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Changing Market Creates a New Lending Environment

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Australian financial markets are constantly changing and with these changes comes a new lending environment. It is important to stay on top of and understand these changes when approaching financial institutions (banks/lenders), to ensure your business receives a positive outcome.

Below are some thoughts on the debt market as we currently see it, with primary focus on the small medium enterprise (SME) market and how this is being impacted. Further focus is how this impacts the equipment finance market over the short to medium term – the life line of capital intensive balance sheet businesses.

Following the GFC in 2007/2008 there has been a trend to increased risk aversion by mainstream financial institutions. This has accelerated in Australia over the past 5 years as financial markets have been subjected to enquiry after enquiry culminating in the Royal Commission.

Whilst many of these enquiries have been focused on consumer lending market there has been material “splash back” into the SME market.

What does this mean for borrowers in the SME space?

In essence “caution” is a key feature of the current banking and finance markets.

Tier 1 financial institutions are becoming hesitant lenders on transactions that they might have been prepared to take on in the past but are now deemed too complex or financially challenging to secure approval.

To help navigate these issues, Ledge’s close working relationship with businesses has given us meticulous understanding of this space with regards to debt, effective life or value of the assets and how it builds long term balance sheet value, which is ultimately “enterprise value”. This is where we are able to assist our clients with both commercial risk and financial risk, which is critical in the current market conditions.

Ledge often see our clients evolving and going through change, growth & development brought about by both internal and external pressures. This is where Ledge forms relationships with clients at their early stages to assist with such growth and development.

To find out more or if you have any questions at all contact your Ledge Finance Executive direct, or contact us here and we will be happy to assist.

 

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