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If you are, you might find that diversifying into the growing market of short-term lending is as opportunistic as it is lucrative.
Globally, short-term lending is a growth industry. Short-term loans provide an often crucial cash injection to enable businesses to expand and/or bypass cash flow issues, such as paying creditors, purchasing stock, paying the ATO and GST, providing working capital or bridging finance.
Here are 10 reasons brokers should consider branching into the short-term lending market:
1) Revenue: Short-term lending creates an alternative income stream that can be highly profitable.
2) Fast and upfront commissions: A short-term loan has a significant return on the time invested. Transactions are generally processed within three to 10 days, with the broker paid on the day of settlement. There are no clawbacks.
3) Strong borrower demand = expanding client base: Post-GFC, banks have generally tightened their loan qualification criteria. This has pushed the volume of traditional bank clients into the specialist sector.
4) SME sector growth: Smaller businesses have been a core market that seeks short-term loans to quickly counter a lack of cash flow. This sector continues to evolve rapidly throughout Australia.
5) Client retention: At the end of the short-term loan period, refinancing is often required, providing ‘two bites of the cherry’.
6) Competitive advantage: Tapping into short-term lending enables a point of difference through a broadened service offering, equating to a greater revenue stream.
7) Competitive rates: Rates that reflect risk don’t need to be excessive. There’s an increasing expectation that rates don’t exceed 1-2 per cent per month in a typical short-term loan period of one to six months.
8) Flexible solutions: The short-term lending industry is accustomed to providing specialised and specific solutions that can be tailored to, and best suit, a client’s individual needs.
9) Compliance: The NCCP legislation has encouraged a growing number of reputable, professional lenders in the short-term space that are compliant, service-oriented and competitive.
10) Back-end support: Interim Finance is one of several lenders that offer a complete back-end support service, where brokers can elect to have the loan written and managed on their behalf at no cost. This has been popular for those who are time poor and seek the assurance that the loan is compliant.
Commissions aren’t affected and the client relationship is maintained.
I encourage brokers to realise the potential of this growth market and its lucrative opportunities with confidence.