MPA 21.05

CELEBRATING 20 YEARS

MPAMAGAZINE.COM.AU ISSUE 21.05

REBALANCING THE FOCUS Pepper Money’s head of commercial on the non-bank’s support for resilient and agile businesses TOP 10 COMMERCIAL BROKERS Rising to the top in a year of tough challenges

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A GUIDE TO COMMERCIAL LENDING A deep dive into the options for brokers and borrowers

PROCEEDING WITH CAUTION Experts predict wait-and-see approach by businesses

03/05/2021 11:10:56 am

Forward thinking to keep you in front.

We’ve got an eye on the future, not just for our business but for yours.

Our technology promises to help you solve today’s challenges, while our tech investments will equip you to realise tomorrow’s opportunities.

Go far. Go together. afgonline.com.au ACN: 066 385 822 | Australian Credit Licence: 389087

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MAY 2021

CONNECT WITH US

CONTENTS

Got a story or suggestion, or just want to find out some more information? twitter.com/MPA_Australia facebook.com/Mortgage ProfessionalAU

UPFRONT 02 Editorial

Taking the road to success through commercial lending

16

37

FEATURES

COMMERCIAL PROPERTY

With businesses in city centres rethinking their situations as more people work from home, industry leaders give their insights from 2020

SPECIAL REPORT

BIG INTERVIEW

MALCOLM WITHERS

The head of commercial at Pepper Money talks about how the non-bank responded to COVID-19, and the support it offers brokers

10

Businesses are navigating the impact of the end of JobKeeper

06 News analysis

Even as the economy recovers, many business owners remain cautious

08 Opinion

Diversifying your offering is important, but education is key to better outcomes

FEATURES 32 Debtor finance

TOP 10 COMMERCIAL BROKERS

Meet the best brokers in the commercial lending space and find out how they topped the list despite a challenging year

04 Statistics

A vital area of commercial lending for businesses that need help with cash flow

21

FEATURES

SME LENDING

Now that businesses have made it through 2020, confidence is rising.

How does this relate to opportunities for mortgage brokers?

46 Mental health

Corporate employee wellness programs may not be hitting the mark

50 Cultural values

Leadership in today’s world can often be a multicultural challenge

52 Mindset shift

After a year of uncertainty, leaders need to shift the way they think and lead

PEOPLE 54 Brokerage insight

Launched in the midst of COVID, Protego Finance is focusing on partnerships

28 FEATURES

ASSET FINANCE

As businesses look to grow after a cautious period, demand is rising, and many SME owners are in the market for new equipment

56 Other life

Collecting old BMWs is just one of many passions for broker John Mavroudis

MPAMAGAZINE.COM.AU NOW ONLINE: Our daily newsletter. Keep on top of property market trends, business strategy, and what industry leaders have to say.

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04/05/2021 9:37:19 am

UPFRONT

EDITOR’S LETTER www.mpamagazine.com.au

Taking the road to recovery

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here is no doubt that the last 12 months have been tough for businesses. Even with restrictions rolling back, 54% of SME owners still reported revenue losses in March, according to the ACA Research Business Sentiment Tracker.

While many are now ready and eager to begin investing in their businesses again, it has been a long road.

The entire commercial lending sector has been affected by the events of 2020.

With a complete change to how Australians work, usually-bustling cities have quietened down as people work from home. Many businesses have rethought their large, centrally located office spaces in favour of smaller offices and more flexible working arrangements. In October 2020, Colliers International released its ANZ Capital Markets Outlook 2021 report, revealing a 58% drop in commercial real

With more mortgage brokers than ever writing commercial loans, those who do not yet offer a diversified service are up against some stiff competition estate transactions in the first three quarters of 2020 in Australia. The hotel sector was the most affected, followed by the office and retail sectors.

MPA spoke to a few of the brokers in this year’s Top 10 Commercial Brokers list about their experiences of the last year in commercial lending and how they overcame any challenges. For mortgage brokers thinking of moving into commercial, these brokers can provide invaluable insights into what to expect.

More than 4,500 mortgage brokers have already taken steps towards diversifying, according to the latest MFAA Industry Intelligence Service report. With more mortgage brokers than ever writing commercial loans, those who do not yet offer a diversified service are up against some stiff competition.

Australia is now seeing the light at the end of the tunnel: many restrictions have been lifted, consumers are more confident than they have been in over 12 months, the workforce is returning, and businesses are ready to invest. After a difficult and confusing year, and with the myriad of solutions out there, who better than a broker to turn to for help?

Keep reading as MPA takes a deep dive into the different areas of commercial lending and what they can do for your business.

MAY 2021 EDITORIAL

SALES & MARKETING

Editor Rebecca Pike

National Sales Manager Claire Tan

Contributors Renée Giarrusso, David Gill, Repa Patel, Gaiti Rabbani Production Editor Roslyn Meredith

Global Head of Media Marketing Lisa Narroway

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Designers Cess Rodriguez, Aira Olgado

Chief Operating Officer George Walmsley

Traffic Coordinator Kristine Jamir

Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

tel: +612 8437 4784 rebecca.pike@keymedia.com

SUBSCRIPTION ENQUIRIES

tel: +61 2 8311 5831 • fax: +61 2 8437 4753 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES claire.tan@keymedia.com

Key Media Australia (Mortgage) Pty Ltd Regional head office: Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto and Manila

Mortgage Professional Australia is part of an international family of B2B publications and websites for the mortgage industry CANADIAN MORTGAGE PROFESSIONAL neil.sharma@kmimedia.ca T +1 416 644 8740

Rebecca Pike, editor, MPA Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.

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www.mpamagazine.com.au

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UPFRONT

STATISTICS RECOVERING FROM COVID-19

BUSINESSES FEAR IMPACT OF END OF JOBKEEPER The government’s JobKeeper stimulus ended in March 2021, leaving many businesses unable to support their staff. In the lead-up to the cut-off date, Treasury warned that there could be around 150,000 job losses. According to the Sensis Business Index, the majority of businesses surveyed expected the end of JobKeeper to have a moderate to severe impact on their operations.

19%

of SMEs say the time it takes customers to pay invoices has increased

60% 50% 40% 30% 20%

15%

of SMEs would seek a bank loan if they needed finance

10% 0% It will have a major impact on our business

6%

more SMEs were successful in getting finance in November 2020 than they were in September

It will have a moderate impact on our business

SMALL BUSINESSES LEFT BEHIND Business sentiment regarding the support offered by the banks varies depending on business size.

Those with fewer than five employees feel the most let down by the banks.

BUSINESS CUSTOMER PERCEPTIONS OF SUPPORT PROVIDED BY THE BANKS Excellent

4%

Good

Average

Not very good

Poor

10%

9%

10%

42%

37%

40%

29% 33%

46%

16%

of SMEs believe it will take more than one year to recover to pre-COVID levels Source: Sensis Business Index, Sept–Nov 2020

50%

14% 3% < 5 employees

52%

50%

36%

47%

42%

9% 2% 5–19 employees

6% 2% 20–99 employees

8% 0% 100–500 employees

Positive

Source: ACA Research SME Sentiment Tracker

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www.mpamagazine.com.au

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04/05/2021 9:53:39 am

BROKERS’ COMMERCIAL LOAN VALUES HIT HIGH

WHEN JOBKEEPER ENDS IN MARCH 2021, WHAT IMPACT DO YOU BELIEVE IT WILL HAVE ON YOUR BUSINESS? September

October

Total commercial loans written by mortgage brokers reached the highest value ever in the six months to September 2020.

VALUE OF COMMERCIAL LENDING SETTLED BY MORTGAGE BROKERS

November

It won’t make any difference

Apr 15Sep 15

$5.736bn

Oct 15Mar 16

$4.818bn

Apr 16Sep 16

$8.051bn

Oct 16Mar 17

$7.903bn

Apr 17Sep 17

$8.847bn

Oct 17Mar 18

$8.943bn

Apr 18Sep 18

$9.047bn

Oct 18Mar 19

$8.788bn

Apr 19Sep 19

$8.995bn

Oct 19Mar 20

$9.694bn

Apr 20Sep 20

$9.375bn $0bn $2bn

$4bn

$6bn

$8bn

$10bn

$12bn

Source: MFAA Industry Intelligence Service, 11th Edition

Source: Sensis Business Index, Sept–Nov 2020

100% DROP IN TURNOVER

VACCINE EXPECTATIONS Most Australians believe it will take the government one to two years to complete the COVID-19 vaccination rollout. Views are split on when the housing market, travel and unemployment will return to pre-pandemic levels

Some WA businesses that rely on in-person services (eg recreation services and beauty spas) saw a 100% decline during the state’s five-day lockdown in February.

Thinking about the future, how long do you think it will take for the following to occur?

TOP 5 MERCHANTS BY % DECLINE (1–5 FEB vs 18–22 JAN 2021)

Looking ahead from April 2021

Within the next six months

Seven months to one year

One to two years

More than two years

Never

The COVID-19 vaccine rollout will be completed in Australia

7%

23%

42%

21%

7%

Quarantine will no longer be required after international travel

8%

15%

37%

31%

9%

The housing market will return pre-pandemic levels

16%

17%

30%

22%

15%

International travel will be allowed without restriction

7%

14%

32%

40%

8%

TOP 2 MERCHANTS BY % GROWTH (1–5 FEB vs 18–22 JAN 2021)

40

28%

20

22%

0 -20 -40 -60 -80 -100

Unemployment will return to pre-pandemic levels

10%

20%

34%

27%

9%

Australia will pay off its national debt

5%

8%

11%

42%

34%

Source: The Guardian Essential Report

-100%

-100%

-99%

Massage Miscellaneous Health parlours recreation and beauty services spas

-96%

-91%

Sports Charities and Drug clubs and fundraising stores and promoters societies pharmacies

Liquor and beer stores

Source: Bankwest Spend Trends analysis

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04/05/2021 8:09:23 am

UPFRONT

NEWS ANALYSIS

Promise of recovery, but SMEs cautious All signs point to a strong economic recovery, but many SME owners are still cautious. Despite that, there is a great opportunity for mortgage brokers to help small businesses source finance THE AUSTRALIAN ECONOMY might be recovering and consumer sentiment improving, but experts fear that small businesses will remain cautious. With the delay in the rollout of vaccinations, business owners may wait and see whether more lockdowns and snap border closures will occur, says business credit score company CreditorWatch.

Despite that concern, the group’s Business Risk Review showed that credit enquiries were at their highest in 18 months. As this is an indication that business conditions are normalising, why is there an expectation that demand for finance will reduce?

CreditorWatch chief economist Harley Dale says there is considerable uncertainty about how the next few months will pan out, particularly with the COVID-19 vaccination delays in Australia and subsequent delays in the opening of international borders.

“That situation is naturally going to cause a bit of angst and uncertainty to businesses, and so it might delay their demand for finance just while they sit back and assess how things evolve over the next few months,” Dale said.

Overall, the recovery of the Australian economy looks promising. The NAB Monthly Business Survey released in April showed that business conditions were at a record high in March. Business confidence dropped

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compared to February but remained at an above-average level.

“Businesses are telling us activity continues to increase at a very healthy rate as we have moved past the rebound phase in activity with the earlier removal of pandemic-related restrictions. Overall, the recovery over the last year has been much more rapid than anyone could have forecast,” said NAB’s group chief economist Alan Oster.

“Despite the dip in confidence [in March], it remains well above its long-run average. This in

also writing commercial loans. Year-on-year there was a 24% increase, possibly in response to COVID-19.

Looking at the current market and its opportunities, Dale said a strong economic recovery was on the cards, and therefore it was

“It’s about having a deep dive into where the opportunities lie, because there are sectors which are still struggling and probably will do for some time” Harley Dale, CreditorWatch combination with a very strong read for forward orders points to ongoing strength in activity, which hopefully sees conditions remain elevated, even as we pass through the end of the JobKeeper program.”

Figures released in the MFAA’s 11th Industry Intelligence Service report show that a record-high number of mortgage brokers are

a good time for mortgage brokers to consider offering commercial finance.

“The data continues to reinforce that the economy is recovering. So in terms of mortgage brokers, that sends a signal that businesses are getting back on track, and what they’re reopening for is probably relatively normal commercial business operations [compared

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03/05/2021 11:28:33 am

MANY BUSINESSES FEAR THEY WON’T SURVIVE SMEs’ level of concern about survival

12%

13%

12%

39%

36%

15%

31% 27%

31%

32%

34%

26%

16%

24%

57%

42%

48% 58%

10% 52%

November December February March % total concerned Note: Of those utilising Jobkeeper in March 2021: 83% were concerned about business survival (up from 76% in February)

Source: ACA Research SME Sentiment Tracker March 2021

to] what they had last year, where they were heavily constrained and in a lot of instances couldn’t operate at all,” Dale said.

He warned that there were two caveats to that, however – one being the lack of demand for business finance thanks to the delayed

struggling and probably will do for some time,” Dale explained.

As small businesses are facing into the uncertainty of the future, the FBAA has urged more mortgage brokers to upskill in order to properly service an SME market that

“There is a huge market being taken for granted by the big banks, which finance brokers can tap into through offering quality service and knowledge” Peter White, FBAA COVID-19 vaccine rollout; the other that different industries are having different experiences with recovery.

“The aggregate recovery looks good, but it disguises the fact that some sectors are doing better than others, so it’s about having a deep dive into where the opportunities lie, because there are sectors which are still

is increasingly frustrated by the big banks.

While many brokers are already undertaking independent professional education to help them better understand details like business balance sheets and profit and loss statements, FBAA managing director Peter White said knowledge was essential to meet a widening gap in the finance market.

White pointed to a recent report from Judo Bank and East & Partners which found that 12% of SMEs had no interaction with their banks in 2020, but felt they needed more engagement. The report also found that of the businesses that had any sort of interaction with their banks, only 15% rated it as high-quality, and 54% said their interaction was low-frequency and low-quality.

“These figures confirm that there is a huge market being taken for granted by the big banks, which finance brokers can tap into through offering quality service and knowledge,” White said. “The government’s current decisions around responsible lending ensure easier access to credit by SMEs, many of whom brokers already deal with through home mortgages.

“Many business owners are not aware of the significant increase in fintech and nonbank lenders, but unless finance brokers understand this market – and this includes the ability to comprehend business accounting practices – our industry won’t be able to take full advantage of it.”

www.mpamagazine.com.au

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03/05/2021 11:28:57 am

UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email rebecca.pike@keymedia.com

Educate for best results While diversification can be a great option for brokers, CAFBA says those moving into commercial need the right education to ensure the best customer outcomes FOLLOWING THE banking royal commission and the onset of COVID-19, many residential brokers decided to diversify into commercial finance lending. This makes perfect sense as it can provide funding solutions across a broker’s entire customer base – whether for consumers or SMEs. However, while diversity has become a bit of a buzzword and the concept is quite simple, the execution is not as straightforward.

Commercial finance of course operates in a self-regulating environment, so how do we ensure we provide the best outcomes for our customers? Commercial finance can be complex, with the right analysis paramount to delivering the right product. Whereas resi lending assessment can be backward-looking, commercial finance is often forward-looking, with cash flow forecasting and upcoming contracts important to a historical analysis.

So, how do we ensure practitioners have the requisite skills, education and knowledge to operate in commercial lending? Just as a motor vehicle driver’s licence does not permit operation of heavy machinery or transport, the same principle applies to commercial finance. How does the industry provide training to ensure those who operate in this sector have the right skills to be commercial finance professionals?

The answer is twofold: through education and accreditation.

Last year the Commercial & Asset Finance Brokers Association brought the industry together to form the Education Council. Its purpose was to ensure content and training were consistent and relevant across the entire commercial finance industry, whether it was provided to lenders or brokers. All the major lenders and aggregators joined the council with the common goal of ensuring we have an educated and qualified industry.

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Research has also shown that expanded educational offerings can attract a new generation of commercial financiers for whom a credential is a necessary first step. Gen Y and millennials are drawn to a profession that offers a credential and structured career path.

As we move towards further professionalism of the industry, having designated credentials will reflect the education and professional standing of the commercial finance sector. In

Education will not only attract a younger and more diverse commercial financier into the industry but also demonstrate their ability to uphold professional standards.

The term ‘education’ has become popular over the past few years, but it must be the right education. Lender seminars and workshops (or masterclasses) are important to increase knowledge but only go part of the way. They cannot be the substitute for formal education.

In the aftermath of the royal commission and in a self-regulating industry, the need for education has never been more important the aftermath of the royal commission and in a self-regulating industry, the need for education has never been more important.

It is the industry’s goal to expand the professional education program and use this to attract more diverse entrants by offering credentials and a structured career path through the commercial and asset finance sector.

There are courses available to assist brokers in upskilling to write commercial loans, such as Commercial Lending Skills, Mastering Cashflow, and Advance Commercial Lending Skills. These lead into the more formal Certificate IV in Financial Services (FNS41815): Specialising in Commercial & Asset Finance; Diploma of Financial Services (FNS51815) Complex Issues in Commercial Lending; and an Australianised version of the US Certified Lease and Finance Professional course.

Education will be held up as proof of the industry’s ability to self-regulate commercial finance and deliver the prestigious professional designation – the Certified Lease and Finance Professional – with post-nominals (CLFP).

Professional bodies such as the CPA and CA in accounting lend weight to their professional qualifications by requiring additional development and training such as annual updates and certified professional development activities to maintain accreditation.

The Education Council will continually review the content of all courses to ensure compliance, relevance and continued development, and will investigate a structured mentoring program to ensure any new entrant is educated, qualified and capable of effectively delivering the commercial finance product.

It is important that lenders and aggregators with broker accreditation policies only permit commercial brokers with the requisite education and credentials to introduce transactions.

This will ultimately ensure that commercial finance is truly self-regulating.

David Gill is CEO of the Commercial & Asset Finance Brokers Association of Australia (CAFBA).

www.mpamagazine.com.au

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03/05/2021 10:10:48 am

PEOPLE

BIG INTERVIEW

MALCOLM WITHERS: FLEXIBILITY IN A CHANGING WORLD After refocusing the business on supporting existing customers in 2020, Pepper Money’s head of commercial praises the resilience of both his team and Australians everywhere

DESPITE 2020 being a hard year for so many, Pepper Money’s head of commercial still sees some positives. Reflecting on how Australian businesses had to adapt their operations, with many making drastic changes to survive, and often with little notice, Malcolm Withers praises the resilience and fortitude they showed, calling it “inspiring”.

some role secondments so that staff could concentrate on doing what was needed most: talking to customers.

“Though this would have been challenging at times, we are incredibly proud of the team and feel privileged to have supported so many Australian businesses in navigating their way through the last year,” Withers says.

“We are incredibly proud of the team and feel privileged to have supported so many Australian businesses in navigating their way through the last year” Like the customers it seeks to support, Pepper has also had to be agile and flexible in such a dynamic environment as that created by the outbreak of COVID-19.

Withers says Pepper made the conscious decision to focus on supporting its existing customers through the difficulties of the last year, rather than on trying to drive new business. This meant a shift in focus and

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“We have now rebalanced our focus and are very excited to be supporting both existing and new customers with more reallife commercial real estate loan options.”

Throughout 2020, Pepper’s customers typically needed help in three key areas: debt structuring, access to longer loan terms, and access to higher loan-to-value ratios.

Withers says debt solutions like these have

been able to “empower” customers, whether through access to reduced repayments over longer loan terms; lower deposits for commercial property loans; or debt consolidation that allowed them to refinance to lower repayments.

A flexible loan product for all With Australia back on track, so is Pepper.

The non-bank has developed a product that makes commercial property more accessible for both brokers and customers.

Understanding that customers are already very busy in their day-to-day businesses, Pepper is offering a new product that provides flexibility and ease of access to funds. It gives borrowers flexible income evidence options, from traditional full-doc loans to alt-doc loans, with a 100% offset subaccount and free redraw at no charge. Online access also puts the customer in control of their loan product.

To redraw from their loan accounts, all customers will need to do is log in. The minimum redraw amount will be $50.

For brokers, there is no restriction on accreditation, and online lodgement is an

www.mpamagazine.com.au

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03/05/2021 11:31:49 am

PROFILE Name: Malcolm Withers Title: Head of commercial Company: Pepper Money Years in the industry: 25 Career highlight: “A broker recently contacted me to advise that they had settled their first-ever commercial deal with Pepper after completing our training module. They advised that it was easier than what a banker had made them do under a referral model.”

www.mpamagazine.com.au

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03/05/2021 11:32:00 am

PEOPLE

BIG INTERVIEW

easy-to-follow process. Withers says “it’s never been easier”.

“A customer is too busy in their day-to-day business to have to worry about their loan,” he says. “Customers need a product which has the flexibility to grow with them and the features and benefits that support them.

“At Pepper we can offer customers the opportunity to apply for a loan using alternative documentation to verify their income instead of having to rely on a traditional payslip. That loan can then support them through the growth stage of their business and offer features such as redraw that allows them to put their cash to work whilst having access to it too.”

Commercial opportunities for brokers Brokers offering Pepper’s commercial loan products will have the opportunity to help more customers, the lender says. Whether those are customers looking to buy commercial properties for owner-occupier or investment purposes, or clients wanting to consolidate debt and access cashout, Pepper says it has the right solutions.

The non-bank is no stranger to helping mortgage brokers find commercial offerings

WHAT PEPPER MONEY COMMERCIAL OFFERS

Loans of up to $3m

Up to 75% LVR

Maximum loan amount differs across product and documentation types

LVR differs across product and documentation types

1- to 25-year loan terms Loan terms across product range they need to identify opportunities and hold quality conversations. The lender also actively participates in developing the educational content that is supplied to brokers by each of the industry bodies.

“In order to be successful, the broker of

“Customers need a product which has the flexibility to grow with them and the features and benefits that support them” that can diversify their businesses.

As “long-term advocates for the training and education of brokers”, Withers says the team at Pepper actively support brokers with regular training.

Pepper’s current program includes technical training on its products and policies, and on assessing customers’ income and servicing, as well as training focused on developing confidence by giving brokers the tools

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tomorrow should be seeking out more products to offer their clients,” Withers says.

“Commercial real estate is an easy product to integrate into the suite of current products offered. Commercial property lending for SME clients is the easiest place to start when you consider that everything you have requested from the client to do their home loan is everything you will need in most cases to get them a commercial

property loan if they need it.”

He explains that “brokers tend to see commercial real estate lending as too complex when in reality it is just a matter of looking at the occupations of your existing or future customer base, identifying where you are most comfortable operating, then playing to this strength”.

While we all learnt in 2020 to expect the unexpected, everyone is trying to move forward with the expectation that things will settle down. However, with international travel expected to stay off the table and some caution to remain in the market, it is hard to predict what will happen in the lending industry.

But one thing is for certain at Pepper: it’s in the market to help people succeed.

“In the year ahead we aspire to help every broker realise their own potential, and by doing so we will help more Australian businesses and Australian investors with better solutions for their commercial property lending needs,” Withers says.

www.mpamagazine.com.au

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03/05/2021 11:32:16 am

FEATURES

COMMERCIAL LENDING GUIDE

BACK OPEN FOR BUSINESS

After a year like no other, Australian businesses are beginning to feel confident again, and demand for lending has been rising over the past few months. With more mortgage brokers than ever before writing commercial loans, it’s becoming imperative that broker businesses have a diversified offering 14

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BROKERS AND LENDERS in the commercial field have seen the impacts of the pandemic vary considerably across different areas of the market over the last year. There was a lot of caution in some industries as businesses adjusted to remote working, social distancing restrictions and lockdowns. Other industries, however, thrived.

Over the following pages, industry leaders and experts talk about the different types of commercial lending mortgage brokers might want to explore: commercial property, SME lending, debtor finance and asset and equipment finance.

Experts from across broking, lending and aggregation discuss how each of these areas has been affected by the events of 2020, what they expect the next 12 months to look like, and what opportunities there are for mortgage brokers to diversify.

In general, the performance of the commercial lending market seems to have come as a surprise to many. When the pandemic hit early last year, there were fears that both the residential and commercial markets would suffer.

In terms of commercial property, despite the rising office vacancies and falling occupancies, lenders have in fact seen opportunities for a lot of business owners to buy the premises they work from. This is not the same for every business owner of course; some have had to close their doors permanently.

However, the opportunities are there for brokers to speak to business clients and find out how they can help. Often they may find solutions that the business owner didn’t know were possible. When talking to a business about cash flow problems, the broker might identify an area in which purchasing a new asset could help.

Assets and equipment are expected to present a big opportunity for brokers in the months ahead as businesses look to grow after a subdued year. But there are a few factors to keep an eye on that might impact this market, such as how border closures are affecting the delivery of assets like vehicles.

In explaining the commercial landscape and encouraging mortgage brokers to dip their toes into lending in this sector, industry experts are calling on brokers to make sure they are educated in each area of commercial lending.

Diversification is not for everyone, though. Particularly since the start of the pandemic, mortgage brokers have been incredibly busy with their existing residential clients and may not have the capacity to take on additional work. Many successful brokerages form partnerships instead that mean they can refer commercial clients to those more experienced and dedicated to lending in this area.

For mortgage brokers who are considering whether or not diversification is right for their business, MPA’s guide to commercial lending highlights the areas that will offer the greatest opportunities over the next year. Read on to find out how to make the most of them.

www.mpamagazine.com.au

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03/05/2021 3:13:24 pm

FEATURES

COMMERCIAL LENDING GUIDE

COMMERCIAL PROPERTY ENDLESS WAYS TO GROW Even with the changes to the way Australians work, and reduced retail confidence, the commercial property market fared better than many expected in 2020 THE PERFORMANCE of the commercial property market in the past year has been “somewhat of a surprise”, according to lenders in this sector, who were expecting a difficult year thanks to COVID-19. While the market did soften, it was nowhere near as much of a fall as many expected.

In July 2020, the value of new loans for the purchase of commercial property dropped by 25% from the previous year. But by the end of last year the value was the highest it had been since June 2019, and 2021 has started with strong figures too.

Different industries have been affected in different ways, of course. La Trobe Financial’s chief lending officer, Cory Bannister, explains that the sector hardest hit was discretionary retail, particularly hospitality and tourismrelated businesses. On the other hand, demand for logistics and industrial property surged globally on the back of strong demand from investors.

Even in the office market, Bannister says landlords have reported stronger-thanexpected results.

“Like many businesses, commercial office landlords have had to adjust their business models, shifting from large-scale tenants on

16

long-term leases to providing flexible space to encourage more tenants to sign shorter contracts,” he says.

“This shift is seeing many operators who were once unable to take a city lease take advantage of the opportunity to adopt a CBD address.”

It will not come as a surprise to learn, though, that office occupancies across Australia are at an all-time low. Before the

declines and new office space continues to come on to the market.

Thinktank’s general manager – partnerships and distribution, Peter Vala, predicts the sector will see a higher level of persisting vacancies than pre-COVID. “Retail premises are still holding up well in moderate-to-good locations; however, higher vacancies and slower sales turnover will persist for some time in the weaker areas and more specialised property,” he says.

“It’s clear the inner city is still suffering to some extent from remote working, with consistently fewer people in the CBD, as opposed to well-located strata offices in suburban areas which are performing along the same lines as retail.”

Opportunities for business owners and brokers Despite the resilience of the commercial property market in 2020, Liberty is cautious about being too optimistic about the future.

Group sales manager John Mohnacheff says it is clear things will not “bounce back to a pre-COVID world”. Particularly as snap lockdowns continue across the country to combat any virus outbreaks, he says businesses need to remain cautious and ensure they have contingency plans in place.

This doesn’t mean that market conditions

“It’s clear the inner city is still suffering to some extent from remote working, with consistently fewer people in the CBD” Peter Vala, Thinktank pandemic, the average level of occupancy in all capital cities was around 90%, according to the Property Council of Australia. The occupancy rates of Sydney CBD offices dropped to a low of around 30% in August 2020, and in Melbourne it was down to a low of 7% in October.

At the same time, vacancy rates have edged higher as demand for office space

will be more or less favourable, but things will be different, with many new opportunities for smart business owners to make their mark.

“Already, we have seen a strong shift in consumer behavioural patterns, with more Australians turning to online shopping than ever before,” he explains.

“While this has led to some businesses

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GROWTH IN COMMERCIAL LENDING

6,000 5,000 4,000

5,391

5,104 4,577

4,676

4,619

4,351 4,263 3,611

3,000

3,595

3,959

3,651

3,897

4,003

3,118

2,000 1,000 0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2021 2021 Source: ABS Lending Indicators

choosing to reduce the number of physical shopfronts, it has simultaneously increased the demand for warehouse space and shipping facilities.

“Our way of work has evolved faster than we could have anticipated, and we are still very much in a state of flux. While some employers seek larger spaces to better accommodate social distancing requirements, others have decided to downsize to help reduce costs.”

As businesses recover from the direct impacts of COVID-19, lenders are seeing them “taking advantage” of low interest rates to purchase commercial property.

Malcolm Withers, head of commercial at Pepper Money, says this is one of the biggest trends the non-bank has seen.

With this demand for commercial property and positive outlook for retail growth, there are opportunities for mortgage brokers to step in. Withers says there is a gap in the market where “customers are begging to tell their story”.

“Diversification allows brokers to become that person who listens to their story and becomes their business relationship manager,” he says, adding that this leads to stronger ties

their business premises via SMSF – and he sees no reason for this to change.

“Over the past 12 months we experienced steady demand for SMSF loans secured against commercial property, typically from SMEs looking to purchase the premises they operate their business from, in many cases reducing their monthly cash flow requirement as a result as they shifted from renters to property owners,” he says.

“For brokers looking to get into this space, we find accountants and financial planners are the best source of referrals. Not only can they establish a steady and sustainable supply of regular, quality clients, but brokers can also take comfort in knowing that the clients have been qualified, and deemed appropriate, to undertake borrowings under an SMSF structure.”

The non-bank is keeping the commercial

“Over the past 12 months we experienced steady demand for SMSF loans secured against commercial property, typically from SMEs looking to purchase [their] premises” Cory Bannister, La Trobe Financial and a longer-term relationship with the client.

“Commercial real estate is an easy product to integrate into the suite of current products offered, especially when you consider that everything you have requested from the client to do their home loan is all you will need in most cases to get them a commercial property loan if they need it.”

Brokers can provide businesses with alternative solutions One of the areas where La Trobe Financial has traditionally seen an opportunity for brokers to help borrowers is in self-managed super fund lending. Bannister says many brokers will have self-employed customers who can take advantage of the benefits of purchasing

process easy for new entrants by mirroring its residential loans. If a broker can write a residential loan, they can write a commercial loan, and with its team of senior commercial underwriters and national BDM support staff, La Trobe Financial is providing the necessary assistance and training.

“The forms, documents and lodgement methods are the same, with the only difference being the format of the valuation, which is typically longer for commercial property and uses different methodology to arrive at the valuation figure, so we really do make it easy for brokers to use us,” Bannister says.

Thinktank’s Vala also sees SMSF loans as an opportunity for brokers. He believes they

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03/05/2021 3:16:20 pm

FEATURES

COMMERCIAL LENDING GUIDE OFFICE OCCUPANCIES RISING Level of occupancy in capital city office buildings, July 2020–March 2021

Pre-COVID average

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Jan-21

Feb-21

Mar-21

100% 80% 75%

71% 63%

84%

71%

65%

50%

50% 35% 25%

0% Melbourne CBD

Sydney CBD

Brisbane CBD

Canberra

Perth CBD

Adelaide CBD

Hobart CBD

Darwin CBD Source: Property Council of Australia

are ideal for clients with longer-term wealth goals and ideal for brokers as the loan terms tend to be much longer. While SMSF lending is much more technical, when it comes to commercial loans for standard offices, industrial, retail, professional suites, childcare facilities or student accommodation, Vala says raising finance of up to $2m is very similar to arranging a home loan for a selfemployed client.

“When it comes to larger and more complicated deals, however, we generally recommend that brokers who are new to commercial either defer or partner with an experienced broker as they can be very

18

“Keeping the process as simple as possible was vital to us when designing this [commercial] product, as it makes it even easier for brokers” Malcolm Withers, Pepper time-consuming and often not come to fruition,” he says.

Thinktank also supports and educates brokers in commercial lending, led by its relationship managers: from deal structuring and workshopping, to client visits, to assisting with the entire journey of the loan.

“With low rates, the affordability of owning or upgrading commercial property has never been more attractive for borrowers and more advantageous for brokers. For selfemployed and SME clients, now is an excellent time for those renting to consider buying,” Vala says.

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Australians love their brokers. And so does ANZ. That’s why we go the extra mile when it comes to giving you support. Our customer-facing ads highlight the importance of brokers by reminding Australians they can speak directly to you, for their home loan needs. And to ensure you get the support you need when you need it, our team of dedicated ANZ BDMs are ready to work with you.

ANZ is the bank that sees Brokers as partners.

And that all adds up to better support for your customers.

ANZ Financial Wellbeing MFAA Quarterly Survey of Brokers (September 2020), page 10, brokers’ market share of all new residential loan settlements during September 2020 quarter grew to highest share on record at 60.1% © Australia and New Zealand Banking Group Limited (ANZ) 2021 ABN 11 005 357 522. Australian credit licence number 234527.

FEATURES

COMMERCIAL LENDING GUIDE Many ways to grow a business Despite recent growth to a record high in the number of mortgage brokers also writing commercial loans, Mohnacheff says commercial lending remains largely overlooked. Brokers hold the majority of the residential mortgage market share, and he warns that it is a highly competitive climate for those looking to scale up.

“One of the great things about this industry is the endless ways to grow your business and increase your customer base – and diversifying into commercial lending is an ideal place to start,” he says.

While Mohnacheff agrees that loans for commercial properties can be very similar to residential loans, he warns that there are a few differences.

“While many lenders will fund up to 90% of a residential property’s purchase price, most are more conservative when it comes to commercial property – and some may only agree to fund 60%,” he explains.

He adds that Liberty has a flexible approach to commercial loans, and with its range of options and competitive LVRs, it can offer tailored solutions.

“Although purchasing a commercial prop-

COMMERCIAL PROPERTY PRICE FORECASTS Property industry expectations of the capital value of property by asset type in the 12 months from March 2021

Residential capital growth index March qtr 2021

Office capital growth index March qtr 2021

Retail capital growth index March qtr 2021

Industrial capital growth index March qtr 2021

Tourism capital growth index March qtr 2021

Retirement capital growth index March qtr 2021

73.6

-13.6

-28.6

20

41.1

-15.7

Source: Property Council of Australia

“One of the great things about this industry is the endless ways to grow your business and increase your customer base” John Mohnacheff, Liberty erty will generally require a larger deposit, it’s worth keeping in mind that lease periods are typically much longer than for a residential property,” Mohnacheff says.

“This means that a commercial property like office space or a warehouse can potentially be a more stable long-term investment and can also require a lot less legwork for the owner.”

As shown by the figures in the MFAA’s 11th Industry Intelligence Service report, growing numbers of mortgage brokers are

-13.3

diversifying into commercial lending.

Pepper Money is seeing more mortgage brokers take up its commercial real estate offering, and Withers says one of the key reasons for this is the fact that its application process uses the same ApplyOnline functionality that brokers already use to lodge mortgage applications.

“Keeping the process as simple as possible was vital to us when designing this product, as it makes it even easier for brokers to work with credit and find the

right solution for their customer,” he says.

The non-bank is actively helping brokers diversify into commercial by offering them regular training. Two thirds of the training focuses on helping the broker feel comfortable by teaching them the tools they need to identify an opportunity and how to have a quality conversation with their customer.

The other third covers training on Pepper’s products and policies, assessing customers’ incomes and servicing.

“Having access to Pepper’s commercial property loan products means mortgage brokers can potentially help more of their clients,” Withers adds.

“Whether it’s a client looking to buy a commercial property for owner-occupier or investment use, or a client wanting to consolidate debt and access cashout, then Pepper Money has options to offer them.”

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SME LENDING GREEN SHOOTS AS CONFIDENCE BUILDS Lenders are looking to support SMEs seeking funding for growth, and this means more opportunities for brokers

FOR SMALL business owners, getting access to finance has always been a struggle.

During COVID-19 this became much harder, but it looks like things are turning around.

In the quarter to March 2020 – before the pandemic really struck – 32% of SMEs said it was more difficult to access finance than in the quarter before, according to the Sensis Business Index. By the time August 2020 came around, this figure had risen to 37%.

Taking a closer look at the month-bymonth change in the following quarter, it’s clear that businesses became more and more confident in 2020 about their ability to access finance with each passing month. By November, only 25% of SMEs said it was harder to access finance.

However, the drop did not equate to a change in how easy businesses were finding access to finance – instead, more SME owners were saying it was just as difficult as it was two or three months before.

From its brokers’ point of view, AFG says lenders showed “a fair bit of caution” throughout the difficult lending period brought on by COVID-19, and they were offering a range of different products for different scenarios. Because of this, the aggregator focused on providing education and support, because small brokers “massively needed the help”.

“They’re so time-poor at the moment,” says David Drinkwater, AFG national sales

manager, commercial and asset finance.

“They actually need some guidance and advice, and sometimes you can get that directly from the bank that you’re dealing with, but quite often dealing with one bank will give you a limited amount of products that you can use, and you may be chasing something different. So that’s where getting an educated broker who can get the customer’s best options is key, especially in a tough

Thomas, NAB executive, commercial broker and equipment finance sales, says 2020 was the biggest year it ever had through the broker channel, and 2021 is so far exceeding expectations.

The SMEs turning to NAB “come in all shapes and sizes”, but those needing finance might be sole proprietors looking for a small loan, farmers wanting to acquire new equipment for the harvest, or a large enterprise

“One of the things our residential brokers struggle with is a bit of confidence ... we find they’ve needed personal support” Chris Slater, AFG environment like we’ve just gone through.”

Agreeing on the importance of education during a difficult business period, AFG’s head of sales and distribution, Chris Slater, adds, “We just tried to provide as much support as we could for the customers themselves, but tried to empower our mortgage brokers to be as educated as they could about what was available for our customers.

“We had SME customers who took their home loan through AFG, for example, and they were in distress.”

At NAB, the bank is lending around $2.5bn every month to businesses. Chris

seeking expansion finance on a grand scale.

Currently, the dynamic of today’s SME market is “one of urgency”, Thomas says.

“The economy is evolving quickly, and SMEs are increasingly pivoting towards growth opportunities, requiring investment in all sectors.

“Interestingly we are seeing an uptick in SME mergers/acquisitions. COVID also seems to have accelerated generational change, and these transactions are very private in nature.

As such we are witnessing that several brokers are leading the deal, which speaks volumes to the value that they bring.”

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FEATURES

COMMERCIAL LENDING GUIDE SMEs looking to boost cash flow On top of the need for funding to invest in growth opportunities, the primary reason businesses are turning to small business lender OnDeck is for help with cash flow. The fintech saw very early on when the lockdowns were first announced that businesses were experiencing a “cash flow squeeze”.

It offers short-term unsecured business loans of $10,000 to $250,000, which are often used by SMEs to buy trading stock, for marketing activities, or to hire more staff, do renovations and repairs, purchase new tools and equipment, etc.

Oliver Wade, OnDeck’s head of marketing and partnerships, says it is worth remembering that not every has business struggled during the pandemic, with many pivoting to new markets or revenue streams.

“Our own independent research confirmed that SMEs needed cash flow to navigate the pandemic, and this continues to be the case as we see the economy rebound,” he says.

“Small business owners are renowned for their determination and willingness to adapt, and we are seeing a renewed sense of optimism among the SME community. This, coupled with the ability to access fast, efficient

“Empathy and understanding around the key opportunities and challenges facing [customers’] businesses is really the ‘secret sauce’ for diversifying into SME lending” Chris Thomas, NAB finance, is helping SMEs chart a fresh course for the future.”

SME lender Moula also saw businesses come to it for help with cash flow. Head of sales Tas Tzimos says some may have had a gap between payables and receivables, while others needed help bridging between projects.

“We often encounter businesses who win a contract or get hired to fulfil a project that will increase revenue in the future, but they need capital to scale up and cover costs before they actually get paid for the work,” Tzimos explains. “We also see many businesses seeking funds to purchase inventory or equipment, to cover tax debt, pay for overheads.”

In the early stages of the pandemic, Moula offered payment deferral options to help businesses overcome the initial challenges,

and it also participated in the first phase of the SME Guarantee Scheme that allowed businesses to defer repayments on principal and interest loans for six months.

“Before the pandemic, we consistently were hitting records for new lending at Moula,” Tzimos says.

“During COVID, we saw a decline for several months, but that situation started to improve dramatically later in the year as business confidence returned. We also noticed a change in the sectors that we were lending to. For example, our lending to businesses in financial and insurance services, professional, scientific and technical services, and wholesale trade increased.”

The federal government’s SME Guarantee Scheme has played a big part in the recovery

HOW BUSINESSES SEE ACCESS TO FINANCE Compared to two months ago, do you think finance is currently...

easier to access?

70%

about the same to access?

60%

60%

more difficult to access?

59%

58%

50% 40% 20% 10% 0%

28%

27%

30% 13%

September 2020

25% 16%

14%

October 2020

November 2020 Source: Sensis Business Index, November quarter 2020

22

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FEATURES

COMMERCIAL LENDING GUIDE of many businesses. It was established towards the end of March 2020 and provided support of up to $40bn in lending to SMEs by guaranteeing 50% of new loans issued by participating lenders.

Westpac took part in the first phase and is currently involved in the second phase and the

businesses or invest in office equipment, machinery and business stock.

The national head of commercial intermediaries at Westpac Group, Janelle Pearce, says that while many small businesses are still doing it tough, particularly those impacted by international border closures, others are

“Small business owners are renowned for their determination and willingness to adapt, and we are seeing a renewed sense of optimism among the SME community” Oliver Wade, OnDeck

nesses to not only grow but change. Pearce says she has been inspired by the entrepreneurial nature of small businesses and how they have adapted, giving one of Westpac’s customers as an example.

“Manly Spirits, a boutique distillery on Sydney’s Northern Beaches, saw an opportunity last year to leverage the business’s equipment and skills to manufacture hand sanitiser, which was in short supply amid an unprecedented surge in demand from health professionals, businesses and the general public,” she says.

“Small businesses like this are securing finance and moving fast on their feet to navigate through the challenging period.”

Significant opportunity to diversify third phase, the SME Recovery Loan Scheme.

The bank has seen many businesses take it up while also making the most of record-low interest rates to invest in their future growth.

Customers across a range of industries have turned to Westpac for finance to expand their

moving back into growth mode. “We’ve seen some really positive economic data out recently, showing business confidence is high, and we’re confident that optimism will translate to growth in the near term,” Pearce says.

The pandemic has also forced some busi-

As businesses like this continue to grow and adapt, there are plenty of opportunities for mortgage brokers to look at how they can do the same and help small business customers.

After the outbreak of COVID-19, AFG saw a drop in the number of mortgage brokers

FRUSTRATIONS ABOUT FUNDING METHODS SMEs’ top funding frustrations

Have to provide property security

79.8%

Conditions of loan

84.3%

Lack of flexibility

74.0%

Funder is hard to deal with

55.8%

Loan tenure is too short

40.2%

Don’t feel secure with the lender

26.6%

Doesn’t meet all our needs

21.8%

Difficulty accessing government-guaranteed loans during COVID

47.0%

Online lenders charging high rates (especially during COVID)

22.6%

Rising indebtedness without a clear recovery path (especially during COVID)

64.5%

Other

0.2%

Don’t have any frustrations

11.8% Source: Scottish Pacific, SME Growth Index, November 2020

24

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diversifying into commercial lending as they faced into a busy residential period, but the numbers are now starting to pick up.

Drinkwater says the opportunity to diversify is “significant”. Compared to the 60% of home loans introduced by brokers, they only

significantly. He adds that diversifying into SME lending takes investment and commitment, as well as an appreciation of the differences between applying for business finance and home finance.

“Much of this comes down to relationships

“More and more mortgage brokers are recognising the value of diversifying into SME lending. It creates an opportunity to contact their mortgage clients to offer additional products” Tas Tzimos, Moula bring in about 20% of SME loans.

“While some lenders continue to close branches, it still creates that better opportunity to have that face-to-face with the customer, especially when you’re potentially already dealing with them in doing their mortgage lending,” he says.

Slater adds that around 25% of the customers that brokers service are SMEs, and with fintechs and SME lenders joining the market, the barriers to entry to the commercial space have lifted. But he says “it is very much about confidence”.

“One of the things our residential brokers struggle with is a bit of confidence,” Slater says. “To have the confidence to do [commercial lending], we find they’ve needed personal support, which is why we have the scenario line and dedicated commercial BDMs to support them.”

Acknowledging the research that shows businesses have often found it difficult to access finance, NAB says it focuses on a relationship-led model and providing a nimble and innovative approach to accessing finance. This includes helping brokers understand any nuances and changes to business models, and workshopping through any deals to help brokers “think outside the box” and build solutions.

For brokers looking to diversify, Thomas says the opportunities are real and growing

held and having a much longer-term view of the customer,” he says.

“It’s not uncommon to provide lending to a business customer four to five times a year, whereas with a home lending customer it might be once every three years. These differences are important.

“Spending time understanding the customer’s needs, being able to walk in their shoes, and having empathy and understanding around the key opportunities and challenges facing their business are really the ‘secret sauce’ for diversifying into SME lending,” Slater adds.

As a fintech, OnDeck is able to use data and modelling to make its process for applying for SME loans much more straightforward for the customer than applying for a home loan. The lender does not ask for any upfront asset security; it just requires a director’s guarantee.

“Our products are tailored to SME needs, and for us, transparency is the key feature that builds trust,” Wade says.

OnDeck’s own research has shown that one in four SMEs have been knocked back for bank finance, and among those that do get the green light, a further 25% say they experienced negative impacts because of the time it took to secure the finance.

As brokers can help their customers access easy finance from OnDeck, Wade says it

SMEs AND THE SEARCH FOR FINANCE OnDeck’s research has found that 40% of SMEs surveyed have, at some stage, applied for finance across a variety of sources. Among these:

1 in 4 (24%) have had their application rejected by a bank

38%

of SMEs less than five years old have been rejected by a bank SMEs turned to alternative solutions:

42%

turned to family and friends

32%

used a credit card

29%

partnered with an online lender

13%

of small businesses gave up their goal of seeking funding altogether Source: KPMG Mutuals Industry Review 2020

provides a way to deepen their relationship with the client.

“Brokers need to see their business as a key investment – and, as with all investments, diversification is critical to supporting healthy long-term returns,” he says.

“By diversifying into commercial lending, brokers not only give their business exposure to a separate market, they can also enjoy faster loan turnaround times.”

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FEATURES

COMMERCIAL LENDING GUIDE BUSINESS CONFIDENCE REBOUNDING

80% 70% 60% 50% 40% 30% 20% 10% 0% -10%

Confident

Worried

*Net balance

Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20

SME net confidence 2009–20

Source: Sensis Business Index, November quarter 2020

SMEs seeking transparency and flexibility Approving more loans each week, Moula is optimistic about economic growth and business confidence. Making it easier for mortgage brokers to handle SME loans, the lender has just launched a referral process that gives brokers the choice of submitting a light-touch referral instead of a full application, and Moula will handle the rest.

“It’s been a great experience for brokers who don’t feel as confident about handling all the nuances of a business loan application,” says Tzimos.

Understanding that small businesses are frustrated with the difficulty of accessing finance, Moula takes this simple, no-nonsense approach to all of its loan applications.

Tzimos explains that business owners want transparency, quick access to finance, the option of unsecured finance, the flexibility to repay their loans early, and short-term capital funding.

Mortgage brokers can offer this flexibility to Moula’s SME customers, and Tzimos says it is a simple way to diversify.

“More and more mortgage brokers are recognising the value of diversifying into SME lending,” he says.

“It creates an opportunity to contact their mortgage clients to offer additional products. It will also keep customers from going

26

to other finance brokers who offer business lending and could eventually take over their mortgage lending as well.”

Taking a hands-on approach to supporting mortgage brokers who want to diversify, Westpac sits down with them for a meeting once they have shown an interest. They discuss their typical client base, their busi-

the link and constant in a small business’s journey with Westpac Group.”

While securing finance at Westpac for home loans and SME business loans is similar in some ways, Pearce explains that there are a few differences.

“Instead of looking at a customer’s personal circumstances, we’re looking at

“Our goal is to build long-term sustainable relationships with our clients and brokers, who are looking for expertise and a banker who understands their industry” Janelle Pearce, Westpac ness model, and cover growth and networking strategies as well as educating the broker on what solutions the bank can offer.

For brokers who are still unsure about diversifying but are curious, the bank holds group and individual training.

“Our goal is to build long-term sustainable relationships with our clients and brokers who are looking for expertise and a banker who understands their industry,” Pearce says.

“Business owners don’t have time to be repeating their story, so the brokers become

their business circumstances. We need to understand the goals and aspirations of the business owner and how we can help them to achieve them,” she says.

“We will also need to review the financial background of the business and will assess the projected cash flow to help evaluate this.

Having all their financial documentation current and available, such as business activity statements, bank statements, management accounts and personal tax returns, will help the small business owners prepare.”

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FEATURES

COMMERCIAL LENDING GUIDE

ASSET FINANCE WEATHERING THE STORM Many businesses are looking to invest in new equipment this year as they focus on growth and recovery following the challenges of 2020

“IF YOU could turn an office upside down and shake it, anything that fell out could be financed.”

That’s how someone once described asset finance to the head of aggregation at Specialist Finance Group, Blake Buchanan.

Asset finance is going to be a big opportunity in the commercial lending space this year as businesses recover from the effects of COVID-19.

According to a survey from ACA Research, 22% of businesses are looking at increasing their business spending or capital invest­ ments. Among those planning to purchase assets for their businesses, 43% are seeking to invest in IT/office equipment, including hardware and software.

Vehicles – which are often front of mind when thinking of asset finance – were the next most popular items businesses were expecting to spend money on.

Seventeen per cent said they were planning to buy passenger vehicles, including SUVs; 11% were looking to purchase light commercial vehicles, including utes, vans, and minibuses; and 19% wanted to invest in other types of vehicles, equipment, machinery or plant.

Reflecting on the asset finance space in 2020, Buchanan says it was interesting to see two very different results in terms of the impact on businesses.

28

SMEs SEEKING NEW SOURCES OF FUNDING

1/3 SMEs looking to close or sell 1/3 of SMEs plan to sell or close their business if no significant improvement

2/3 SMEs looking for new funding options 2/3 of SMEs are planning to adjust their business funding method to deal with pandemic’s aftermath Source: Scottish Pacific SME Growth Index, November 2020 quarter

“Some people spoke about JobKeeper being the only thing keeping them afloat, but then others were booming, such as mortgage and finance brokers. This presented different challenges but also opportunities for each,” he says.

For those businesses that suffered a loss of trade or even had to close their doors, there was an opportunity to reflect and potentially modify the way they did business, which many did successfully.

While demand for asset finance dropped at the start of COVID, it bounced back to greater than normal levels “fairly quickly”, says Buchanan. However, the supply of

assets is still delayed in many areas, depending on where they are coming from.

Thanks to border restrictions and closures, items coming from overseas have been held up, he says, and there is also a backlog of demand for vehicle purchases in particular as many factories are in locations where hard shutdowns were put in place.

This has slowed down some transactions, but business in other areas has made up for this.

Economic recovery a pathway for brokers Confidence is now up, and cities like Sydney are almost as busy as pre-COVID levels; employment levels are rising, broker market share is on the rise, and demand for finance has not waned.

“This points to a stable short- to mediumterm recovery but is dependent on things going well, with no more mass and lengthy shutdowns,” Buchanan says.

For mortgage brokers, he believes the opportunity is always there to diversify their offerings – not just in the current market. Buchanan warns, however, that it is rare that a broker can perfect their expertise across the residential, asset and commercial finance sectors. Instead, those that have excellent diversified offerings usually achieve this through partnerships

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or by employing experts in the field.

“The first step towards diversification of your business is education. Brokers need to be skilled to a level where they can identify opportunities to assist their clients in these areas,” Buchanan says.

“A perfect example might come up with a home loan application from a self-employed client. In their A&L there may be a vehicle under the business that is four years old. Is it likely that they will need finance for a new vehicle soon to take advantage of some tax incentives or as the vehicle depreciation schedule is at an end?

“A broker should ask these types of questions and offer to assist. There are plenty of resources and people available who can assist brokers with placing such deals.”

Buchanan also gives an example of a baker who runs out of bread every morning.

Through a simple conversation, the broker can identify the problem and offer the solution of an additional oven.

“Through financing the asset, the baker doubles production and profits without

BUSINESSES LOOKING TO INVEST IN NEW ASSETS What businesses are looking to purchase in the three months from March 2021

IT/office equipment, including hardware and software

34%

Other types of vehicles, equipment, machinery or plant

15%

4%

Passenger vehicle(s), including SUVs

15%

2%

Light commercial vehicle(s), including utes, vans and minibuses

9%

2%

Electric vehicle(s), including hybrid and fully electric

8%

2%

Agricultural, construction or earthmoving vehicle(s)/equipment

6%

2%

Commercial real estate, including buildings or land

7%

1%

Truck(s) less than 4.5 tonnes that can be operated with a car licence

5%

2%

Truck(s) more than 4.5 tonnes that require a heavy vehicle licence

5%

2%

Medium and large bus(es) with more than 12 seats that require a bus driver licence

4%

2%

9%

Source: ACA Research Business Sentiment Tracker

“The first step towards diversification of your business is education. Brokers need to be skilled to a level where they can identify opportunities to assist their clients” Blake Buchanan, Specialist Finance Group having to dip into capital to fund the purchase,” he says.

Depending on the asset class, it should not be too difficult for brokers to access providers and information, Buchanan says.

Nevertheless, the requirements for simple asset transactions usually involve less work than a home loan – though for different items more work is often needed.

“Purchasing a vehicle that you use to get to and from jobs is vastly different to, say, purchasing a plane or special purpose vehicle,” he says.

Funders’ changing appetite pushes SMEs to non-banks According to another experienced commercial broker, education is key to success in this sector. Managing director of Atlas Finance Matt Atkin explains that having the ability to read and understand financials and then present the deal to the right lender takes time and is different to what most mortgage brokers do on a day-to-day basis.

From his perspective, asset and equipment finance has not changed a great deal because of COVID. While he saw a spike in

clients and accountants wanting to raise capital early on, that evened out, and Atkin found that there were enough other working capital products to achieve the same thing.

The biggest change in the space was funders’ appetite for risk.

“Many pulled their streamlined products, which meant that brokers without the necessary skills struggled. It also blew out the turnaround times as funders had to change their processes and upskill their people whilst having them work remotely,” Atkin says.

This also meant he saw a rise in non-bank lenders taking on more risk but at a higher margin. This is backed up by research from Scottish Pacific, which showed that almost a quarter of SMEs actively diversified their funding base to fund new business growth using non-banks.

“I believe this is another positive for the industry as SMEs now have access to funds across a range of lenders at fair rates,” Atkin says.

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FEATURES

COMMERCIAL LENDING GUIDE

MORE MORTGAGE BROKERS THAN EVER WRITING COMMERCIAL LOANS 5,000 4,500

4,486

4,539

Oct 19Mar 20

Apr 20Sep 20

4,000 3,500 3,000

3,617

Oct 17Mar 18

Apr 18Sep 18

3,481

3,670

2,932

2,500

2,647 2,374

2,000 1,500

3,668

1,673

1,641

Apr 15Sep 15

Oct 15Mar 16

1,000 500 0 Apr 16Sep 16

Oct 16Mar 17

Apr 17Sep 17

Oct 18- Apr 19Mar 19 Sep 19

Note: Represents commercial brokers as those mortgage brokers who had written a commercial loan through their aggregator’s panel during the period. Mortgage brokers who solely wrote loans

direct with lenders are not included.

Source: MFAA Industry Intelligence Service, 11th Edition

Diversified broker business broadens client base Atkin knows first-hand how a diversified offering can benefit a broker’s business.

After setting up Atlas Finance with other equipment finance specialists, the brokerage decided to expand into residential mortgages and commercial insurance.

“The diversified offering was one of the reasons our business weathered the storm in 2020. We can offer our referral partners and clients solutions and insights that most others cannot, because we have such a wide set of skills in our business,” he says.

“The broking market has many capable people, but we are trying to differentiate

30

“[Some people spoke] about JobKeeper being the only thing keeping them afloat, but then others were booming, such as mortgage and finance brokers” Blake Buchanan, Specialist Finance Group ourselves by building a business that has scale to be able to service a large, diversified client base. We cannot do this without a broad offering.”

Five months into 2021, Atkin remains positive about Australia’s economic recovery.

Funders are lending again, but it’s expected that the challenge for many clients will be to

convince funders that they can afford to service new debt when their 2020 numbers don’t support it.

“Many of the funders are saying they will be commercial where possible, but time will tell. Access to capital will play a huge part in Australia coming out of the COVID recession,” he says.

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DEBTOR FINANCE AN ATTRACTIVE DRAWCARD FOR SMEs Many businesses are looking to grow in 2021 but are cautious about taking on more debt. Debtor finance could be the perfect solution REASONS SMES NEEDED FUNDING IN 2020 Of the 46% of SMEs who sourced new types of funding in 2020, the most common reasons they needed it were:

31%

wanted to develop new products and services to diversify revenue

24%

needed funding to buy new or replacement equipment or machinery

21%

felt the need for increased cash reserves

20%

had to refinance existing loans

15.5%

found traditional bank funding was unable to meet their business needs

7%

could not rely on equity in their home to fund business requirements Source: Scottish Pacific, SME Growth Index

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RESEARCH HAS highlighted the resilience of small businesses across Australia as more owners seek finance to invest and grow. But while Scottish Pacific’s SME Growth Index in March showed a strong bounce-back in business confidence, there were still concerns about the difficulty of accessing finance.

One in four businesses had cash flow issues after being declined for a lending product, one in five were planning to make arrangements with the ATO to manage their cash flow, and one in four SMEs were unsure of how they would recover.

Figures from CreditorWatch show that one of the problems many businesses have had to navigate in the past year are lengthy

(+49%), construction (+29%), and professional, scientific and technical services (+25%).

Sectors that have seen a reduction in overdue payments are accommodation and food services (-57%), electricity, gas, water and waste services (-28%), retail (-23%) and manufacturing (15%).

One solution for these businesses is debtor finance, also called invoice finance, which is a type of funding that boosts cash flow by giving businesses access to funds that would otherwise be tied up in their outstanding invoices.

“Unlike a loan, with debtor finance business owners don’t actually take on debt

“Debtor finance puts to work assets that are already in a business, giving owners peace of mind that their personal assets like the family home are not at risk” Craig Michie, Scottish Pacific payment times. Although business confidence is increasing, some industries are still in worse positions than they were a year ago in terms of overdue payments.

Hardest hit is the healthcare and social administrative services sector, which saw an increase of 140% in overdue payments from March 2020 to March 2021. Other badly hit areas are administrative and support services

or have to make repayments; they in effect get early access to money they’ve already earned,” says Scottish Pacific senior executive Craig Michie.

“Debtor finance puts to work assets that are already in a business, giving owners peace of mind that their personal assets like the family home are not at risk.”

It provides a line of credit secured against

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LATE PAYMENT TIMES BY SECTOR Number of days payment is overdue, by industry

Mar 2020

Mar 2021

80 70 60 50 40 30 20

Other services

Arts and recreation services

Healthcare and social assistance

Education and training

Public administration and safety

Administrative and support services

Professional, scientific and technical services

Rental, hiring and real estate services

Financial and insurance services

Information media and telecommunications

Transport, postal and warehousing

Accommodation and food services

Retail

Wholesale trade

Construction

Electricity, gas, water and waste services

Manufacturing

Mining

Agriculture, forestry and fishing

10 0

Source: CreditorWatch

trade receivables – the money a business is owed – and the business can access up to 95% of the value of their outstanding invoices. This allows business owners to take on new customers, invest in new equipment and staff, and negotiate better terms with suppliers as they have the cash to pay them earlier.

Businesses unwilling to take on new debt Scottish Pacific’s SME Growth Index found that business owners’ intentions to fund growth in 2021 by using banks was at a record low, and their intention to use nonbanks was at a record high.

Due to the uncertainty and business conditions brought about by COVID-19, Michie says small business owners did not want to take on more debt last year, and he expects this to continue in 2021.

“This debt reticence provided a great opportunity for many businesses to try debtor finance for the first time. Being able to fund opportunities using assets already in the business was an attractive drawcard for many SMEs in 2020 and remains so,” he says.

With business owners keen to get back to ‘business as usual’, demand has picked up and activity levels have risen over the past few months.

A big opportunity for brokers in the year ahead is in businesses looking to restructure.

ScotPac’s SME Growth Index showed that two thirds of small businesses are making plans to restructure in 2021. In anticipation of increased demand, the non-bank is working with brokers and other advisers.

“The fact that 66% of small businesses plan to restructure is massive, and it provides a perfect opportunity for brokers to

initiate discussions with their SME clients,” says Michie.

He encourages brokers to talk to their clients about the changes they are looking to make in the business, how this will impact their working capital needs, and their options for financing the business if there are shortfalls.

Many SME owners do not realise they can use business assets, such as stock, equipment, outstanding invoices and commercial property, to keep their family home out of the funding equation.

“Diversifying into working capital finance with ScotPac can open up many new opportunities for mortgage brokers, as we can fund their clients right through the supply chain using debtor finance and products such as asset finance (for equipment), progress claim finance and bad debt protection,” Michie says.

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FEATURES

COMMERCIAL LENDING GUIDE

Debtor finance opens doors to more opportunities

LOOKING OUT FOR BUSINESSES THAT NEED ASSISTANCE

Diversifying into debtor finance also provides brokers with additional revenue streams without the associated costs and upskilling that might come with financial planning.

Michie adds that helping businesses with debtor finance means the broker can then assist them further as they grow and look to purchase new equipment or property.

Unlike a mortgage application, there are no application forms to fill out, which means a broker can be as involved as they want to be. While there is a meeting to go over the financials, the broker can choose whether or not to be there, and whether or not they collect the financials and other details required, or leave it to the client.

Scottish Pacific provides training sessions, webinars and face-to-face events to help brokers understand the debtor finance

For any broker, it is important to know what solutions are right for their customers.

Michie says they need to work out if debtor finance is suitable for the client, and provides the following examples of scenarios that brokers should look out for.

Owner is reluctant to, or can’t, put up property as security Funds are needed urgently Business has outgrown bank funding limits Start-up with no trading history (the banks won’t consider them) Change in trading conditions or seasonal trading issues Business is dealing with rapid growth Management buyout and acquisition ambitions Succession planning Wants to take up import/export opportunities Business is in an industry with high wages or expenses and needs secure cash flow “If your clients are dealing with any of these scenarios, it’s worth investigating how debtor finance might solve their problems by unlocking the value tied up in their existing balance sheet assets,” Michie says.

“[There] are ‘hidden’ assets a business owner might not even realise they have at their disposal, and we work with brokers to help their clients see this” Craig Michie, Scottish Pacific market, as well as assess their clients. The non-bank is also currently beta-testing its new broker portal. Michie says the aim is to have approved lines of credit so that if a customer walks in needing $250,000 for their business, the broker can get a quick and simple approval.

“All our brokers really need to know is how to spot clients who may benefit from asset-based funding,” he says.

“Cash flow is the lifeblood of every SME. It can be hard for many small businesses to access bank funding – perhaps they haven’t got enough trading history, or don’t have or don’t wish to use personal property to secure business funding.

“From a single unpaid invoice to equipment or other business assets, these are

34

‘hidden’ assets a business owner might not even realise they have at their disposal, and we work with brokers to help their clients see this.”

As the economy continues its recovery and business owners look at how they can invest further, Michie says brokers will play an increasingly important role in helping them access funding.

He adds that it is important that brokers have conversations with their small business clients about how they can source funding to help them manage their cash flow, whether they’re looking for extra capital to replace JobKeeper funds, or to help them take advantage of growth opportunities.

“A final prediction is that the trend for small businesses to increasingly turn to nonbanks, tracked since 2014 in our SME Growth Index, will continue and strengthen,” Michie says.

“This makes it a great time for mortgage brokers to take a look at diversifying their income streams by offering debtor finance and other asset-backed finance products to their clients.”

ABOUT SCOTPAC ScotPac is Australia and New Zealand’s largest non-bank business lender, providing funding to small, medium and large businesses, from start-ups to enterprises exceeding $1bn in revenue. For more than 30 years ScotPac has helped thousands of business owners succeed by unlocking the value in their business assets. Whether a customer is purchasing stock, investing in vehicles and equipment, improving cash flow or accessing additional working capital, ScotPac can help.

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04/05/2021 5/03/2021 10:14:57 9:30:42 am AM

SPECIAL REPORT

Top Commercial

BROKERS 2021

CONTENTS

MPA celebrates the very best brokers in Australia’s commercial lending space

e.

5 3 3

Feature article .............................................. 38 Methodology ................................................ 39 2021 winners list ........................................

41

Last year’s winners ...................................... 41 Profiles .......................................................... 42

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0:42 AM

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04/05/2021 10:15:24 am

SPECIAL REPORT BUSINESS STRATEGY

TOP COMMERCIAL BROKERS 2021

Commercial brokers rise above challenges NO AREA of lending has been completely untouched by the effects of the COVID-19 pandemic, whether the result has been a substantial decrease in volume or a substantial increase. On the commercial side, several factors have impacted Australian businesses.

The lockdowns in the past year meant that retailers across the country had to close their doors, and when they reopened, continued social distancing restrictions required caps on the number of people on their business premises. Spending dropped, but only briefly. ABS figures show that retail spending soared in March 2020 due to panic-buying, plummeted in April as many shops closed their doors and people stayed inside, then bounced back up to

above pre-COVID levels in May, where they have remained ever since.

This does not reflect the entire picture, however. ACA Research’s Business Sentiment Tracker shows that 54% of SMEs reported lower revenue due to COVID-19 in March 2021. That figure has remained above 50% since the ACA’s first report in April last year.

The effect of the pandemic on business was different depending on the sector. While some traded incredibly well, like those in the industrial sectors, others struggled, such as hospitality and tourism.

White-collar businesses were also affected by the fact that many employees were required to work from home. This had a huge

TOP COMMERCIAL BROKERS: 2021 VS 2020

38

Value of top broker’s loans

Lowest loan value of brokers in Top 10

Number of loans written by top broker

2020 – $454,000,000 2021 – $543,247,000

2020 – $65,246,750 2021 – $56,670,800

2020 – 34 2021 – 37

The types of loans written by MPA’s top commercial brokers demonstrate the different needs of businesses in 2020, compared to 2019 impact on the commercial real estate sector.

By March 2021 Sydney’s CBD was only 50% occupied, according to the Property Council of Australia. Melbourne’s occupancy rates were much lower due to extended lockdowns in this city, with only 35% of CBD office space occupied.

While this means office vacancies are on the rise, brokers and lenders have also reported that many businesses that previously rented space are now able to buy commercial property, thanks to low interest rates.

The figures of this year’s top commercial brokers reflect the state of the market in 2020.

The types of loans written by MPA’s Top 10 demonstrate the different needs of businesses in 2020, compared to 2019.

Almost 35% of loans written by the Top 10 brokers were for commercial property. This is almost a 10% increase on loans written for this purpose in 2019. The share of loans for

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FROM THE SPONSOR

On behalf of La Trobe Financial we would like to officially congratulate the 2021 MPA Top 10 Commercial Brokers for achieving the industry’s most recognised and highly soughtafter honour for commercial brokers in Australia. This prestigious list recognises the highest-performing brokers and highlights the contributions they have made to our industry and within their own communities. As the industry’s top

performers, they have set a benchmark of excellence that can be celebrated and respected, especially on the back of a pandemic and a volatile market.

They have upheld a culture and set of practices that others can aspire towards.

At La Trobe Financial, our purpose since 1952 has been to provide financial solutions to underserved markets, and we therefore, now more than ever, are honoured to support this important sector.

“It is important for lenders to support brokers who are not familiar with certain products or situations and to encourage them to explore these options” Cory Bannister, La Trobe Financial

development finance has also increased, from 33% to 41%.

With the rise in these areas came a substantial drop in the share of SME loans. Twenty-one per cent of the loans written in 2019 by last year’s top commercial brokers were for SME lending, but this year SME loans make up just under 3% of loans written.

These figures are not entirely unusual, however. They are much more in line with the share of loans written in 2018, when SME finance made up almost 4% of loans, commercial real estate made up just over 35% and development finance 43%.

This is the biggest year for the ‘Other’ category. For example, 100% of one Top 10 broker’s loans were for goodwill finance. This type of finance is used by businesses such as pharmacies and medical and dental practices, where the lender is able to lend based on a

business’s goodwill and equipment rather than having to use their home as security.

Diversifying during COVID-19 Mortgage brokers have been busier than anyone expected during COVID-19, with high refinancing numbers, an influx of first home buyers, and customers needing help with deferred repayments or other assistance in dealing with the economic impact of the pandemic. Despite that, the number of mortgage brokers also writing commercial loans has increased.

The 11th edition of the MFAA Industry Intelligence Service report shows that, yearon-year for the six months to September 2020, there was an increase of almost 24% in brokers writing commercial loans.

There has been a continual rise in mortgage brokers expanding into commercial

Congratulations once again to these brokers for their significant achievement, and we wish them continued success with their cause to make a difference.

Cory Bannister Chief lending officer, La Trobe Financial

METHODOLOGY To find and recognise this year’s Top 10 Commercial Brokers, MPA invited brokers from across Australia to submit their figures for 2020. The online form asked for figures such as the total value of commercial loans settled, the number of commercial loans settled, and the proportion of loans in the following areas: commercial real estate, equipment and asset finance, SME lending, debtor finance, unsecured business lending and development finance. Brokers also supplied information such as the number of support staff on their team, their number of years as a commercial broker, and their aggregator details.

Aggregators were then required to verify the details submitted.

The final ranking of brokers is based on the total value of commercial loans they wrote in the 12-month period.

60 Average number of commercial loans written by this year’s Top 10, up from 51 $230,919,651.16 Average value of commercial loans written, up 24% 122 years Combined number of years as commercial brokers

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SPECIAL REPORT BUSINESS STRATEGY

TOP COMMERCIAL BROKERS 2021

country. The partnership team also helps new-to-commercial brokers find opportunities and solutions that they may not yet have identified or capitalised on.

TOP 10 COMMERCIAL BROKERS’ LOANS BY SECTOR

34.9%

Commercial real estate

Adaptability crucial to success

Equipment and asset finance

0.7%

Debtor finance

0.3%

Unsecured business lending

0.8%

SME finance

2.8% 41%

Development finance Other

19.5%

There has been a real push to educate more brokers on the benefits of diversification and how to go about offering wider solutions lending since the MFAA began reporting these figures. In the April to September 2015 period, there were just over 1,600 diversified mortgage brokers, but the figure now stands at 4,539.

In its report, the MFAA comments that the challenging home loan market has encouraged brokers to expand their portfolios in response to uncertainty, fluctuations and instability in this area due to the impact of COVID-19.

Over the last few years brokers have become more aware of the importance of a diversified business, but more recently there has been a real push to educate more brokers on its benefits and how to go about offering wider solutions.

Aggregators, lenders and industry associations like the MFAA have been working to support brokers who are interested in diver-

40

sifying. With restrictions limiting in-person events, they have turned to digital training sessions, which are much more accessible.

“It is important for lenders to support brokers who are not familiar with certain products or situations and to encourage them to explore these options, assisting them with growing their business,” says Cory Bannister, La Trobe Financial’s chief lending officer.

The non-bank has a 140-strong loan underwriting team on hand to support brokers, so if something comes up during the process that the broker is not familiar with, they can help them along the way.

Particularly helpful for those mortgage brokers who have not previously ventured into any form of commercial lending is the highly personalised relationship service model provided by La Trobe Financial’s 44 client partnerships managers across the

Mortgage brokers who have already diversified into commercial lending are seeing the benefits. This year’s list of Top 10 commercial brokers is a mix of those who only offer commercial lending and those providing both residential and commercial solutions.

Offering a customer more than one type of service also helps brokers compete against others in the market. Residential mortgage brokers risk losing their clients to brokers that can assist them with both home loans and SME loans.

Speaking to MPA Online recently, Specialist Finance Group’s Victoria state manager, Marcus O’Brien, said embracing change was crucial to success, and that meant being adaptable.

“What I’ve seen over the last year and a half is brokers who have been more adaptable to change, who have been quite resilient, particularly through COVID-19, have actually done quite well,” he said.

“The brokers [who get] on board quicker have had very successful results and maintained their momentum, if not actually increased it during the last short period.”

The number one broker in this year’s Top 10, Adrian Lee from Catalyst Debt Capital, offers a complete service, from home loans to commercial loans, to financial advice and debt funding services. With his ability to help such a wide range of clients, including individuals, families, small businesses and large corporates, it’s no wonder he wrote almost double the volume of the broker in second place.

After a whirlwind year, it is incredible to see the 2021 numbers, and particularly impressive to see brokers returning with bigger and better results. Congratulations to everyone who made it into MPA’s Top 10 Commercial Brokers list this year.

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Top Commercial BROKERS 2021

1

Adrian Lee CEO Catalyst Debt Capital Telephone: 1300 411 455 Email: info@catalyst.com.au Website: www.catalyst.com.au

2 3

Domenic Lo Surdo Joint managing director Stamford Capital Australia

Jean-Pierre Gortan Managing director Simplicity Loans and Advisory

6

Melissa Ashcroft General manager AAA Mortgages

7

Daniel Green Director Green Finance Group

8

Kevin Wheatley Managing director Bayside Residential and Commercial Mortgages Telephone: 02 8355 2008 Email: kevin@baysidecm.com.au Website: www.baysidecm.com.au

Telephone: 1300 022 022 Email: enquiries@simplicity.net.au Website: www.simplicity.net.au

4

Ben Wardley Director The Brokerage

5

Mark Churchill Managing director Allfin

9 10

Jason Arnold Managing director Quattro Finance and Advisory

Marwan Rahme Managing director Kanebridge Capital

TOP COMMERCIAL BROKERS 2020 1

Adrian Lee, CEO – Catalyst Debt Capital

6 Thomas Waltham, Managing director – Capital United

2 Jean-Pierre Gortan, Managing director – Simplicity Loans and Advisory

7 Jason H Fallscheer, Director – Pitcher Partners Finance

3 Ben Wardley, Director – The Brokerage

8 Cameron Perry, Director – Perry Finance

4 Daniel Green, Director – Green Finance Group

9 Ren Wong, CEO – N1 Loans

5 Jason Arnold, Managing director – Quattro Finance and Advisory

10 Daniel Kwan, Director – GM Capital Solutions

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SPECIAL REPORT BUSINESS STRATEGY

TOP COMMERCIAL BROKERS 2021

KEVIN WHEATLEY

D

espite experiencing the “worst year” he has ever seen, Bayside Residential and Commercial Mortgages managing director Kevin Wheatley fought his way through it to join the ranks of the top commercial brokers again in 2021.

Bayside not only writes commercial loans for Australian businesses but has clients offshore as well. Wheatley says many of the global projects he is involved in were heavily impacted, and Bayside saw contracted revenue streams of up to 50%.

Nevertheless, he is still among the best commercial brokers in Australia and managed to write $138,182,798 in commercial loans in 2020.

Wheatley says his continued success is down to the consistency of his advice to clients, meeting their objectives, and having their trust. Being in this year’s list is a “fabulous achievement”, he says.

“There are a lot of great commercial brokers out there, and to be able to stand alongside those individuals that work so hard in achieving results for their own clients,” he says.

That hard work can often take not just weeks but months. Wheatley and his team

42

Managing director, BAYSIDE RESIDENTIAL AND COMMERCIAL MORTGAGES

have spent 12 to 14 months in some cases on finding the right solution for their clients.

But he says this just cements the client relationship even further.

“As you run through that due course you actually have the benefit of building a stronger relationship with your client because they can see the laborious hours that you put in,” he says.

“They’re long hours, and you never complain about it, you just keep working with those individuals, and I think it’s a great achievement for any of those brokers that have made the Top 10.”

Offering both residential and commercial mortgages, Bayside supports clients with a full range of financial solutions.

Wheatley started the brokerage in 2009 as a “one-man band”, eventually growing the business off the back of long nights and early mornings. Today, the brokerage has five fulltime staff but benefits from strong partnerships with law firms, meaning there is a wider team of around 25 people to offer a full holistic service.

“Through COVID we’ve had to lean on insolvency advice and support very much on a monthly basis, but we have this collab-

oration of professional people that supports my business, and that works twofold,” he explains.

“When my clients get into financial trouble, they provide the support; and in collaborating with lawyers and insolvency practitioners, where there’s funding opportunity available we can raise the capital generally through the private sector capital markets and get those people out of the difficult insolvency situation they’re confronted with and back on track.

“It’s this wonderful collaboration of these wonderful teams around you that’s really been a point of difference to our business.”

$138,182,798

Total value of loans settled

16

Total number of loans settled

12

Number of years as a broker

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JEAN-PIERRE GORTAN

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aintaining a spot in the Top 10 despite the difficulties of the last year, Jean-Pierre Gortan believes his success comes from building his business around the ethos of “always putting the customer first”.

Unlike many of the other brokerages in the 2021 list, Simplicity Loans and Advisory offers only commercial lending. This means that COVID-19 made for a trying time for the business, with lenders concerned about asset values and pausing a lot of their transactions.

Gortan says it was almost “a blessing in disguise”, in that it not only enabled them but forced them to become better at what they did and to form relationships with lenders they had not done business with before.

“We had that pressure to solve clients’ issues during a very uncertain time, but I think ultimately it’s made us a better business,” he says. “It was extremely stressful at the time for us and all the staff, but we’ve come out of it really well. Our results are off the back of a very strong latter six months of 2020.”

Eighty per cent of Gortan’s business in 2020 was in commercial property, with the other 20% in development finance. He says the business prides itself on delivering value,

Managing director, SIMPLICITY LOANS AND ADVISORY

not just for clients but for referrers as well, and this has to be distinguished from price.

With its longer time frames and potential future opportunities, commercial lending is much more focused on the customer relationship. Gortan puts relationships ahead of fees, believing a suitable outcome for the client is better in the long term.

“Our aim internally is to deliver effectively the best transaction we can, rather than gouge a client for commissions and things like that, because we’re looking to do the next transaction and to form a long-term relationship with each of these people,” he says.

A keen advocate for education in commercial lending, Gortan is part of the MFAA’s commercial and equipment finance forum, which was put in place to help the industry upskill. Commercial lending is a “very different skill set” to home lending, he says, and the underlying issue is training and experience.

“If you’re looking to do commercial lending, you need to do training, you need to immerse yourself in industry events,” he says.

But there’s an alternative for those who don’t want to diversify. “If that’s the case, align yourself with someone that can actually fulfil those transactions. It serves as a defensive

strategy to align yourself with someone you can trust. At the end of the day a commercial broker in most instances will do residential lending, and so you have to align your clients with, one, someone you can trust, and two, someone that’s not going to take the rest of your portfolio with them.”

He adds, “In future years my aim is to see other brokers within our business make the list. As the business matures and volumes increase I am taking more of a mentoring role for our staff and their pipelines. Nothing would please me more than to drop out of the list but see two to three of our key team members join these rankings.”

$310,072,125

Total value of loans settled

22

Total number of loans settled

10

Number of years as a broker

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SPECIAL REPORT BUSINESS STRATEGY

TOP COMMERCIAL BROKERS 2021 ADRIAN LEE

CEO, CATALYST DEBT CAPITAL

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his year’s top commercial broker wrote more than half a billion dollars in 2020, increasing his total loan value from the year before by 20%, with just three more loans written.

Coming in at number one for a second year running, Catalyst Debt Capital’s CEO, Adrian Lee, wrote 65% of his loans in development finance and 35% in commercial real estate.

Like most brokers in the sector, Lee spent almost three months during the lockdowns in caretaking mode: clients needed to keep on top of the rapidly changing credit market, and the brokerage’s role shifted from funding and arrangements to a more advisory and support role.

“The new enquiry levels at one point were so low we repurposed our entire busi-

of services, from residential mortgage broking to corporate debt advisory and direct lending. It has a wide client base, from first-time residential investors to leading AREITs and ASX-listed businesses.

The advisers and management team are therefore all highly experienced in real estate debt markets, funds management, banking and technology.

On top of the team’s experience and dedication to reaching its targets, Lee says the brokerage’s investment in business process improvement is a contributor to its success.

“We have some extremely experienced, talented and hard-working people in the business, and our in-house focus on continually re-engineering our process to improve customer outcomes is starting to

“After more than a few ‘pizza nights’ in the office over the past few months, we have managed to not only achieve our targets but exceed them” ness into a logistics centre to source and deliver 100,000 K95 medical masks to hospitals around Australia,” Lee says.

While this was a rewarding experience, when the wheels started to turn again, the team needed to make up for the down time.

For a moment, Lee believed the gap between the brokerage’s year-to-date and annual growth targets seemed impossible to bridge.

“After more than a few ‘pizza nights’ in the office over the past few months, we have managed to not only achieve our targets but exceed them,” he says.

Catalyst Debt Capital is a holistic financial services business that provides real estate capital solutions via a diverse range

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enable some really exciting initial productivity and market insights, and has helped us redefine the way we source solutions for our clients,” he says.

Additionally, the market was surprisingly buoyant: overall lending activity increased by 30% in January, clearance rates have risen by 90% at times, and property prices have reached considerable highs.

“I don’t think anyone predicted just how buoyant the market would be,” Lee says.

“Confidence is high, and it’s almost as if everyone is playing catch-up. We’ve broken internal records month after month since July last year.”

If anything, Lee says he wouldn’t mind

the market easing a little bit and normalising into more sustainable business, but it has still been great for business.

In the commercial real estate space, Lee has seen an increase in client enquiries for the repositioning of commercial office assets. He puts this down to reduced yields in the sector prompting investors to bring forward plans to improve or add value to their existing assets. The hotel market has also seen a pick-up in activity.

What Lee found his clients needed the most from him, however, was confidence.

“Experienced clients understand that market shocks equate to opportunity, but capital flows can change very quickly. Our clients needed us to accurately advise on the rapidly evolving state of play and provide certainty of capital from us or other highquality funders,” he says.

Looking back at 2020, Lee says one thing stands out in particular.

“There were many lessons on offer in 2020, and whilst this might sound a little sentimental, professionally, I have learned that nothing is truer than this: if you take a view that your existence is to help clients, and you line up everything else behind that, almost everything will eventually fall into place,” he says.

$543,247,000

Total value of loans settled

37

Total number of loans settled

8

Number of years as a broker

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Adrian Lee (left) receiving his trophy from La Trobe Financial chief lending officer Cory Bannister

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FEATURES

MENTAL HEALTH

Why wellness programs may fail Supporting the mental health and wellbeing of employees has been crucial over the past year as they’ve coped with the confusing landscape of COVID-19.

But while businesses often turn to certain wellness programs to support their staff, this is not necessarily the right move, writes business coach Repa Patel

ACCORDING TO ABS data, 45% of Australians between the ages of 16 and 85 will experience a mental health condition in their lifetime. One in five Australians has taken time off work in the past 12 months due to feeling mentally unwell (stressed, anxious, depressed or mentally unhealthy).

The ever-accelerating pace of change, the bombardment of continuous information, and the pressure to ‘be on’ 24/7 can quickly overwhelm us and cause stress. This has been heightened by the uncertainty of the ‘new next normal’ as we navigate the COVID environment.

Wellness programs as a burnout solution In an attempt to alleviate stress and stave off burnout, many Australian organisations are now offering corporate wellness programs to their employees. The tools and services vary from discounted gym memberships and access to mindfulness and health apps, to basic medical tests such as blood pressure checks.

The main aim of these programs is to support employees in becoming healthier and managing their mental health. There are many studies that claim to prove that wellness programs deliver some of these benefits.

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FEATURES

MENTAL HEALTH

Corporate wellness programs that focus entirely on individual employee wellness are ignoring one key factor: poor leadership leads to lower employee wellbeing However, despite these studies, mental health issues, inflammatory diseases (high blood pressure, type 2 diabetes) and obesity are rising.

In a recent discussion with a well-known Australian brand that offers an award-winning wellness program, the general manager of HR confirmed that the mental health of their workers had declined despite several years of offering the program. Uptake of the program was almost universal in the organisation, yet the mental wellbeing of their employees was declining.

This is supported by a study conducted in the US in 2018. The Illinois Workplace Wellness Study of 5,000 people showed that: • after one year, workplace wellness did not change an employee’s health behaviours • employees who participated in the program were healthier before joining the program (which may explain some of the findings of the studies that showed benefits delivered by these programs)

Why wellness programs may not work As the Illinois study shows, often the people that choose to participate in wellness programs are already healthy and have strong internal motivation to enhance their wellbeing.

There is also another factor that contributes to the failure of a wellness program: it aims to treat the symptoms (stress and burnout) rather than the cause. In my experience, it is workplace culture that causes stress. Many studies show the impact (good and bad) of workplace culture on business performance. In the 2019 banking royal commission, Commissioner Kenneth Hayne

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found clear failings in culture and governance that led to poor conduct on the part of some financial services providers.

Finally, in an increasingly VUCA (volatile, uncertain, complex, ambiguous) world, leaders are struggling to manage their own stress levels, and this can have a negative impact on their teams. Studies have shown that poor leadership increases employees’ risk of sickness and risk of suffering a heart attack.

Corporate wellness programs that focus entirely on individual employee wellness are ignoring one key factor: poor leadership leads to lower employee wellbeing.

What works to improve employee wellbeing?

Supporting your leaders in managing their own stress and curating a positive work culture are the two biggest impacts you can have on employee wellbeing. In practice, this means:

1

Increasing employee engagement is key

There’s a strong link between how engaged employees feel and their performance and wellbeing. Research shows the characteristics of a positive culture are: • genuinely caring for work colleagues as you would for friends • being kind and compassionate when your colleagues are suffering • avoiding blame and forgiving mistakes • inspiring each other at work • emphasising meaningfulness of the work • treating each other with respect, trust, integrity and gratitude

It’s important to help your team find meaning and purpose in their work

2

A study by psychologist Andrew Steptoe and his team at University College London looked at 7,300 adults over a very long period of time. It found that the more meaning and purpose they had in their lives, the more positive changes they experienced in the following four years. This included physical, social, psychological, emotional and economic prosperity.

3

To lead others, you must lead yourself

Leaders need to find their own meaning and purpose in their work. If they put their oxygen mask on first, they are then able to help their team. Leaders with a strong sense of purpose (beyond financial gain, status and personal interest) create strong and sustainable performance cultures through high engagement.

The CEO and senior management team must be open to evidencebased solutions rather than following industry trends

4

In my top Australian brand example above, the organisation accepted that their efforts at increasing wellbeing were failing.

The starting point for elevating employee wellbeing is to support your leaders in first solving the underlying problem of their own stress, and then in leading more authentically and compassionately.

And, of course, this starts with the board, CEO and executive team.

Repa Patel GAICD is an author, facilitator, executive coach and former board chair working with leadership teams and boards to increase engagement, customer satisfaction and business growth.

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FEATURES

CULTURE

The impact of cultural values Workplaces today are filled with people from different cultural backgrounds.

Author and cultural intelligence specialist Gaiti Rabbani explains how your cultural values impact your leadership style

LEADERSHIP IN today’s global world is a multicultural challenge laden with complexity. Whether you’re leading across geographical borders or navigating increased diversity at home, one of the key challenges is to align people of different cultural backgrounds to work together to fulfil the same objectives.

It is fair to say it would be impossible to master all the norms and values of the many cultures that most people encounter on a daily basis. The good news is that, whether you are managing a diverse team in Australia, strategising entry into new markets in Asia or reporting to shareholders in Europe, you don’t have to learn the intricacies of each culture. Becoming aware of the cultural values that shape your leadership style, the variations that exist among cultures, and how those differences play out is the key.

Culture is a filter people use to perceive and interpret the world around them. This filter is mostly subconscious. By developing cultural intelligence (CQ) we become more

50

aware of our assumptions and how they can impact our ability to motivate and influence others.

We explore three cultural values here that will help you uncover your leadership style and consider ways in which you may adapt your approach to better influence, motivate and engage your stakeholders.

Discussion and debate and even explicit expression of disagreement are the norm. In contrast, in India, China and South Korea, rarely would an individual openly communicate a difference of opinion when seniors are present. A convention of hierarchy holds strong in such cultures where leaders and elders within the family, community and

A convention of hierarchy holds strong in such cultures where leaders and elders within family, community and business are held in high regard Context. What is your communication style? Is it explicit, direct and clear, or is your communication style more indirect, emphasising harmony?

Consider that in Australia it is culturally acceptable, in fact expected, that individuals should express their views in the workplace.

business are held in high regard. The culture is one of promoting harmony, and silence represents respect.

To obtain viewpoints from across your team, you may consider offering alternative ways for them to share information with you.

By scheduling a private conversation before

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or after a team meeting you can solicit their input that may otherwise not be presented if they are averse to direct conflict or prefer to stay quiet to respect the formal or even informal hierarchy within a group.

Authority. Do you adopt a flat, egalitarian approach to leadership, or do you practise a top-down, hierarchical leadership style?

Typically, and representative of the Anglo culture, a leader in the US would encourage shared decision-making, actively seek contributions, and ultimately work towards consensus within a team. On the contrary, in the Arab culture, there is generally a hierarchical structure that emphasises differences in status. It is mostly expected that superiors will make decisions.

Does your team connect with your approach? For example, you may strive to empower people but recognise that not everyone seeks to be empowered. Some people prefer to follow a chain of command.

Consider how your team members demonstrate initiative or approach decision-making and whether this varies across the cultural groups you interact with. Is there a need to introduce decision-making guidelines or authority matrices to consider and create clarity for those with different styles?

Achievement: Cooperative versus Competitive. Do you prefer to achieve results collaboratively, or are you more competitive?

Western business is largely structured around competition, with a strong task-first orientation. Communication often serves the purpose of sharing information or updates and checking in on progress. Collaborative cultures, such as can be seen in Latin American cultures and the Arab world, value establishing and nurturing relationships before tackling the task at hand.

Do you allocate time for personal check-ins at the start of a meeting, or do you prefer to get down to business first and see if there’s

time left? How might you need to adapt in order to increase your influence and ability to motivate teams, especially in this time of restricted travel when we are reduced to lessthan-ideal communication channels?

Given that few of us are exact representations of our national cultures of origin, it is essential to dig below the surface to avoid the instinctive trap of stereotyping. By understanding your cultural preferences versus those of others you interact with, you can develop insights that will bridge previously obscure differences with those of other cultural backgrounds.

Gaiti Rabbani is a cultural intelligence specialist, an executive adviser of people and culture and founder of Rabbani Collective, a company that enables businesses to harness the potential of their people.

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FEATURES

LEADERSHIP

Why uncertainty needs a mindset shift Changing the way leaders think and act can have a big impact, particularly as we emerge from one of the most uncertain periods of our lives. Renée Giarrusso writes about the benefits of a ‘Gift Mindset’

POSITIVE PSYCHOLOGY research shows that 40% of our happiness is determined by how we think and act. It is possible to achieve an increase in happiness. This has a flow-on effect that can help us deal with challenges and uncertainty – a key reason we need to adopt a ‘Gift Mindset’.

Certainty is an innate core human need, and never before has there been so much uncertainty in the world, in the workplace and about our future. With hybrid working environments and remote working arrangements now the norm, this has shifted the way we need to lead, connect and collaborate as leaders.

What is a Gift Mindset?

For many years I have embraced the Gift Mindset and educated clients to bring this into their workplace culture. The foundation of this mindset is to embrace, not resist, the challenging and positive experiences we encounter. Everything we go through offers a gift if we are willing to unwrap it and use the lessons to progress ourselves and others forward. Too often, in a leadership position, we get caught up in the ‘doing’, and the ‘being’ becomes lost, with a diluted focus on people and instead a focus on process and progress.

Our biggest lessons come from embracing our challenges and successes. In times of uncertainty this response can be stifled as we are juggling so many balls, such as strategy, structure, innovation, systems, skills, people, and achieving results and growth. At times we can glide through uncertainty without acknowledging and sharing the gifts of how we achieved this.

Drivers of a Gift Mindset The drivers that can lead us to adopt a gift mindset are: • challenging situations or people • positive situations or people

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When leaders assume a Gift Mindset, they can approach situations in their lives with deeper self-awareness, viewing whatever they are faced with, good or bad, as an opportunity to progress. Seeing the gift in any situation changes our thoughts, feelings, and therefore the way we approach our tests and triumphs as a leader. We can use these lessons to learn and embrace uncertainty as an opportunity to build resilience and grow and strengthen our leadership.

Gifts come in many forms. Sometimes they are hidden or buried in the past. The 2020 pandemic is an example of a situation presenting gifts that both challenge and provide opportunities to look at uncertainty in a different way.

Our gifts or lessons fall into 12 key areas or soft skills that, once shared, we can deepen and develop. The 12 gifts include resilience, growth, change, forgiveness, courage, re-energising, empathy, connection, contribution, gratitude, curiosity, and optimism.

Strong leaders embracing a Gift Mindset will unwrap and deepen lessons in many of the 12 gifts, including resilience, courage, empathy, growth, change, curiosity, and optimism. By being aware of and accepting the lessons, then actioning these by sharing as leader, you cannot help but encourage others to do the same. Sharing the lessons we learn through our experiences not only empowers us and can help create future leaders; it can also be someone else’s survival guide and can create a culture of sharing and openness.

Why does a Gift Mindset matter?

We all deal with uncertainty in different ways. Some leaders bury their heads in the sand, some look at uncertainty as an opportunity for change, and some take it in their stride as one of the constants in life.

As a leader, if we choose not to learn from and share our lessons, we risk robbing the world of our insights or, worse, contributing

The pandemic is an example of a situation presenting gifts that both challenge and provide opportunities to look at uncertainty in a different way mindlessly to a world already heavy with distraction and clutter.

Never before have we lived in a such connected world but at the same time been so disconnected. Adopting a Gift Mindset and sharing your lessons can get you out of your own head and reinforce the gifts you have to share. It gives you the ability to grow others through your lessons. Contribution is a human need, as is connection: we are all wired to connect. By adopting a Gift Mindset, you satisfy these needs, not only for yourself but also for those around you, and create a collaborative culture.

Vulnerability and courage The more open we are, the more vulnerable we become and the more likely others will listen and use our lessons as a survival guide. Strong leaders know this when dealing with change and working through times of uncertainty.

Brené Brown’s extensive research on vulnerability has brought to light its importance. We need to peel back the layers and understand our fears and feelings – these are connected to every success or challenge we experience. Future leadership belongs to the brave, and if this means sharing our

lessons, we have a compelling reason to do so. Courage is a skill set we need to foster and master. As Brown says, “the greatest barrier to courageous leadership is armour”.

Unwrap your gift to lead through uncertainty Following are a few common strategies and tools that the leaders we work with adopt as they lead through uncertain times: • Develop supportive relationships in and out of the workplace • Reframe uncertainty as an opportunity for growth • Foster an attitude of gratitude, and focus on what you do have • Dial up empathy by leaning into others and sharing the journey • Know what lights you up and motivates you, and tap into this regularly • Flip statements into questions to open up curiosity and new ways of thinking • Focus on what isn’t changing and what you can control • Be excited by uncertainty and what it could mean for the future As a leader, the way you lead through uncertainty comes back to what your mindset is and what you see, understand and action.

Disclosing our challenges and our successes to others can help create rapport and support deeper and more meaningful relationships.

In the process you can create a collaborative and connected culture, navigating what is an ever-challenging landscape of opportunity.

Renée Giarrusso, author of Gift Mindset, is a communication and leadership expert working with leaders, teams and organisations to energise mindset and accelerate leadership and communication.

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PEOPLE

BROKERAGE INSIGHT

A unique approach to partnerships After working as a mortgage broker for eight years, Ben Gregory decided to step out on his own and start a new business at the height of COVID-19. He talks to MPA about the risks he sees in the market and how the special partnerships he forms with other brokers help them with niche deals THE PATH TO PROTEGO Founder of Protego Finance Ben Gregory spent several years in the finance industry before he moved into mortgage broking.

2000

Started out in financial planning at NAB, where he worked for more than 10 years

2012

Joined Hage and Harris Financial Solutions as a financial planner and mortgage broker

2015

2020

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Expanded his experience over the next five years as a mortgage broker at Mortgage Choice, RAMS and Easy Approval

Founded Protego Finance

RATHER THAN chasing ‘vanilla deals’, the team at Protego Finance are all about helping clients who may be a bit more challenging.

Mortgage broker Ben Gregory says he doesn’t believe broking is simply about chasing the lowest rate or the biggest cashback offer; instead, it’s about assisting clients with all the complexities they face and helping them turn homebuying into an understandable, enjoyable process.

“As challenging as it can be some days, I wouldn’t have it any other way,” he says.

And it certainly has been challenging.

Protego Finance was founded in 2020, in the midst of COVID-19, when Gregory’s experience of working from home after the outbreak of the pandemic made him realise that he had all the tools and resources he needed to go it alone.

Based in South Australia, Gregory was

“I think we’ve been very lucky with how things have moved forward: the HomeBuilder and FHOG combined offer a strong deposit to our lower-priced market” Gregory has spent more than 20 years in the financial services industry since joining it in 2000 when he wrote his first home loan as a banker at one of the big four. In 2007 he moved into financial planning and added mortgage broking to his arsenal in 2012.

In 2015 Gregory stepped back from financial planning and focused purely on mortgage broking – and has been a mortgage broker ever since.

joined by a part-time administrative officer and more recently by a new broker. Like Gregory, the broker came to Protego from a financial planning background, which he believes perfectly complements the type of complex business that the brokerage specialises in.

Protego Finance’s primary customer base is made up of first home buyers, low-income earners, low-deposit customers, and “anything

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Protego Finance founder and mortgage broker Ben Gregory (left) with new broker Joel Davis

“My doing these loans saves the brokers significant time, allowing them to continue to focus on the rest of their business” else that is more than a vanilla deal”. Gregory says a lot of his customers are nervous clients who have never tried to get a mortgage before or have been told they are too difficult to get a loan for.

Helping these customers has been vital during COVID-19, and although Gregory found it the perfect time to open up a new mortgage broking business, he admits that the pandemic has created some interesting challenges to work through, particularly in terms of what the lenders will and won’t accept.

“In SA I think we’ve been very lucky with how things have moved forward: the HomeBuilder and FHOG [First Home Owner Grant] combined offer a strong deposit to our lower-priced market,” he says.

“This has obviously moved a larger portion of clients towards construction loans, as opposed to buying established homes. I feel it has also reduced the number of investors we are currently seeing.”

A unique difference for Protego Finance is

its active engagement with other mortgage brokers. With his significant experience of working with lenders that other brokers might avoid, Gregory offers his services to other brokers who are looking to outsource challenging loans but still want to keep a relationship with their clients.

“My doing these loans saves the brokers significant time, allowing them to continue to focus on the rest of their business, secure in the knowledge that they have someone in their corner looking after their client,” he says.

“With this approach the clients are then also much more open to refinancing back with their original broker in a few years, as they see it as their broker bringing in a ‘specialist’ to solve a one-off problem.”

Moving forward, Gregory feels that lender opportunity is a risk. He says the ongoing restrictions added to lending policies by different institutions is in turn leading to brokers having fewer ‘niche’ opportunities to assist clients.

PROTEGO FINANCE AT A GLANCE Founder: Ben Gregory Location: Adelaide Year founded: 2020 Services: First home buyers, low-doc loans Number of employees: 2

“This creates the risk of being unable to assist our clients where traditionally we may have been able to,” he says.

Specifically for Protego Finance, growth is “very much on the agenda” over the next 12 to 18 months. Gregory says bringing on his new broker has created the opportunity and capacity to continue to service not only his current clients and referral partners but also to grow the brokerage’s footprint.

“I’m really looking forward to the challenges that new referral partners will bring to the table in 2021,” he says.

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PEOPLE

OTHER LIFE

TELL US WHAT YOU GET UP TO Email rebecca.pike@keymedia.com

“My dad had a BMW when I was a kid, a nd I just loved the shape of that car”

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Number of BMWs John Mavroudis has owned

8

Age at which his love affair with cars began

1980–90 Era of the BMWs he purchases

AN EYE FOR BUYING WELL For MoneyQuest’s John Mavroudis, collecting and trading vintage BMWs is just one of many passions AMONG SEVERAL hobbies enjoyed by MoneyQuest Murrumbeena broker John Mavroudis is his passion for collecting BMWs. In the last 10 years he has owned about a dozen of them, and keeps them in car spots at the office as well as at home, where thankfully he has a farm with enough space to store his many cars.

Mavroudis says he has an eye for buying well and usually hears about cars

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for sale through word of mouth or at car sales where people don’t realise their true value – and then he’ll just hold on to some and sell others at auction.

“I don’t do them up; I like cars to be original, and I don’t like muscle cars or loud cars. I just like the older prestige cars,” he says.

“I won’t drive them every day, but maybe once a week, once every couple of

weeks, I’ll go for a little cruise and remember what it feels like to drive a proper car that doesn’t have all of the technology.”

Mavroudis also likes running, jet-skiing, 4WDing, gardening, and flying planes. He applied for his private pilot’s licence several years ago but never completed it.

However, “it’s on the to-do list” to eventually finish, he says.

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