Bridging the working capital and commercial funding gap for SMEs

Source Switzer Daily, by Steve Torso

It is estimated that the commercial lending market is valued at $9 billion per year. However, the SME market is severely underserviced representing under 10% of this figure. Banks that spend millions on capturing new business customers are failing existing customers by not approving lending.

An East & Partners survey of SMEs has revealed what every small to medium business owner suspected – 44% of SMEs that applied for new credit were unsuccessful, and the 6 out of 10 that were the lucky ones suffered interest-rate increases while personal home loan rates dropped to the floor.

Lindsay Kirschberg, Director at NTA Securities highlights the growing customer problem “Business owners I’m in direct contact with complain of risk-adverse lenders with inexperienced staff who only know how to check boxes. As the banks have centralised their systems they find they have no direct relationship with the business owner, and it is the businesses that suffer as a consequence”.

Capitalising on SME credit demand

NTA Securities provides specialist working capital and debt finance to Australian small-to-medium enterprises. Head of Investments, Anthony Simpson is bullish about opportunities in the Australian commercial lending environment “NTA Securities is a startup ready to exploit the funding gap between banks and business.  The main aim to sufficiently capitalise the company for significant growth. We launched a $5M debenture as there is pent-up demand in the SME market for lending. Feedback we have received from our broker network is that this could be placed very quickly with high quality borrowers at low risk”

A Modern Approach to Credit Management

Through providing working capital to companies who need it NTA Securities can help where banks refuse, offering unique opportunities for small and medium sized businesses to grow. Mr Simpson continued “Our rigorous risk management policies ensure the funds distributed are to suitable candidates who meet our lending criteria and the money is used and distributed effectively by way of monitoring the borrowers bank accounts. All debt is secured as a first ranking security registered under the Personal Property Securities Register mitigating any default risk.”

Market and investor demand

The demand for income producing assets in business has never diminished but the opportunities for borrowers have. IBISWorld anticipates that capital expenditure is expected to increase in 2014 through to 2017, representing an opportunity for lenders like NTA Securities.

This has been supported by strong interest received from around the country since listing its capital raising offer on Wholesale Investor. Interest has been received from investors locally as well as China, Malaysia and the Middle East. “The demand for this kind of product is self-evident. With a three year term paying 11.75% per annum in quarterly instalments investors want exposure to a secure investment that is asset backed.”

“In addition, to the current $5M initial funding round, we are planning to raise another debenture in June bring our funds under management to $10M. The aim is to reach $25M by end of 2015 and there is demand to sustain this investment.” The outlook for 2014 is that SMEs now have the opportunity to capitalise on these new funding lines and contribute to the engine room of society.