OPINION: AUSTRALIA’S banking and finance landscape has changed considerably over the last twenty years. Going from a sector where the big four banks provided the lion’s share of financing, numerous other banks and alternative finance channels have entered the market.
While the risk appetite amongst some banks has shifted in recent years, there is still appetite with other funders in the market, creating healthy competition and the opportunity to make sure your business’s funding is appropriately structured.
It pays to consult a trusted advisor and explore all your options when it comes to financing business expansion or a new project.
In business banking, it used to be commonplace to have the same professional look after you over several decades, but that culture is changing. While that is still the case for some business owners today to go through their bank for all financing, we are seeing increasingly more demand for a single, trusted point of contact for finance outside traditional channels.
Seeking advice from a broker does not necessarily mean you will walk away from your existing bank either. Businesses want to know that they are getting the best options available in the market to ensure they are geared for growth without jeopardising financial stability.
Sometimes, it will be beneficial to secure finance through your current lender, and other times it may be more suitable to access other funding sources.
These scenarios, where businesses look outside their established business banking relationships for other finance options are occurring more, particularly in the property industry or in transactions where traditional funding sources may not have the risk appetite to fund the activities.
Importantly, being knocked back by one financier does not mean it’s time to wait until the tides change with your usual lender. In these cases, it’s usually a good time to explore your options.
There is a large market of private lenders in Australia who can fund projects, especially when the risk appetite of major financiers in traditional channels means your project or transaction may not go ahead.
These funders do not advertise, so it is a network that you need to break into with the support of an adviser.
While you might pay a slightly higher rate with these channels, you need to weigh up the opportunity cost and the risk of delays to the long-term viability of your business. That’s a process I help businesses work through when they are considering their options.
Recent events have understandably rattled markets and consumer and business confidence, but that doesn’t mean businesses can’t make things happen right now. It is important to remember that a setback does not mean you can’t bring the funding together through different channels or with different terms.
A big part of what I do is showing businesses what is possible and available in the market. This is not always through exploring different financing options. Sometimes businesses need a trusted person to discuss their current arrangements and provide an independent review of how things are structured.
Being a good sounding board for businesses owners, understanding where they’re coming from, what their challenges are and what their goals are over the short, medium and long term is valuable to these people, especially when so much of a business’s success hinges on how their financing is structured.
Now more than ever, it is crucial to understand how best to structure project financing and transactions for long-term financial stability. There are several factors you need to consider depending on the climate in your sector, your business’s current financial structures and your business’s long-term objectives, so engaging a trusted advisor to leverage their experience in dealing with a wide range of funders can be invaluable.
By Jason Fallscheer, Client Director of Pitcher Partners Finance.
Fallscheer is the client director of Pitcher Partners Finance and was recently named in Mortgage Professional Australia’s top 20 commercial brokers for 2020.