time updates on loan status and approvals. “There’s no more waiting and wondering about how much their client can afford or what the rates will be – everything is accessible in real time, even on mobile.” The product significantly cuts the time brokers need to understand what a client can afford to borrow. “With Prospa IQ you can start a conversation with your client about their funding needs, get a quote, submit the application and get approval, all in same conversation – no need to wait days or weeks for a decision or outcome. On top of that, partners can now manage their own clients’ applications end to end for greater control,” says Sanz. Brokers can now also submit a Prospa IQ quote as an application and manage the entire process, receiving real-time updates on loan status and approvals.

One complicating factor is the upcoming holiday period. The approach to year-end is bringing varied funding requests from SMEs, reflecting the diverse needs of different sectors. “With the festive season just around the corner, businesses may need a quick cash injection to hire new staff, expand operations or ramp up support for the busy holiday period,” says Sanz. “For example, we recently provided a metal manufacturing business with a $150,000 line of credit to use and reuse on multiple projects that needed to be completed before the end of the year.” Not all businesses are seeking growth capital, however. Some seasonal operations are looking for support during their quiet periods. “There are also many businesses out there that may be winding down and, instead of needing extra funds to grow, need financing to cover cash flow gaps during the off season.” The long summer break is also a key planning period for many. Prospa research shows that one-third of businesses would consider borrowing to expand over the next 12 months, underscoring the growing shift toward strategic investment rather than just operational funding. “We recently supported a bakery manufacturing business with a $500,000 loan to purchase a complex piece of equipment at auction, which didn’t require any property security up front,” says Sanz, highlighting how alternative lenders are supporting significant capital investments.

“We’re now seeing several businesses start to look ahead, turning to their brokers to understand how they can plan for sustainable growth and build a cash safety net”

“With Prospa IQ you can start a conversation with your client about their funding needs, get a quote, submit the application and get approval, all in same conversation”

As small businesses look forward to a different environment in 2025, Prospa is rolling out faster approval systems and expanded product lines to support SMEs’ strategic investments and growth

Prospa has also expanded its product range, extending loan terms to five years for businesses borrowing over $150,000 and increasing its Business Line of Credit limit to $500,000. The timing of the Prospa IQ launch is important and aims to help businesses get through that period of flux when the direction is clearer but tough business conditions may linger. “As we continue to navigate changing economic conditions, it’s important for brokers to have all the resources and support they need to ensure they are up to date with products and policy to have better client conversations,” says Sanz. “Tools such as Prospa IQ will allow them to deliver better customer experiences while positioning themselves as the subject-matter experts in business lending.”

61%

Source: YouGov, Prospa

Brokers are also slowly gearing up for the change in season, and more are expanding their service offerings to meet client needs. “We’ve seen an 11% increase in brokers referring customers to us in the last 12 months. It’s a growing opportunity, and brokers are catching on,” says Sanz. For brokers considering this expansion, Sanz recommends focusing on the three A’s: awareness, appetite and access – a personalised approach that helps brokers determine the most appropriate funding solutions, whether those are through asset finance, cash flow funding or residential mortgages. More businesses are likely to start thinking about ways to take advantage of the better conditions that beckon and will seek guidance on how they can drive long-term growth and boost their cash reserves. But making sure that businesses are aware of the options available remains a key task for non-banks and brokers alike.

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New tools for a new season

Summer funding patterns

Brokers becoming more aware of opportunities

Published 11 Nov 2024

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SME cash reserves improving

April 2024

44%

SMEs with less than 2 months’ cash reserves

October 2024

Awareness, appetite, access: Transitioning into SME business loans

Source: Prospa

2. Create appetite Take the time to understand your clients’ businesses – get to know their business models, cash flow cycles and the challenges specific to their industry. Focusing on business goals will enable you to have stronger value-based conversations with your clients to help determine the most appropriate funding solution. Be customer obsessed.

1. Build awareness Start by looking at your existing network – current clients may need business funding too. Educate your existing client base on how you can help them secure SME financing for their businesses.

3. Provide access There are many different types of lenders to choose from, and alternative lenders can often offer something that traditional banks don’t. The key is identifying what’s most important to your client – is it speed, low repayments or no asset security? This will help you access the right finance from the right lender.

“Our research shows that currently, only 52% of the SME market is aware of alternative lenders and just 20% are considering using them,” says Sanz. He emphasises the need for greater awareness among SMEs of their funding options, suggesting that many business owners could benefit from viewing business lending as a strategic growth tool rather than just emergency funding. If you’re a broker, I’d encourage you to start having proactive conversations with your SME clients. Ask them about their business goals for 2025, and discuss how you can support them in achieving those goals. And over the longer term, the greener pastures on the horizon will present an opportunity for the sector to continue maturing. “I would encourage lenders and brokers to continue the journey we began a decade ago, educating SMEs on the benefits of alternative lenders,” says Sanz.