Market research firm East & Partners has revealed a growing trend for Australian businesses to use third party finance brokers and mortgage originators when they are obtaining finance products.
East’s banking markets report revealed a sizeable 38 percent of small to medium enterprises sourced business banking product through a broker over the past six months, up from 6 percent five years ago.
Perth-based Australian Finance Group operations manager Mark Hewitt said while housing loans have slowed down, growth in lending to the commercial sector has accelerated over the past two years.
“Commercial loans are probably the fastest growing part of AFG’s business”, Mr Hewitt said.
Mr Hewitt said businesses go to brokers instead of banks because they are looking for the best deal, want to be offered a range of products from a variety of lenders and want impartial advice.
Anne-Marie Syme, managing director of finance broking business The Loans Café, said the business lending market is massive and is increasing.
According to East, the combination of extremely competitive business banking markets, increasingly demanding small business customers and the push by sizable mortgage originators and aggregators into the commercial space, will see this trend continue.
Mortgage aggregator FAST national sales manager David O’Toole said a lot of change is happening in the market and brokers are diversifying.
“Brokers need to cross-sell more products and it’s now more about a client retention strategy,” Mr O’Toole said.
Mr O’Toole said clients use brokers rather than going direct to banks because a lot of the residential clients they look after are in the SME market and now understand they can shop around for their commercial and equipment finance.
“More clients know if they stay with their own banks they may not get the deal that suits them best,” he said.
“Brokers will source a better deal simply because banks don’t have the same staff level to closely manage the client relationship in the SME market.”
According to East & Partners’ report, the challenge for financiers is to truly understand this sector and to develop clear strategies to effectively manage and optimise engagement with third party originators.
