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SMART BoxTM – Making It Easy to Compare the Cost of Small Business Loans

If you try to compare business loans from several lenders, it’s not always clear what your client will pay in interest and fees. This is because loan information is presented in different ways, so there hasn’t been a standardised way to compare business loans – until now. What is SMART Box? Smart Box (Straightforward Metrics Around Rate and Total Cost) is a tool to compare small business loans using several standardised metrics. How does the SMART BoxTM work? The SMART BoxTM is a one-page disclosure document with two parts. The top of the page includes the basic elements of the loan, including the Loan Amount, Disbursement Amount, Total Repayment Amount, the expected Loan Term, and Repayment Frequency. The rest of the document shows six common loan pricing metrics: Total Cost of Credit, Average Monthly Payment, Total Interest Payment (TIP), Annual Percentage Rate (APR), Cents on the Dollar, and Factor Rate. It also shows whether new fees apply or if there’s a reduction in the Total Payment Amount if the loan is paid off early. You can find an example of the SMART BoxTM document here, including a breakdown of each section. Why SMART BoxTM? In early 2018, the Australian Small Business and Family Enterprise Ombudsman’s Office reported on transparency and disclosure in the fintech sector. It found that 47% of fintechs believed SME lending needed to be more transparent. As a result, the Australian Finance Industry Association (AFIA) developed the Online Small Business Lenders Code Of Lending Practice. In June 2018, six leading small business lending fintechs, including Moula, signed the Code. They agreed to meet small business legal...

Connective Asset Finance – Moving finance broking into the modern era.

According to recent research* many established and traditional finance broking businesses are struggling to compete with younger, tech savvy players with a more agile approach. But now one of our leading aggregators has created a solution - one that delivers a painless transition in a rapidly changing commercial and business finance broking industry. Head of Connective Asset Finance, Brent Starrenburg claims that joining an aggregator (like Connective) should offer brokers a lot more these days. Whilst access to a larger panel of lenders is certainly important, it’s compliance support, process efficiency and cost-effective technology that commercial and business finance brokers really need and want. “We’ve created a business-focused operations system that’s extremely user-friendly and easily adapts to suit any broking business model” says Brent. “Mercury is a built-for-purpose IT platform for brokers that we develop in-house. It’s proven to significantly increase the number of customers a broker can service efficiently, which also greatly expands their potential for profit. Not only that, it’s specifically designed to help brokers overcome a wide variety of challenges.” The biggest challenge is change. Recent research conducted by Connective Asset Finance to identify these challenges revealed four key trends currently effecting the industry and set to drive big changes over the next few years. These included: ·   An inevitable transition toward the use of technology and automation ·         An increasing focus on compliance and industry regulation ·         Changes to how credit is assessed by lending institutions ·         An increasing demand for industry-wide education and training standards. “Joining Connective Asset Finance gives brokers a solution to all of these challenges” says Brent. “Mercury has a...

Filling the small business funding gap with a new equipment finance solution

OnDeck Capital Australia (OnDeck), a subsidiary of the US-listed OnDeck Capital, has launched an equipment finance solution to fill the small business funding gap.  Mr Cameron Poolman, CEO of OnDeck Australia, said brokers often speak to OnDeck about the challenges they encounter obtaining traditional finance solutions for non-primary assets.  “These include assets such as catering equipment, gym equipment, IT, food processing and fit-outs, which mainstream financiers will not finance because of the asset type or its age, says Poolman. “Currently, to purchase these types of assets, many small business owners must resort to using their valuable working capital or turn to family and friends. Often the purchase simply doesn’t happen and that limits the development or even the ongoing operations of the business”.  Mr Poolman said that what distinguishes OnDeck funding solutions from traditional lenders is its focus on the future potential of the business.  “We want small business in Australia to succeed.  To do this, we must support and invest in solutions for them.  Our focus is on a small business owner’s overall financial health, and not just purely on the short-term resale value of its business assets. As such, our equipment finance solution places no maximum age restrictions against any asset class.  It provides small business the finance to purchase necessary equipment, frees up cash and gives owners more opportunity to focus on what’s best for their business.”  OnDeck’s research has shown that one of the main reasons small business borrow from on-line lenders was to buy equipment.  “Our strength is our technology and the data and analytics we’ve sourced from lending more than US$10 billion to...
Australian Financial Complaints Authority – AFCA

Australian Financial Complaints Authority – AFCA

Transitional Information 1.            Overview As CAFBA members know, the Australian Financial Complaints Authority (AFCA) will replace the Credit and Investments Ombudsman (CIO), Financial Ombudsman Service (FOS) and Superannuation Complaints Tribunal (SCT) from 1 November 2018. CAFBA members with FOS membership should have been registered with AFCA already.  AFCA is currently contacting CIO members directly to arrange registration by 31 August.  Registration is also dependent on CIO membership renewal being completed by 31 August, with all fees paid by that date. However, CAFBA members with CIO membership must also maintain their existing CIO membership during the transition period. Disputes in progress, or lodged, with an existing EDR Scheme prior to 1 November 2018 will be managed under the Rules of that Scheme.  From 1 November, all complaints must then be lodged with AFCA and dealt with under its Rules. Further details of AFCA’s broader jurisdiction and the transition process are set out below to assist Members understand AFCA’s scope and the timing of key obligations, including the changes of EDR details on documents and websites. 2.            AFCA - EDR Schemes - Mergers AFCA will largely be a merger of the three existing EDR Schemes – Financial Ombudsman Scheme (FOS), Credit and Investments Ombudsman (CIO) and Superannuation Complaints Tribunal (SCT).  FOS is already involved in the transition process, with most of its members registered with AFCA.  CIO and its members are yet to transition. All new disputes lodged after AFCA has started will be handled under the new AFCA Rules, which will incorporate new claims limits and compensation caps. Disputes lodged with AFCA will be called complaints. A memorandum of understanding...
CAFBA Supports the Rural Finance Reform Bill

CAFBA Supports the Rural Finance Reform Bill

In February the Rural Finance Reform Bill was presented to the House of Representatives by Rebekha Sharkie (MP for Mayo) and read for the first time. The Bill calls for an amendment to the Banking Act 1959 in relation to loans to primary production businesses. CAFBA supports this Bill, which follows on from the good work in this area by Kate Carnell and the ASBFEO. This Bill provides greater certainty for primary producers regarding their rights when in financial hardship. In her address to Parliament, Ms Sharkie made a couple of important observations recognising the cyclical nature in assessing business loans compared to consumer loans. Ms Sharkie said “ Primary producers ride the swells of international commodity markets, exchange rates and weather, their fortunes so often dictated by factors well beyond their control. Family farmers hope to make profits over a multiyear cycle, using the good years to build their financial buffer to see them through the bad.” This Bill avoids the problems associated with the drafting of NCCP 2. The ABSFEO commented that “This Bill will provide a range of suitable protections for small farm businesses. It reflects the recommendations of the Select Committee on Lending to Primary Production Customers and the ASBFEO Small Business Loans Inquiry.” Some important features of the Bill are: It also provides adequate timeframes for the primary producers to attempt to refinance their facilities, or sell their assets, without it impacting on the management of the farming business, or devaluing their assets through a “fire-sale” The one-pager, plain English fact sheet will more easily outline the primary producers rights and obligations as a...

CAFBA Applauds Productivity Commission Report

The Commercial Asset Finance Brokers Association of Australia has welcomed the Productivity Commission’s draft report into competition in the financial system, but calls for POS exemptions to be revisited and for the regulator to “stop putting band aids on a great big bleeding wound”. Speaking to The Adviser after the Productivity Commission (PC) released its draft report into competition in the financial system on Wednesday (7 February), CAFBA’s vice president, Kathryn Bordonaro, said that the association welcomed the majority of the findings and recommendations related to SME lending. Ms Bordonaro noted that while she was still analysing the 640-page report, her initial reactions were that it showed “good in-depth knowledge and understanding of [SME lending] issues” and was “well researched”. “My first reaction was that I was very glad to see that the report has kept a very clear line between home loan, consumer lending and SME lending,” Ms Bordonaro said. “Quite often you see reports and responses from government departments and regulators where all credit is planted in one pot, and this report I would commend for recognising the different needs of those two separate markets, the different players that are in those industry sectors and keeping that very clear line.” Ms Bordonaro noted that while the only mention of brokers in the draft report relates to mortgage brokers (and not commercial brokers), she said that “perhaps commercial brokers don’t get a mention because we haven’t had any problems in our sector”. She elaborated: “We’ve very much flown under the radar because there is not a problem there that needs addressing. So, maybe that is why [commercial brokers] don’t get a mention...