Time for brokers to diversify into SME lending

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THE BROKER INDUSTRY is set to undergo significant changes in 2025 due to technological advancements and shifting market dynamics. While residential lending continues to be the foundation of many brokerage businesses, industry experts see a promising opportunity in the small business sector. This shift is driven by financial pressures and constrained cash reserves, leading to an urgent demand for professional lending guidance.

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.

ROBERTO SANZ, PROSPA

Without a reprieve of lower interest rates in 2024, there have been growing concerns among borrowers regarding mortgage repayments. This has led to financial and emotional stress for borrowers, their reserves and income at the mercy of interest rates and the market. Recent research highlights a troubling trend: nearly one in five small businesses is operating without any cash reserves. This is concerning, especially as over three-quarters of small business owners report a personal impact due to rising costs, consumer spending and residual tax obligations. This vulnerability within the small business sector presents a timely opportunity for brokers to diversify their services and better support their small business clients. Roberto Sanz, national sales manager at Prospa, says, “What we’re seeing is a perfect storm of opportunity and necessity. Brokers have the foundational skills needed to assess lending needs and navigate complex financial situations. Expanding into small business lending is a natural progression that allows them to leverage these existing skills while addressing a critical market need.”

Technology plays a vital role in facilitating lending diversification. Modern lending platforms and digital tools enable brokers to expand their services while maintaining efficiency. Brokers must embrace these technologies. Clients now expect a seamless experience, and those who adapt will succeed. The advantages of diversifying into small business lending go beyond immediate revenue opportunities. It enables brokers to forge deeper and more comprehensive relationships with their existing clients, many of whom may be business owners themselves. This expanded service offering can help protect against fluctuations in the residential lending market while providing more stable income streams throughout the year.

While many of the skills and knowledge brokers have can translate, Prospa understands that diversifying your offering can mean there are market gaps – particularly when answering the questions, ‘How much can I borrow?’, ‘Am I approved?’ and ‘What are the costs?’. That is why Prospa created its revolutionary tool, Prospa IQ, to help brokers answer these questions in seconds and provide quicker and more flexible loan options for small business owners. The innovative quoting tool uses a proprietary Credit Decision Engine to provide instant, personalised quotes without affecting clients’ credit scores. Prospa IQ also automates document checks, streamlining the application process. The generative technology is a first of its kind in the Australian market and will continue to evolve, enhancing brokers’ ability to serve clients. Additionally, Prospa has introduced partner-led client management features that allow brokers to oversee applications end to end. It also has an updated Partner Portal for increased workflow efficiency, including lead submissions, application tracking and access to marketing resources. Together, brokers can use these tools to provide an accurate quote for their clients while remaining in the driver’s seat of the lending process. For more information, sign up for a Prospa IQ learning session here.

Looking ahead, brokers who successfully diversify their services are likely to experience promising prospects. With potential rate cuts predicted for early 2025 and signs of strengthening cash reserves among small businesses, the sector shows significant opportunities for growth. Additionally, the personal nature of small business lending aligns well with the relationship-focused approach that successful brokers already utilise. For brokers considering this expansion, the key is to build knowledge and capabilities now. This involves understanding the unique challenges and opportunities in small business lending, developing relationships with specialist lenders and investing in the necessary technology and training to effectively serve this market.

“What we’re seeing is a perfect storm of opportunity and necessity ... Expanding into small business lending is a natural progression that allows [brokers] to leverage [their] existing skills while addressing a critical market need”

“We strongly believe that the future of Prospa will strengthen the value proposition of brokers in market. And our future will empower our partners to reach even more customers, leveraging our new technologies to enable them to scale their SME offering”

2025 and the challenges it will bring

Meeting your customers’ diverse needs

Published 10 Feb 2025

New generative technologies are helping brokers evolve into more versatile consultants, empowering them to enter the small business (SME) lending space and deliver a seamless client experience

Sanz says, “Building your capabilities will help to empower you to serve your customers. For example, Prospa offers a flexible business line of credit that allows ongoing access to a pool of funds that can be used as working capital or to cover cash flow gaps. The key difference between this and other products is that you pay interest only on the funds you draw down for the time you use them, whether for a day, a week or a year. Being able to offer something like this to a client at a pivotal time, either of growth or recovery, could help to grow your relationship with them as a consultant to more than just their home.” As the financial services landscape continues to evolve, the successful broker of 2025 will be equipped to provide comprehensive financial solutions that address the full spectrum of their clients’ needs, playing a vital role in supporting Australia’s small business sector during challenging, and prosperous, economic periods. Lastly, Sanz says, “Every decision that we make moving forward, we take into consideration the impact it will have on our broker partners in particular. We strongly believe that the future of Prospa will strengthen the value proposition of brokers in market. And our future will empower our partners to reach even more customers, leveraging our new technologies to enable them to scale their SME offering.”

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The data paints a particularly stark picture of small business owners’ challenges. Many business owners are using their personal income to keep their businesses afloat, with 28% relying on personal funds to cover business expenses. This leaves little flexibility and little room for capitalising on market opportunities. A cash reserve of at least three months acts as a safety net against unexpected costs and helps support your business’s growth. The blend of personal and business finances perfectly positions brokers, who intimately understand personal lending, to provide assistance. The timing for brokers to venture into this area couldn’t be better. Research indicates an increasing number of businesses seeking external funding, with 26% of business leaders planning to pursue external funds over the next year, up from 23% in 2023. This rising demand for financial support aligns with many businesses showing signs of recovery, evidenced by a 4% decrease in the number of businesses operating without cash reserves over the past six months. For brokers considering diversification, the small business sector offers tremendous growth potential. The key is to understand that these business owners require more than just business funding – they’re looking for trusted advisers to help them navigate their financial journey, from managing cash flow to planning for growth.

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Australian Broker Talk

Resources

Sector Focus

Power Panel

Independent Feature

Executive Team Profile

Exclusive Leader Profile

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Business Focus

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Premium Content

Technology

Reverse Mortgages

Investment Loans

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Commercial

Specialty

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Technology and innovation for sustainable growth

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ROBERTO SANZ, PROSPA

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