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Scottish Pacific on Royal Commission findings: impact on small business sector and brokers
SCOTTISH PACIFIC CEO Peter Langham has commented on the 76 recommendations of the Hayne Royal Commission that the Government has said it will implement, and their potential impact on the SME sector and brokers.
BROKER REMUNERATION
"We have real concerns over the drastic changes flagged for the residential broker sector," Mr Langham said. "We work closely with commercial brokers to organise funding for thousands of SMEs - while the Royal Commission recommendations focus on residential brokers, we are concerned about the impact this will have on the viability of the whole broker sector and consequently on small and medium business owners.
"Adding a broker fee for service is likely to be detrimental to anybody who can't get funding from the banks. Brokers play a major role in putting non-bank lending alternatives to their clients, providing real solutions for business owners when the banks can’t or won’t lend to them.
"Fee-for-service is likely to drive borrowers straight to those with the biggest advertising budget.
"Brokers have helped drive lending competition and increased the visibility of non-bank lenders – Australia’s ability to provide diverse lending options for consumers and SMEs could go backwards if the fee for service is implemented. Whatever happens to brokers will be critical to the whole consumer and SME lending space.
"Brokers provide an essential service for anyone looking for help finding the right funding solution, whether they want a home loan, a way to finance a piece of essential equipment, or a working capital facility that allows their business to grow. Without the independent broker, the consumer might lack the ability to see all the options open to them and end up picking funding that isn’t right for them."
SME SECTOR
"Treasurer (Josh) Frydenberg points out that affordable access to finance is critical to the economy," Mr Langham said. "The success of the SME sector is vital for the economy. It’s important that the changes flagged in today’s Royal Commission report don’t negatively impact the flow of funding for SMEs.
"To keep SME funding flowing, there should be broad business and political sector support for promoting viable alternatives to the banks that are available for small business funding. Scottish Pacific has teamed with ASBFEO to work on a guide to small business lending to be widely distributed later this year, so that more business owners – and vitally, the accountants, brokers and business consultants who advise them – know where to turn to and what their options are. Ideally, we'd like the banks to hand out this guide to their business customers so that if the banks turn down a loan, the business owner knows their other options.
"Small business owners must be prepared to seek out alternative financiers to the banks - there are a range of funding options already available to them if they look beyond the banks. Interest in alternatives is already increasing – Scottish Pacific saw a doubling in SME funding enquiries in December 2018, compared to the previous year. Business owners are looking to do things differently, in light of the Royal Commission," he said.
"Australia’s cooling property market, along with more stringent lending conditions introduced due to the Royal Commission, will definitely impact SME owners who need to use their home as security for their business loan," Mr Langham said.
About Scottish Pacific
Scottish Pacific is Australasia’s largest specialist working capital provider for SMEs. For more than 30 years Scottish Pacific has lent to small, medium and large businesses with revenues ranging from $500,000 to more than $1 billion.
