The biggest challenges facing SMEs and how brokers can help them

Being a small business owner hasn’t been easy over the past 24 months. From lockdowns to catastrophic climate events to inflation, there is plenty to keep small business owners awake at night. But despite all the uncertainty, businesses are moving (and adapting) with the times.

Beau Bertoli, Co-Founder and Chief Revenue Officer at Prospa, says, “change is the only constant in the life of a business owner.” While things haven’t been easy over the past couple of years, many have come out the other side more resilient than ever. And with the cost of running a business and interest rates on the rise, the ability to adapt to change and pivot to other opportunities is a “new muscle” small business owners can only benefit from.

While there are more challenges are on the horizon, according to Beau, businesses also feel optimistic. “Over 70% of SMEs are predicting growth in their revenue and looking to the future with a lot of positivity,” and that’s not something we can ignore.

Understanding the impacts of change on SMEs and supporting your clients

Not all change is bad for business. When it comes to interest rates rises, Beau says, “it’s something small business owners will definitely be paying attention to, but it’s unlikely to be the primary reason why they borrow money or not.”

Small business owners wanting to invest in their business are “rarely driven by the cost of capital,” says Beau. Say your client is a restaurant owner borrowing $100,000 to open a second location. It’s less likely a 0.5-3% interest rate increase would sway their decision if projected profits for that restaurant are 10-20 times the cost of capital.

Talking to brokers and advisers in particular, Beau says, “rising rates are not necessarily a bad thing for business investment and business choice. Yes, capital may cost a little bit more, but focus on the return.” Many business owners haven’t experienced a rising cash rate, this is an opportunity to show them that change doesn’t mean they need to put their business dreams on hold.

And for brokers wanting to diversify? Beau says you don’t have to look too far. Start with your customer base and see who’s self-employed or has access to businesses.

“Start thinking about your own business and where you’re going to get your own growth from,” says Beau. “I hope the mortgage growth does continue, but you need a plan B, and I think commercial is a very, very smart place to be.”

Given the current environment, Beau says, it was surprising to learn that 7 out of 10 small businesses rate the health of their business as good. Looking at the data, “just over 40% [of SMEs] are forecasting their revenue to grow next year by as much as 23%.”

With many small businesses navigating a challenging market by partnering with lenders like Prospa, now is a good time for brokers and advisers to grow their business and expand into SME finance.

Beau’s top tips for brokers

Beau understands that almost every small business could use some form of capital to help them run and grow. Here are his top tips for writing SME finance:

• Assume every business owner needs capital.
  Have a think about what your SME client could do with funding. “Even if they don’t realise they need it, there’s very likely an opportunity in the back of their mind that they’ve been saying no to because they don’t have access to that money.”
• Learn just enough about commercial credit.
  “You don’t have to become a master,” says Beau. You just need to know about the different commercial products and how businesses can benefit from them, which is something you can learn in under an hour.
• Start a conversation with your small business customers.
  Get to know your SME clients and understand their needs. “That’s the qualification conversation that unpacks where there are opportunities for capital,” he says.