How brokers are adapting as commercial finance conditions shift

Nathan Murphy, director of business loan brokerage BlueRock, told Broker Daily that a tightening economy, regulatory changes, and looming debt obligations are changing how and why small- to medium-sized enterprises are using finance.

“The resilient businesses have got smarter about finance,” Murphy said.

“They’re building closer relationships with brokers and their accountants, using property equity more strategically, and being more proactive about cash flow planning.

“Business owners aren’t expected to know it all, and we see the best ones leveraging their relationships with their accountants, financial advisers and mortgage brokers to successfully plan and manage their finances.”

Under pressure

Financial pressure for businesses has ramped up in recent weeks, particularly in sectors reliant on oil-based products, such as transport, agriculture, and freight.

A recent study from credit reporting bureau CreditorWatch has indicated increased risks of insolvencies across multiple SME industries as a result of the fuel crisis.

As a result, the federal government has announced a raft of financial assistance to help businesses, including a temporary halving of the fuel excise on petrol and diesel and a $1 billion package of new interest-free loans.

However, Murphy said that SMEs are facing a much wider combination of financial and operational pressures.

“SMEs are mostly worried about cash flow, rising costs and compliance pressures like Payday Super and ATO debt,” he said.

“A lot of them are also concerned about softer consumer demand, especially in hospitality, retail and construction.”

Hospitality and construction remain among the hardest-hit sectors, with insolvency rates continuing to sit above the economy-wide average. Murphy attributed this to thin margins, wage pressures, and ongoing input cost challenges, particularly in construction.

Thin ice

Even prior to recent geopolitical tensions in the Middle East, which are now contributing to rising fuel costs and broader economic uncertainty, SMEs were already under strain.

Inflation continues to weigh heavily on the sector. Recent data shows more than one in three SMEs (38 per cent) identify inflation as the primary issue affecting their business, while 46 per cent cite it as the biggest barrier to growth, up from 39 per cent last year. Looking ahead, 67 per cent expect inflation to limit growth over the next 12 months.

Regulatory changes are also set to increase pressure on cash flow. From 1 July, superannuation payments will shift from a quarterly to a monthly cycle, creating immediate liquidity implications.

According to one study, 41 per cent of businesses either lack awareness of the Payday Super reform or do not fully understand it, and 30 per cent are unsure or unprepared to meet the new payment cadence.

Broker Daily has previously reported that the changes could reduce SME borrowing capacity by as much as 15 per cent.

Against this backdrop, Murphy said demand is rising for more flexible funding solutions.

“We are seeing a greater demand for overdraft and line of credit facilities to help manage business cash flow, which is consistently tightening for most businesses given recent economic trends,” he said.

“Whether that relates to time frame between creditors and debtors, seasonal business impact, or just the current state of the economy, these products are most beneficial due to the ability to reduce the balance, redraw on the limit and only pay interest on the outstanding balance.”

At the same time, outstanding liabilities with the Australian Taxation Office (ATO) continue to affect SME credit quality.

“The most common trend we are seeing is accumulated ATO and GST debts they’re still working through,” Murphy said.

“This has a flow-on effect to bank credit, either at the time of an application or through an annual review – the banks don’t look favourable on ATO arrears, and it has a strong impact on the ability to seek new debt with commercial banks/lenders.”

Non-banks gaining share

Murphy said non-bank lenders are now playing a central role in broker recommendations, particularly for borrowers with complex financial profiles.

Broker Daily recently reported how many businesses are still pushing for growth despite the mounting pressures.

“Non-banks now play a central role in our recommendations for SMEs,” he said.

“Lenders like La Trobe Financial, Thinktank, Shift, and ORDE Financial offer the kind of flexible income verification, alternative document options, and faster turnarounds that banks simply can’t match for self-employed borrowers.

“The Reserve Bank of Australia has noted that increased non-bank competition has improved credit availability and reduced refinancing risk across the market.”

However, Murphy said major banks still have a role where borrowers meet standard lending criteria.

“That said, I still recommend the major banks where clients fit the criteria as the pricing is hard to beat,” he said.

“But for anyone with complex income, unusual structure or time pressure, non-bank should be a strong consideration.”

Broker role expands

As credit conditions tighten and lending policies become more restrictive, brokers are increasingly acting as navigators for SME borrowers.

“We are seeing more SME business owners continue to lean on the broker market,” Murphy said.

“Banks can have restrictive credit policies that lock a lot of legitimate SMEs out of funding or at least make it very difficult to obtain funding.

“My job is increasingly about navigating that complexity, understanding which lenders are a fit, which can move fast, and how to structure a deal that actually gets approved.”

[Related: Brokers urged to adopt ABC client strategy]

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