Understanding small businesses’ needs

In the first of three installments in the ‘How to Prospa’ series, we look at how to expand your client base by understanding the sentiment and funding needs of your small business clients.

At a glance

  • Expanding your business starts with looking at opportunities within your existing client base.
  • Before reaching out to clients, consider the priorities and concerns of small business owners.
  • Understanding the pain points for small business owners, and how external funding could smooth the way to growth, can help you offer a more comprehensive service.
  • Start by looking for opportunities to improve your clients’ loans and credit lines, and stay up-to-date to leverage other opportunities.

Unlocking value in your current clients

If you’re looking to expand your brokerage business, often the instinct is to attract new clients. Following the business rule that it’s much more profitable to grow your existing customers, however, first consider adding more services instead.

The majority of businesses are small businesses, so the chances that you are already in contact with many small to medium business owners are high, as is the potential to grow your business by offering a wider range of benefits to these clients – especially if you can offer advantages beyond those offered by traditional lenders.

Research, conducted in April 2023, into the intentions of Australian small business owners showed that demand for financial assistance is strong: business loan demand is up 18% compared to three years ago, and demand for business credit has increased 8.6% in the same period.

Meeting this demand has the potential to deliver revenue growth for brokers that cross-sell their current clients into related services. Learning about their business, cash flow and financial requirements creates more reasons to be in touch more often.

It also puts you in a stronger position, as once you understand their business, you can become their go-to broker; they won’t want to have to go through all the details again with someone else.

Small business sentiment

An effective way to position yourself as a comprehensive source of financial solutions is to learn about commercial credit, and especially about how alternative lenders operate. Understanding the ways alternative lenders can be faster and more flexible than traditional lenders can allow you to present more options.

It’s also good to know where you can make quick wins. YouGov research shows that 30% of small business owners intend to borrow over the next 12 months to achieve their future business goals, and 71% of small business owners will seek funding to expand their business.

While 83% of business owners expect to grow over the next 12 months, small business owners still face hurdles in the current economy; 57% say inflation has affected their cash flow in the past six months and 27% are dipping into their personal savings to keep their business running.

Consistent revenue is a major issue for smaller businesses; three in five small businesses are planning to use external funding to cover operational cash flow issues such as rising costs; 15% are worried about being paid on time; 31% are looking for ways to fund staff hires and training.

The opportunity here is that only 25% of small to medium businesses actually applied for funding in the last year, and of those, just over one-third received the full amount they applied for. Sole traders especially find it hard to secure finance from traditional lenders.

Educating your clients about the funding solutions available to them can help them to better manage cash flow and invest in new equipment and staff, and could provide a significant boost to their growth.

There is also potential in building your clients’ awareness of non-traditional lenders. Only about half of small business owners are aware of alternative lenders, and with speed of access to funds increasingly important for these clients, you could be in a position to offer products and services better suited to their needs.

Starting the conversation

Consider framing your initial contact with clients around the opportunity to review cash flow or funding options.

If you have existing residential clients, start with questions about their home loan, such as:

  • What impact would refinancing have on your business?
  • Are there opportunities to improve your current debt arrangements?

The key is to build trust without undermining their current relationships.

You can then get into the details, with questions such as:

  • How are you managing your cash flow?
  • What upcoming opportunities or challenges do you have?
  • How quickly would you like to obtain the funds?
  • If you had the choice, would you use property to secure the funds or would you prefer to separate?
  • How would you invest $50,000 into your business?

You can also use opportunities outlined in this year’s Federal Budget as ways small business owners can boost their business. For example, are they considering:

  • Investing in energy efficient equipment to attract the $20,000 tax deduction and energy rebates
  • Taking advantage of the instant asset write off, as the threshold has temporarily been increased to $20,000 and extended until the end of FY24
  • Applying for an Industry Growth Program to offer advice and grants to start-ups and small business owners

And if the answer is yes, then ask how they are planning to fund those plans – which then opens up the opportunity to discuss funding solutions that could help them.

 *Prospa x YouGov SME Sentiment survey, April 2023

Education, tools and support are available for brokers to grow their business. Inquire about becoming a Prospa Partner to expand your range of services and sources of revenue.

The information in this post is provided for general information only and does not take into account your personal situation. Nothing contained in this post constitutes advice or an endorsement or recommendation of any kind by Prospa. Any links to third party websites are strictly for informational purposes only. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.