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A Professional Industry needs professional – let’s start the conversation

A Professional Industry needs professional – let’s start the conversation

When I started my business some 20 years ago, I was often embarrassed to call myself a broker.  When I left my job to become a broker, the looks of disappointment amongst my colleagues was very evident.  Why was a promising banker leaving a credible profession to become a broker?  Some even had the decency to ask me directly.  Slowly but surely, the credibility of myself as a professional commercial finance broker, as well as the credibility of the craft itself improved.  Commercial mortgage broking is becoming legitimate. The attention and importance we now obtain from the banks and lenders is encouraging and the type of new broker we now attract is increasing in sophistication.   I revel at how far we have come as an industry.  But, I’m daunted by how much further we have to go to becoming a profession.  A recognised, educated and qualified profession whose value is widely understood and whose services are just as required as accountants and solicitors.  In the journey to professionalise, we will have only a few opportunities to take major leaps forward in this pursuit, and these opportunities need to be identified and exploited.  We currently have such an opportunity!  An opportunity to demonstrate to the lenders that duly qualified commercial finance brokers are an efficient and effective model for them.  That we are a friend and not a foe.  An opportunity to demonstrate to our clients that we are a cost effective and efficient vehicle to access vital capital for their business.  That we have a deep understanding of their industry, their constraints, their pressures and because we have...
CAFBA comments on the final Royal Commission report released today

CAFBA comments on the final Royal Commission report released today

CAFBA welcomes the release of Commissioner Hayne’s final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. CAFBA acknowledges the work of Commissioner Hayne and his colleagues for the depth of their investigations and for their understanding of the intricate nature of various aspects of the financial services system. We are naturally pleased that there is no finding of market failure in the commercial broker channel which CAFBA represents. We are very pleased that the Royal Commission has recommended that the National Consumer Credit Protection Act (NCCP Act) should not extend to small business lending and that the Point of Sale Exemption of NCCP should be removed. CAFBA has strongly advocated for these changes to government and regulators for many years as well as directly to the Royal Commissioner and we welcome the Government’s support of these recommendations.    CAFBA will now examine the document in detail to ensure that remedies proposed for consumer borrowers do not impact on our ability to deliver workable outcomes for business borrowers. More analysis needs to be done on the recommended changes to mortgage broker remuneration in the consumer home loan space, to ensure competition with banks is not diminished, or rural consumers are potentially denied access to competitive home loan products. CAFBA President David Gandolfo said today: “CAFBA members are career professionals who are interested in the best possible outcomes for their business customers, and they don’t want their customers to be impacted by new regulations and remedies that are intended for an entirely different area of the financial services sector.”   Regulators, bankers and policy makers need to be careful...
The Perfect Storm

The Perfect Storm

2019 is posed to be a very challenging credit market with numerous negative headwinds combining to create the “perfect storm”. Some of these elements include: The Banking Royal Commission and resultant tightening of credit policies by banks ahead of the commission’s findings/directive, with particular focus on verifying expenses and adherence to HEM. Falling house prices coming off record highs, predominately in Sydney and Melbourne, but also across the broader Australian housing market. Tightening of government policy for some overseas investment markets (e.g. China). The completion of a high number of residential apartments which are due to come onto the market in 2019, particularly in Sydney & Melbourne. Publicity around the Opal Apartment saga, highlighting poor construction practices that have occurred in the boom market, potentially causing an increase in caution and concern for potential buyers and in turn placing further down pressure on prices. The upcoming 2019 Federal Election and concerns about a possible federal labor government cracking down on negative gearing and capital gains tax concessions. Borrowers with interest-only mortgages worth around $300 billion are bracing for a credit crunch as their fixed terms, taken at the height of the east coast property boom, begin to expire. It is estimated that based on the nations $1.7 trillion mortgage loan book, close to 900,000 loans, or 1 in 6 mortgages  will be under review and either extended with existing lenders, switched to higher principal and interest repayments, or transferred to a new lender. The above will inevitably increase the number of people placing their properties on the market with holiday homes and investment properties the first off the cap....

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...
For the Customers Benefit

For the Customers Benefit

CLIENT BACKGROUND A small metropolitan based engineering business which was established in 1975 by the Director and currently employs 14 staff. The Business Structure comprises one company, three trusts and a superannuation fund.  The family involvement comprises the two Directors (Mum and Dad) and an adult son as GM. BROKER RELATIONSHIP The customer has been a client of the Broking Firm since 1995 with fifty seven current and completed EF facilities through eleven lenders.  Prior to this the business was a client of the Directors of the Broking Firm (when they were employed elsewhere) for many years. TRANSACTION The customer wished to acquire a new additional CNC Lathe at a cost $480,000 to expand his business.  The machine was to be supplied via a local long established manufacturer’s agent. The manufacturer of the equipment was based in South Korea. The client required assistance with the importing of the equipment and long term EF funding once it arrived. The customer called for quotes from their bank (a big 4 Bank) and from us as their Broker.  Their Bank suggested they could offer the facility required. It should be noted some of the loan structures suggested by the bank we felt were not in the benefit of the customer and as such did not quote for those structures. The initial outcome being that the Bank was asked to look at the facility.   After several weeks of going backwards and forwards the bank could not provide the facility in a reasonable fashion.  This was based around two issues – firstly they could not provide assistance with the importing of the equipment and...
Cybercrime on the rise

Cybercrime on the rise

Did you know that 80% of CEO’s in Australia rate cybersecurity as a top investment priority? Even though Australia’s unemployment rate is increasing as a whole, the demand for I.T experts is increasing and is predicted to continue into 2018. Cybersecurity specialists are among those in high demand, which can be linked directly to the increase in cybercrime. The ACSC (Australian Cyber Security Centre) identified that between 2016 to 2017 there were 47,000 cyber security incidents — a 15 per cent increase on the previous year. Cyber Security Minister Dan Tehan told the National Press Club in October 2017, “business is booming for cyber criminals. “The days of the cyber threat being deployed by a hooded computer geek in a basement are over,” he said. “Sophisticated organised criminal networks are taking control and franchising their business model.” The ACSC found one area of focus for criminals was business email compromise through phishing emails, specifically targeting those in the SME space. Over the course of 2016-17, reports to the ACSC indicated losses of over $20 million related to business email compromises. This high cost is alarming, driving many business owners to purchase business insurance in order to protect their companies from loss of revenue, damage to equipment and reputational issues, which are just some of the damaging concerns with cybercrime. What does business insurance cover? There is no one size fits all when it comes to business insurance, with every business, insurance needs vary depending on what type of industry, trade and type they’re operating in. In fact, there are many different types of business insurance which focus on assets...