Increase in demand will likely continue – here's why
Non-bank lenders like Prospa are in an ideal position to support small and medium business owners, as stricter lending criteria at mainstream banks and continued rate hikes stymy their efforts to jump-start their growth.
This was according to Adrienne Begbie, managing director at Prospa, who also noted that many businesses have missed an opportunity for growth by not being able to access the funds required through mainstream banks.
“Many small businesses are facing increased operating costs and staff shortages, and all these factors have an impact on the decisions that traditional lenders and banks are making,” Begbie said. “With all of this at play, it’s easy to see why there’s a level of general uncertainty about the future.”
Read more: Prospa sees rising need for business loans
Non-bank lending to businesses has been increasing at an average 10% clip year-on-year for most of the last 12 months, according to Reserve Bank data.
“There’s quite an appetite for alternative lenders from Kiwi small businesses, as Prospa NZ saw a 57% increase in originations this financial year to reach $131.8m,” Begbie said.
And this steady increase in demand will likely continue amidst the wider economic environment and the tightening of lending criteria at mainstream banks, providing advisers with the opportunity to branch out from a heavy reliance on residential lending, an area that is itself facing headwinds as the property market continues to cool.
“With more traditional lenders and banks having tightened their lending criteria, the demand for alternative lenders has increased, and we expect this to continue to increase,” Begbie said.
SMEs that went through an adviser to access non-bank funding often return to them and forgo longstanding relationships with their regular banks.
“A growing number of small businesses are seeking the help of advisers to help solve their finance needs even before going to their own banks,” Begbie said. “Diversifying ensures that you can help your clients with all their financial needs.”
Another factor is the growth of the adviser channel itself.
“Over the last 24 months, the adviser market share of mortgages settled has increased, which is also driving more customers to non-bank solutions,” Begbie said.
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