(10 November 2005 – Australia) The market for business lending products that are not secured against bricks and mortar is growing rapidly and will be worth more than A$100 billion by mid 2006, according to East & Partners.The first release of East’s Working Capital & Receivables Funding Report reveals
the uptake of cash flow financing products such as leasing, factoring &
discounting, and overdrafts grew 22 percent over the past year and will continue
growing at close to 30 percent in coming years.
This segment of the overall lending market is worth A$83 billion currently, up
from A$68 billion in 2004, and East forecasts the market will grow to A$106
billion by the end of 2006.
Much of the growth is being driven by businesses responding to a proliferation
of second tier financial services companies offering innovative working capital
financing.
These financial services firms have themselves responded to long held appetite
among SMEs and middle market businesses for debt funding solutions that protect
the family home.
Businesses are also sourcing debt via the rapidly expanding broker channel where
they are able to secure more flexible collateral arrangements even at a higher
price.
“SMEs and middle market companies are asking for working capital funding
solutions based on the actual state and potential of their business itself
rather than on bricks and mortar securities,” East & Partners principal analyst
Paul Dowling said.
“When residential property was booming, SMEs and middle market companies were
happy to extract the equity from their homes to fund the growth of their
businesses but now they’re again seeking more flexibility and innovation from
their lenders,” he said.
“It’s been tougher for banks to provide non asset based financing because
they’ve been constrained by regulatory issues and their own credit policies but
they’re starting to focus on this market and more aggressively incorporate cash
flow financing solutions into their transaction services propositions,” he said.
Large players in this space already include National Australia Bank, St George
Bank and Westpac.
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For more information please contact:
Paul Bartholomew
Senior Consultant
East & Partners
Tel: +61-2-9004 7848
Mob: +61-410 400 156
paul.b@eastandpartners.com