Where does your Business sit on the Finance divide?

Alistair Wood
Jul 12, 2019
3 min read

The landscape is changing what does it mean for your business?

Welcome to the BRW Advisory Newsletter. We have all witnessed change this year, as we do every year. In banking services these changes manifest themselves in the form of more caution from the major Banks, and an increasing number of players in the non-bank market.

The economic news isn’t wonderful, but isn’t disastrous. The shift of Aussie lending rates downwards, has probably taken most by surprise given the relatively big shift.

An RBA rate of 1% is unprecedented, the question is, whether what at best will translate into a 12.5% reduction in Residential Mortgage costs, is sufficient to turn around the falling prices in the major centres of Melbourne and Sydney. This coupled with the Liberal government being returned to power in Canberra, has already shown signs of at least stabilising the market.

We can point to local situations where our clients, in the last few weeks, have seen buyers return to the residential market, which in turn has had a positive effect on their own corporate business.

Nevertheless, there are a number of external factors that will play out over the second half of the year and have the ability to impact the local economy to a greater or lesser degree. These include the slowing China economy, Trade issues with the US issues for a number of countries, escalating Middle East issues particularly with Iran and the ongoing struggles of the UK to deliver Brexit.

The impact of the Royal Commission continues to be felt, but some of the anomalies that created counter-productive bank behaviour are beginning to be ironed out.

That said we do detect a ‘Them and Us’ divide opening up in the market.

What we mean by this is that we are seeing intense competition amongst the Banks for ‘Blue-chip’ propositions. For example, if you can keep your borrowing requirements for a property lend below 55% loan-to-value, you should, if other metrics are strong be on a borrowing rate ‘all-up’ of less than 3% inclusive of the 90 day BBSY rate.

If your proposition does not meet favour with the majors, then there are a raft of potential alternatives ranging from the second tier domestics, overseas banks, private lenders and the burgeoning availability of pools of money from new entrants. The pricing from these players, in our experience ranges from c.6% to double digit requirements.Whilst such pricing isn’t viable for all, it does provide solutions to the problems created by the increased conservatism targeted by the regulators and implemented by the major Banks.

Each of the new entrants has its own unique focus. We have dealt with many and executed deals with a handful. As a generalisation, those that have promised have delivered and operate with sensible covenants and conditions.

Reviewing the available sources for your borrowing requirements, and providing our clients with the best alternatives we can locate is a key activity for BRW Advisory. Let us demonstrate what we can achieve for your business.

Ongoing BRW Advisory activity

Commercial investment property finance.
Transactional banking tenders for Medium to Large Corporates.
Commercial and hospitality property management.
Trade finance new facility
Asset Finance propositions
Ongoing Facility monitoring

Current market trends

Banks – We are seeing variable approaches, some are seeking to increase margins as underlying rates drop, whilst others are reflecting the full reduction and occasionally we see Banks willing to push to win a deal.

Property lending– No material change. It is a difficult market, but lowly geared proposals are still attracting competition and fine margins.

Development funding remains difficult with all major Banks unless you have a strong track record and are utilising builders who can demonstrate their own capability to complete a project.

Benefits of using BRW

Access to experienced industry professionals.
Free assessment and objective guidance on your banking requirements.
Strong relationships with Tier 1 and Tier 2 and Private finance providers to the Corporate market.
Clear focus on the best deal for the client.
Competitive fees weighted towards achievement of a successful outcome.
Support through the full process ensuring that Bank conditions are achieved quickly and efficiently.