SME funding realities reshape broker role

While economic pressures are certainly weighing on business confidence, lender data shows that hasn’t diminished credit demand.

Non-bank lender Prospa recorded a 12.5 per cent quarterly increase in settlements, while its average deal size rose 5.7 per cent, with 30 per cent of SMEs expecting to access external funding over the next 12 months.

However, as lending scenarios become more complex and options more diverse, both lenders and brokers are reporting a changing role for the third-party channel – to move beyond individual loan transactions and play a more strategic role in how SMEs access capital.

Melissa Ashcroft, director of AAA Financial Group, said the “biggest opportunity” for SME and commercial brokers was moving beyond being a transaction broker and becoming a “trusted capital adviser”.

“Clients don’t necessarily know which lender they need – they know what they’re trying to achieve,” Ashcroft told Broker Daily.

“As lending becomes more specialised, brokers who understand structuring, cash flow, business strategy and multiple funding channels will become increasingly valuable.”

Building the right funding mix

Nathan Evans, senior business development manager at Bizcap, similarly said the role of the commercial broker was evolving beyond arranging individual loans.

“The opportunity for brokers has never been greater because business owners increasingly need trusted advisers who understand the full range of funding solutions available to them,” he said.

Around 70 per cent of Bizcap’s funding volume across Australia and New Zealand now comes through line of credit products, reflecting growing demand for ongoing access to capital rather than one-off funding.

He also said that brokers were increasingly constructing tailored funding strategies that brought together multiple forms of finance.

“We’re seeing the role of the broker evolve from arranging a single loan to constructing tailored funding strategies,” he said.

“Increasingly, brokers are bringing together blended solutions that combine asset finance, commercial finance, cash flow lending and revolving facilities to ensure businesses have the right type of capital for different needs.”

For example, he said a business could use asset finance to purchase equipment, a commercial loan to fund expansion, and a line of credit to manage working capital or bridge short-term cash flow gaps.

“Rather than trying to make one product do everything, brokers are helping clients build funding structures that are more flexible, resilient and better aligned to how their business operates,” he said.

A proactive approach

The senior BDM said that Bizcap had seen brokers taking a more proactive approach with clients, with businesses increasingly looking to establish facilities before coming under financial pressure.

“We’re also seeing conversations shift from transactional lending to longer-term funding strategies,” he said.

“More businesses are looking to establish flexible funding facilities before they actually need them, rather than waiting until cash flow becomes constrained.”

Matthew Chik, broker and managing director of MC Finance Group, said brokers should be taking a similarly proactive approach with SME clients.

“Rather than simply arranging finance when it’s required, brokers should be having proactive cash flow conversations with SME clients and helping them plan their funding requirements over the next 12–24 months,” Chik said.

“Businesses value advisers who can help them prepare ahead, rather than react once cash flow becomes constrained.”

Chik said the broader range of funding solutions available outside of the major banks had also expanded the opportunity for commercial brokers.

“The market now offers a much broader range of funding solutions beyond the major banks, including specialist lenders, non-bank financiers, debtor finance providers and alternative working capital solutions,” he said.

“Brokers who invest the time to understand these products and maintain strong relationships with a diverse panel of lenders will be well positioned to support their clients.”

New opportunities emerge

The changing credit environment is also creating opportunities for brokers to target new types of commercial clients, although demand and financial pressure are not being felt evenly across the SME market.

Paul Evans, Prospa’s national sales manager, said smaller operators were among the businesses most exposed to financial pressure.

“The pressure isn’t evenly distributed,” he said.

“Newer and larger businesses are the most active borrowers, with those turning over $1 million or more leading in intent at 51 per cent, compared with 24 per cent among sole traders.

“At the other end, sole traders and the smallest operators are the most exposed, twice as likely to have no cash reserves.”

He said the divide had created a “clear advisory gap” for brokers, with Prospa finding only 40 per cent of sole traders were using artificial intelligence compared with 62 per cent of non-sole traders.

“This is where brokers really demonstrate their value,” he said.

“The most pressured businesses are often the least prepared and slow to adopt helpful tools.

“This creates a clear advisory gap. Brokers assisting clients with Payday Super, the surcharge ban, and tighter cash flow won’t just be offering loans; they’ll become trusted guides helping businesses stay ahead.

“Over the next year, I see this as the greatest opportunity.”

Ashcroft said that as a broker, she was seeing increased demand across professional services, healthcare, transport and logistics, construction, manufacturing, and property-related businesses.

“We’re seeing strong activity across professional services, healthcare, transport and logistics, construction, manufacturing and property-related businesses,” she said.

Developers were also requiring “increasingly sophisticated funding structures” as projects became more complex and equity requirements remained high, Ashcroft said.

“We’re also seeing significant demand from property developers and investors who no longer fit within traditional bank policy,” she said.

“Private capital has become an increasingly important part of the funding landscape, particularly where speed, complexity or project timing is critical.”

She said that successful family businesses were also reassessing longstanding capital structures as they considered their next phase of growth.

“Rather than just refinancing existing debt, they’re looking at how their balance sheet can support acquisitions, succession planning, business expansion or investment opportunities,” she said.

“Business owners are becoming much more strategic about their capital.”

[Related: Cash flow driving SME credit demand]

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