Baker told TMM Online at the New Zealand launch of Lend Capital, the old way of securitising loans against personal property is going out the back door.
“There are some lenders that want security and a charge over a house a borrower might own, but there are an increasing number of lenders doing unsecured loans.
“It is the new way the market is heading and Lend Capital is about getting the right customer to the right lender first time, as opposed to that customer being bounced around between banks and running out of options.”
Lend Capital has partnered with key non-bank lenders Prospa, Bizcap and Homesec for the New Zealand platform, but aims to expand rapidly.
In Australia Lend Capital has been successful in facilitating 42,000 small business loans to access more than A$1.5 billion in working capital.
Baker says loans are available through lenders of up to $250,000 without security depending on the asset that is being bought. Loans of up to $500,000 can be obtained but the lender will usually take a charge over the new asset. Interest rates range from 9-30%, depending on the customer’s credit record and lender.
Lend Capital’s sweet spot is loans between $30,000 and $70,000 without security for SMEs, usually paid back over 12 months to three years, depending on the lender. “Most lenders are now in line with the borrower and make it easy for them,” Baker says.
In the Australian market Lend Capital has 70 lenders it works with and more than 700 products and is hoping to build up to that type of leverage in New Zealand.
The major banks are part of the platform and Baker says as this country’s four main banks are Australian owned it should make it easier to get them on board here.
“It took four years to build up trust with the major banks in Australia. In New Zealand I think it'll just be a transition because we have already gone through the hard yards in Australian market.”
He says non-bank lenders were open to Lend Capital quite quickly because they are more open to new technology and are more likely to actually move with the leaders in the market place, whereas the banks have the technology, but strict rules on what they can and cannot do.”
About 1,500 mortgage advisers use Lend Capital’s platform in Australia. He is confident advisers will sign onto the platform in New Zealand.
“It's not going to be for everyone but we are hoping is that if an adviser does a deal for an SME, it will unlock that customer's buying value. The system shows that if a customer qualifies for one loan, they can often get a car or personal loan. It will prompt the adviser to tell the customer which lenders will actually approve the extra loan.
“The platform is all about conversion of customers,” Barker says
However, if a mortgage adviser using the platform doesn’t have any expertise in SME asset finance, the platform has a referral programme in the system. The press of a button will send the customer to a specialised asset adviser and they'll be able to help them get an asset finance, Baker says.
A long time coming
It’s taken Lend Capital six years to get to New Zealand while it finessed its technology to be able to walk a customer all the way through to a lender and a loan. It has also reduced fraud.
“We validate and verify a customer’s profile firstly to work out what they can borrow and which lender will give them a loan and secondly we unlock that customer’s true value in terms of other products that could be of use to them,” Baker says. “This has been achieved across both the commercial and consumer markets and we hope to model this in New Zealand.”
Banks will pay fees to Lend Capital as they do to mortgage advisers. Baker calls it a transaction fee. He says Lend Capital doesn’t just deliver a lead to a bank, it delivers a customer who meets their lending rules and product criteria, so there is a transactional fee which varies from bank to bank. “The platform is all about conversion of customers.”
He says Lend Capital wants to make sure customers get a quick loan and they don't get “stuffed around”. “Even in Australia borrowers can wait up to six weeks before the bank will come back and say, you're declined. And that customer turns around, goes, well, I've got nowhere else to go because my bank that I actually bank with has knocked me back. They have no idea about what the options are. So we actually bring that all into a centralised area and simplify that process for them.
“We're all about transparency and speed. We want people to feel confident about what funding is available to them, whether it's consumer or commercial, and to feel comfortable that if their details are put in the system, the system will bring the right products to them. They don't have to buy it, but at least they'll know what they qualify for,” Baker says.
The market for Lend Capital, he says, is exciting, although confidence has evaporated. “If there is a change of Government next month, confidence will hopefully change. A lot of people are sitting on their hands, not borrowing money and worried about the future.”
He believes a change of government will bring confidence back quickly as long as they are going to help SMEs. Australia faced similar problems as well, particularly as some state governments were anti SMEs and people lost confidence. “As soon as they lost confidence the economy started shrinking and SMEs did nothing, but. we're starting to see some growth coming back into the market. “Ultimately SMEs just have to make sure they you can survive throughout that period and that's where loans come into to the mix to help with cash flow to keep you going.