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Thinking Outside the Box – some insights from Steve Geller.

I have been around the equipment leasing industry long enough to know that the phrase “outside the box” was a unique proposition and something to strive for.  When many of the funders in our industry were very parochial in their approach and in need of booking business, particularly to fill securitization conduits, creativity was sought.  Brokers were encouraged, and rewarded, if they came up with ways to do business that did not fit the mold. Funders needed the volume and looked for ways to get business that was unique and creatively constructed.  As long as the broker could build a case for doing deals safely in a particular fashion nothing was really out of bounds. How times have changed.  Lenders have broker manuals which are tomes and spell out exactly how business is to be done. Creativity is not rewarded any longer. That is very discouraging. As business has contracted and delinquencies and charge-offs have risen, credit is being reviewed more thoroughly and selectivity has increased to the point that a credit officer is questioned on far more credit decisions than he/she ever has, and particularly those transactions that become delinquent or take a far more serious downturn.  It is human nature to be more careful  and cross every “ t” and dot every “i” to the point that for any reason an officer might say to themselves, why bother?  They might believe that the close inspection is not worth the hassle.  It gets to the point that so much background information is asked for even small deals that customers feel it is too intrusive and they go other...

The Australian Financial Complaints Authority (AFCA) is now open and here to assist small businesses.

Established in November 2018, AFCA provides fair, independent and effective external dispute resolution for small businesses and consumers. We are a one-stop-shop for consumers and small businesses with complaints about financial firms, including banks, credit providers, insurance companies, financial and investment advisers and superannuation funds. This is a free service for small businesses and consumers to access. AFCA replaces the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal. AFCA’s capacity to deal with small business complaints is significantly greater than predecessor schemes. We define a small business as having fewer than 100 employees (an increase from 20 employees), and we can consider complaints about small business credit facilities up to $5 million (previously $2 million Importantly, the amount of compensation we can award per claim for such complaints has more than tripled, to $1 million ($2 million for primary producers). Different thresholds apply for other financial products and services. For most matters, a complaint must be lodged with AFCA within six years of the complainant first becoming aware of the problem, or within two years of a response from the financial firm. However, the Federal Government has recently announced that for a period of 12 months commencing 1 July 2019, AFCA can consider complaints back to 1 January 2008, based on our current scope and thresholds rather than those applying at the time. We will be issuing guidance prior to 1 July 2019 to explain how small businesses can raise these matters with us. Contact AFCA on 1800 931 678 or visit afca.org.au if you have a financial complaint or wish to know more...

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...