iscover 
It isn’t necessarily that the banks don’t want the business. In many cases, the issue is that their credit systems were designed for a type of borrower that many SMEs simply do not resemble.
The bank model and why it struggles with SMEs
Major bank equipment finance applications typically run through automated serviceability models built around consistent, well-documented income. Two years of financials, a clean credit history, stable revenue, and ideally, property security remain the benchmark.
These models are efficient for processing large volumes of applications. However, they can struggle with businesses whose income profile does not fit that structure.
Common examples include:
• A construction subcontractor whose income fluctuates depending on project cycles.
• A farmer whose annual income arrives largely at harvest.
• A business that has been trading for 12–18 months and does not yet have two full years of financials.
• A director whose personal credit file reflects a previous business failure several years earlier.
• A sole trader running a profitable operation but without a traditional PAYG income structure.
Many of these borrowers are commercially viable. However, when the application passes through an automated credit model, the profile can fall outside the standard parameters, and the application is declined.
Where specialist brokers and lenders fill the gap
The non-bank equipment finance sector in Australia has expanded significantly over the past decade. Today, there are dozens of specialist lenders that assess deals differently from the traditional bank model.
Instead of focusing purely on historical financial statements, many specialist lenders place greater emphasis on factors such as business cash flow, the quality of the asset being financed, and the underlying industry.
For example, lenders familiar with the transport sector understand the resale value of a well-maintained tipper truck. Agricultural lenders recognise the seasonal nature of farm income. In these cases, industry knowledge becomes an important part of credit assessment.
For brokers with access to a broad lender panel, the role becomes less about submitting an application to a single institution and more about identifying which lender’s credit appetite aligns with the borrower’s profile.
What this means for mortgage brokers and accountants
For brokers and advisers working with SME clients, a bank decline should not necessarily be viewed as the end of the conversation.
In many cases, it simply means the application has been assessed by a lender whose credit model does not suit that particular borrower.
Equipment finance transactions can range from smaller asset purchases of $20,000 through to machinery and transport assets exceeding $1 million. With the growth of the non-bank lending sector, there are now more pathways for brokers to assist clients who fall outside traditional bank lending criteria.
For advisers who maintain strong referral relationships with equipment finance specialists, these situations can often become an opportunity to help clients secure the assets required to grow their businesses.
The perception that a bank decline means a deal is finished is increasingly outdated. In many cases, it simply means the client needs a broker who understands the broader lending market.
Kim Woodward is director of Woodward Finance and previously spent more than a decade at Macquarie Bank working in equipment and asset finance. He now works with brokers, accountants, and SMEs to structure equipment and business lending solutions across Australia.
[Related: Why ‘being a doormat’ is killing broker profitability]