Businesses have remained remarkably resilient despite the barrage of COVID-induced disruptions over the past three years. Although commercial and asset finance brokers are navigating economic challenges, a panel of industry leaders has predicted exciting opportunities in the broker space in the next 12 months to three years.
With the Australian economy now at more than full employment and China reopening to Australian businesses, these experts see growth opportunities on the horizon. Given that business leaders are increasingly time-poor, brokers can offer them a real benefit by proactively supporting business growth and cutting through complexity to help business owners realise their ambitions.
Ian Burnett, General Manager Broker & Agency Services at CommBank, spoke with leaders of three industry bodies at a recent CommBank Industry Leadership Forum to tap into what they’re seeing.
Strong demand for commercial and asset finance
Ian Burnett told the panel that CommBank is seeing an uplift in broker new business – both commercial and asset finance. However, asset finance drawdowns continue to be affected by supply issues.
Customers keep saying, “I need to get new equipment because this truck's not going to last forever.” But it's taking 12 to 18 months to get equipment into the country.
“Even if you flicked a switch tomorrow and the supply issue went away, I think it's going to take 18 months at least, and probably longer, for that to bleed through. From a broker's perspective, I think the asset finance industry is in a very, very good position.”
In contrast, client decision making has slowed for some commercial broking customers, said Sarah Lalor, CommBank General Manager, Term Loans and Business Financial Assistance.
”Although we’re not seeing any significant uptick in impairments, we’re seeing a slowdown in decision making as customers wait to see what happens with interest rates.
“Brokers are working effectively with banks to provide certainty that the funding's going to be available when the customer needs it,” she said.
A focus on lender propositions
Although interest rates have gone up for borrowers, banks are still experiencing a high level of competitive pressure according to Burnett, particularly “among the major banks and for bigger-ticket transactions”.
He added: “I think lenders will be thinking hard about what sort of loans the different segments of the market need, and the most appropriate terms and conditions. From a broker's perspective, that’s good news. Brokers can look at the different lender propositions and marry them up with a customer's circumstances and needs.”
The panel agreed that brokers are continuing to do well. “The best run broking businesses are going to get stronger,” said Matt Atkin, President, Commercial & Asset Finance Brokers Association of Australia (CAFBA).
Education and accreditation for commercial brokers
As more brokers move from the consumer side into the commercial broking market, “we've got to provide pathways so they're educated, they're qualified and they've got the right mentors so they provide the right solutions to the client,” Atkin emphasised.
“We're two years into what we think will be a four-year process to go through the professional standards process. It’s the number one priority at this point of time for CAFBA.”
Grant Cairns, CommBank Executive General Manager, Business Lending, said that CommBank also has a role in this. “CommBank’s Broker Education & Skills Training (BEST) framework is a great example.”
Cairns highlighted that BEST includes guidance for brokers on how to help defend against scams and fraud. “We're trying to get education out to as many businesses as possible. The volume and the sophistication of scams is increasing which is why it’s so important businesses are vigilant and keeping themselves cyber safe” he said.
Atkin noted that, to help stem these attacks, the Federal Government is looking at privacy around customer information.
Anja Pannek, CEO Mortgage & Finance Association of Australia (MFAA), is also advocating on the privacy front.
“If privacy changes come in, we want to make sure that they are fit for purpose in what is an already heavily regulated industry.”
She added, “We’re very focused on innovation and the Consumer Data Right legislation (CDR), which I believe will be a game changer for how brokers work with their customers and further deepen that relationship.”
David Gandolfo, OAM, Director, Quantum Business Finance, and a former CAFBA President and former Deputy Chair of the Council of Small Business Organisations of Australia (COSBOA), discussed the additional issues that are facing Australia’s small businesses. He pointed out the challenges of rising energy costs, the cost of funds and finance access, and job skills and supply chain problems for both goods and workers.
Brokers have reasons to be cheerful
The panel agreed that the future for commercial and asset finance broking is bright. Pannek said the industry needed to shift its mindset from future-proofing to future embracing.
“I think we're in a fantastic place at the moment,” she said. “The industry is performing very well on health metrics, on market share and putting the consumer at the centre of everything that brokers do.
“I think we have a unique opportunity for the first time in a long time to look forward and see what the future presents for brokers. Importantly, how areas like technology, AI and automation will actually help the broker get closer to their customer, help them be more efficient and help them work with their customer even earlier in their journey overall.”
Another plus, noted Atkin, is that broking businesses do better when interest rates are moving because customers are looking for options. “So whether you are in commercial, equipment finance or residential mortgages, I see the next three years as being actually quite bright,” he said.
Burnett wrapped up the event by forecasting that “the next 12 months is probably going to be jam-packed full of new innovations that extend the commercial broking market, so I'm very optimistic about 2024 and beyond.”
For more information about our products and services or our BEST program, please contact your CommBank Business Development Manager or commbankbrokers.com.au.