It is tipped that commercial brokers’ relationships with non-bank lenders will become more significant, as companies are about to come out of the support packages extended through COVID.
The government has flooded companies with handouts, (JobKeeper) and the banks have been giving moratoriums. So companies have been doing okay.
However, in the latest data, there’s $270 billion sitting on balance sheets, for both individuals and businesses and this has manifested itself in zombie companies.
What that means is that businesses that would have normally collapsed have been propped up by support through COVID, meaning that insolvencies have been roughly halved.
But there are opportunities for brokers, who serve the companies downstream of a zombie firm, whether it’s a subcontractor or supplier.
Brokers should have an expectation that there are now a number of companies that are like a patient on life support and the family has decided do not resuscitate. Broker’s customers may continue to trade with these businesses because they don’t know the ins and outs and when the crunch comes, they will suffer from credit losses.
Broker’s customers in this situation will also suffer credit impairment as a result, because their financials are going to reflect the fact that they suffered losses. Such firms will end up being short on cash and will go to brokers seeking cash and redraw facilities.
Brokers probably won’t be able to go to the bank because the bank is seeing impairment, so you’re going to have to rely on your non-bank connections.
Inflation is steadily rising, which could bring forward when the RBA lifts the cash rate from its current record low level of 0.1 per cent.
Brokers’ relationships with the non-banks will be key, as banks will constrain their lending as rates pick up. When interest rates start going up, we’re going to see the banks looking to push exposure sheets and I think they’re going to get tighter with their lending.
Look out for the tax collector
The Australian Tax Office (ATO) will also begin to crack down on businesses who have outstanding payments, after almost two years of radio silence.
A window could open for brokers, from businesses that aren’t prepared.
What we will see is that the ATO is going to start chasing your clients for GST, and tax and outstanding amounts, and they are going to push for tax to be paid on time.
Opportunities for you
One of the opportunities that brokers should start to look at is to find out which of your clients need capital for tax bills come July, August and which clients don’t have the money available to pay these bills because they have been spending it on other things. This may open opportunities for loans in the non-bank sector.