Many SMEs would face financial ruin if finance brokers were removed from the mix, one brokerage has claimed in the face of intense speculation about the sector.
Paul Boyd-Skinner, managing director of Gold Coast brokerage AusWise Finance, suggested that many businesses could struggle to access finance and “would collapse” if curbs are placed on the broking industry.
“The business clients I deal with can be at any level from start up, established businesses to a business that looks like they are going under,” he said.
“Our aim is to provide SMEs with the peace of mind to focus on their day-to-day business activity without carrying the burden of finance-related stress.”
Mr Boyd-Skinner cited the example of a manufacturing business that approached his firm, after a Deed of Company Arrangement (DOCA) was placed on it in a bid to recoup a $300,000 debt to the Tax Office and other monies owed to various creditors.
All the while, the administrator was charging the business $20,000 per month in fees.
“We were able to find a solution for them, firstly by using equity in the business director’s home to obtain a short-term mortgage through a private lender and pay off the ATO and the administrator,” he said.
“I also managed to get them an unsecured loan based on the business cash flow to enable them to purchase new supplies and equipment as well as set up a debtor finance facility.”
According to Mr Boyd-Skinner, these financial arrangements saved the business from collapse.
“After six months, the business was flying again and I refinanced the director’s home back through a good, non-conforming lender at a reasonable rate and paid back the private lender. This was all done through alternative finance solutions and no property had to be sold,” he said.
“Your bank may have its place in your business, but sometimes we need to think outside of the banking arena and segregate facilities to other non-bank specialist providers.”
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry which is currently underway has speculated about the effectiveness of finance brokers in achieving positive client outcomes, including their remuneration structure.
Most brokers in Australia do not directly charge clients for their services, instead receiving fees and commissions from the lender chosen by their client.
“It’s a deceptively simple set of questions to ask: who does a mortgage broker act for? You can put it in three ways, I think, and the issue has at least three elements to it,” commissioner Kenneth Hayne said as part of the royal commission inquiries.
“Who does the broker act for? That might be seen as an inquiry about fact or fact and law. Two, who does the customer think the broker is acting for? And third, who does the lender think the broker is acting for? And do you give separate answers at separate steps along the way?
“So who does a broker act for, who does the customer think the broker acts for, who does the lender think the broker acts for, are there varying or varied answers at various steps? If there are, what are they?”
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