Working together to provide essentials for business success

After dealing with COVID restrictions and strained supply chains, businesses now face inflation, staff shortages, rising interest rates and higher fuel and power bills.

Yet despite these headwinds, many Australian business owners have moved forward with essential purchases. The Commonwealth Bank recorded the largest volume of new asset finance lending in its history in the 2022 financial year, driven by COVID stimulus, immediate tax write-offs and our support for customers during this challenging period.¹

CommBank General Manager, Business Home Lending, Broker Agency and Specialist Services Ian Burnett said the changing economic outlook is an opportunity for brokers to work collaboratively with businesses.

“The biggest single thing I’d encourage brokers to do is invest in understanding a customer’s whole business and how they’ve been impacted by what’s transpired. And then to work with lenders to find the best solution in the circumstances for that customer,” he said.

“In the current environment with rising interest rates, brokers need to focus on solutions that improve cash-flow management and enhance a company’s working capital management.”

Where are the opportunities for asset finance brokers?

The pandemic did not affect all sectors equally. Local manufacturers, for example, filled the gap when imported products were unavailable. By 2022, almost one in four Australian businesses reported buying more from Australian companies to overcome supply chain problems, according to Commonwealth Bank research.²

In the Commonwealth Bank’s FY22 asset finance lending figures, demand was led by businesses in agriculture, manufacturing and production. Assets such as forklifts (up 49% from 2021), trailers (up 37%), cranes (up 26%) and trucks (up 13%) topped the list.³

CommBank General Manager, Asset Finance Chris Moldrich said, in general, there is positivity for the year ahead.

“The September we just had was the largest September on record. I’m feeling optimistic about the level of demand that we’re still seeing.”⁴

He sees particular potential for growth in healthcare and agriculture, and also in transport and delivery – the online shopping trend is here to stay and someone needs to deliver the goods.

Long term, there could be more opportunities as the economy decarbonises and businesses transition to electric vehicles and more energy-efficient equipment.

At the same time, brokers will have to be realistic about continuing supply chain issues. The hold-ups that emerged during the pandemic aren’t gone. But that’s not all bad news.

“Specifically for the broker market, there’s going to be an abundance of opportunities for those that can work through the supply chain issues and be patient about when assets become available for settlement,” said Mr Burnett.

“The amount of latent demand that's still in the market is quite phenomenal.”

Businesses want to discuss asset finance

The combination of power bills, inflation and increased borrowing costs mean businesses are keen to drive efficiencies in their operations – and that’s something that won’t end anytime soon.

“I think it’s really important to understand what it is that the customer has done with their working capital. Where appropriate, we can support them with things like being able to offer financing for equipment that may have been purchased outright in the last couple of years,” said Mr Moldrich.

“Whilst we need to make sure these kind of options are suitable, we are seeing a lot of interest in flexible financing options from our customers. So ultimately, it’s still the same tried and true approach in that brokers need to spend time with their customers, really understand their customer’s cash flow and what's driving their businesses, to identify and meet their lending needs.”

He believes people want and need this kind of support during periods of uncertainty.

“I think that a lot of customers are open to conversations about what they’re doing around working capital and how they’re managing some of their finances.”

Brokers are uniquely skilled and positioned to do this, providing meaningful feedback around a business’s P&L and how to manage expenses.

The brokers that can do this will differentiate themselves from their competition, building a meaningful partnership with their clients.

Asset finance and the digital advantage

COVID expedited changes to how global banking systems worked to make things faster, more efficient, and more transparent for people at every stage of a transaction.

“There was the expectation that everything be done faster and using simpler processes – even in the circumstances we were dealing with at the time,” said Mr Burnett.

There were smaller things like a system that rewarded brokers for working collaboratively to get things right the first time as well as investment in end-to-end digital solutions at a larger scale.

“I think customers are a lot more open to using digital channels than in the past,” said Mr Moldrich. That is one of the reasons that CommBank is looking to implement new technologies such as DocuSign in broker channels.

Looking ahead, digital end-to-end experience in asset finance is an inevitability. But that doesn’t mean every problem has a simple solution. That’s where the skills and experiences of the brokers in understanding alternative assessment pathways are incredibly valuable.

Digitisation can mean faster funding for simple issues, but just as important is that it frees up brokers to give more attention to complex client needs.

“Brokers have got to stay engaged with their customers, talk to them, listen to the challenges and issues that the clients are articulating,” said Mr Burnett.

“The one thing I want to really emphasise is that better skilled brokers tend to do better than other brokers in times of great challenge.”