CAFBA recently undertook an Aggregator Benchmark Survey, to ascertain the role, the impact and the functions of aggregators in commercial finance. We are very grateful for the 11 Aggregators that participated, as it provides valuable information on the industry and a data base to work from. The Report will be conducted annually which will allow us to monitor trends and how differing models impact the industry.
From this survey CAFBA has published the first ever Aggregator Benchmark Report 2020, which was recently reported in the Australian Financial Review and the Australian Broker magazine.
The full report is here, with the Press Release as follows:
SMES LOOK TO COMMERCIAL BROKERS, FINDS FIRST-EVER AGGREGATOR BENCHMARK REPORT
SMEs are increasingly turning to commercial brokers for finance solutions according to Commercial & Asset Finance Brokers Association of Australia Limited (CAFBA)’s recently released and first-ever 'Aggregator Benchmark Report 2020'.
The inaugural report represents the first empirical data set available for commercial finance aggregation and will become an annual barometer of both commercial finance broker scale and market sentiment.
According to the report, aggregator respondents transacted on average 22,638 of sub $1 million deals in 2019 and an average volume of 8,155 in commercial deals in 2018-2019. A total of 11 aggregators participated in CAFBA’s research, representing 11,490 individual commercial brokers and around 300,000 individual finance deals. With data collected from March to June, 2020 some participants reported the early impacts of COVID-19.
CAFBA President David Gandolfo said, “until now there has been a distinct lack of quality data on the commercial broking sector – despite its growing presence in Australian markets.”
“It’s fascinating to see the growing appetite for private funders, which are becoming an avenue of choice for many broker businesses. This could be as result of the wider acceptance of using brokers for commercial and residential loans and the diversification of residential brokers into the commercial market.”
According to the CAFBA Aggregator Benchmark Report 2020, in 2018/19 brokers helped small-to-medium enterprises (SMEs) access over 89,000 commercial loans and more than 199,000 commercial asset loans.
“SMEs value the professional advice, market coverage and deal speed that brokers can offer. Increasingly they have relationships with their brokers rather than with individual lenders,” said CAFBA CEO David Gill.
Even in the midst of the COVID-19 pandemic, the outlook remains positive with an overwhelming 91 per cent of respondents expecting commercial loans and commercial asset finance loan volume to remain the same or increase in the next 12 months.
According to CAFBA’s survey, more SMEs are transacting through brokers with brokers placed as the new relationship managers. This is demonstrated through An East & Partners Broker Channel Analysis commissioned by CAFBA in February, 2020 finding that 72.9 per cent of new commercial asset finance transactions are settled through commercial brokers - up from 67 per cent in 2017.
“As accessing finance becomes more difficult, brokers are best placed to present a range of options that meet business needs and structure more complex deals appropriately. As well as simplifying the application process for clients, they reduce the risk of error, which speeds up approvals,” said David Gandolfo.
“Many brokers are also small business owners themselves, so they have a unique understanding of their clients’ needs – and look for opportunities to create strong and enduring partnerships with them.”
“Most customers don’t have a relationship with their bank like they do with their broker. Turnover of bank relationship managers means brokers have taken on that role, and with access to a large panel of lenders through aggregators, brokers can offer an even wider range of options that serve customer needs.”
Brokers need to understand the underlying assets, as well as balance sheets – and the variety of structured products including mezzanine or senior debt funding. There is also a wide range of overdraft and business loan options, as well as stock cash flow and equipment finance. Unless you live and breathe those products, you’re just not informed enough to provide the whole product spectrum to customers,” Gandolfo says.