Financial lender

Changing Market Creates a New Lending Environment

Australian financial markets are constantly changing and with these changes comes a new lending environment.

It is important to stay on top of and to understand these changes when approaching financial institutions (banks/lenders), to ensure your business receives a positive outcome.

We spoke to Ledge Finance Ltd, one of the markets leading finance facilitators, about their thoughts on the debt market as they currently see it, with a primary focus on the small-medium enterprises (SME) market and how it is being impacted. Further focus is on how this impacts the equipment finance market over the short to medium term – the lifeline of capital intensive balance sheet businesses.

Following the GFC in 2007/2008, there has been a trend to increased risk aversion by mainstream financial institutions. This has accelerated in Australia over the past 5 years as financial markets have been subjected to enquiry after enquiry culminating in the Royal Commission.

Whilst many of these enquiries have been focused on the consumer lending market, there has been material “splash back” into the SME market. In particular, the Western Australian market has been further exacerbated by the market correction, which followed the mining construction boom.

What does this mean for borrowers in the SME space?

In essence, “caution” is a key feature of the current banking and finance markets.

Tier 1 financial institutions are becoming hesitant lenders on transactions that they might have been prepared to take on in the past but are now deemed too complex or financially challenging to secure approval. As an example, the business’ ATO position, both current and historical, will be scrutinised by the lender.

What can you do as a small business owner to help navigate these issues?

The first step to take is to seek assistance from your accountant and finance facilitator. Work closely with them to better understand debt, the effective life or value of your assets and how this builds long term balance sheet value, which is ultimately ‘enterprise value’. They can also assist you with commercial and financial risk, which is critical in the current market conditions.

Ledge often see their clients evolving and going through change, growth & development brought about by both internal and external pressures. This is where Ledge forms relationships with clients at their early stages to assist with such growth and development. If you would like assistance to finance your growth, please get in touch with Ledge.

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