Kim
Good day. I’m Kim Big, and welcome to our podcast tailored for small and medium business owners who wanna understand more about accounting and tax in Australia. Please note, that the insights and tips we share in this podcast are general in nature and are not designed to replace personalised advice. Your financial situation is unique. So it’s essential to weigh the information we discuss against your specific goals, current financial status, and individual needs. Seeking professional advice is always your best bet for making informed decisions that align with your personal circumstances.
Hi, everyone. I’m Kim Bigg, and welcome to episode five of our podcast. Show Me The Perks. A series tailored for small and medium businesses and their owners in which we offer practical insights around the big accounting and tax matters in Australia.
We are recording this episode on the eighth of February two thousand and twenty-four. This is my first episode of twenty twenty-four, and I’m really pleased to have Bruce Debenham, director of Perks finance with me today, and he’ll be discussing all matters of finance. I look forward to hearing more about Bruce. Firstly, if I’ll throw across to Bruce and ask him to provide a little bit more information about himself and his history and career in finance.
Bruce
Thanks, Kim, and thank you for having me on Show Me The Perks. So I started my career back in the late eighties in solvency.
For a firm over in the UK. I did that for about six years before I immigrated to Australia working for Price Water House Cooper. Again, in the insolvency Consulting space. I then ventured into banking with National Australia Bank for about nine years and Rural Bank for about six years before then joining Perks. I’ve been with Perks now for nearly nine years.
Kim
Fantastic. Thank you, Bruce. And you interest to see the Price Waterhouse Coopers come up in the media in recent times for interesting reasons, or you get your heavily shy away from that.
Bruce
Maybe we’ll move on from their Kim, yes.
Kim
Best left unsaid. Excellent. And you are a proud Englishman.
Bruce
I am Indeed and Arsenal a mad Gooner.
Kim
Yes. Yes. Not a great time to bringing you into this podcast because they are actually going quite well.
Bruce
They’re going very well indeed, Kim, very well and had a great win just recently. So apologies to all those Liverpool fans out there, but it’s great to be a gooner right now.
Kim
It is. It is.
It’s just one of those periods that you just almost hope that, you know, they don’t go too well or Bruce will be up and about and a little bit, you know.
Bruce
I have been doing quite excited in the office on a on a morning when they’re playing yes.
Kim
Excellent. Well, we’ll move along because the let’s said about Arsenal the better, I think. In today’s episode, we are talking about why someone would wanna use a finance broker for their business lending. And I’m in particular talking about SMEs, That’s what our podcast is all about. So we like to talk about small medium enterprises and their owners. So I’m gonna throw across to Bruce to ask a few questions first, and then we’ll jump into a bit of a case study example on this. My first question to throw to Bruce is what is involved in being a business finance broker for those who might be listening who don’t know?
Bruce
Thanks, Kim. Yeah, Fundamentally, it’s really about to be a good finance broker. You really need to understand how the banks work. You need to understand their policy, their process, each bank, has their own policy and process, but some of it’s different from one bank to another. So understanding that is pretty critical in your role as a finance broker because the end of the day, we focus on SMEs and business owners, and each of those have various different needs.
And so you need to find the bank or the financier that suits those particular needs. And so understanding their policy, understanding the information that the banks want is critical to that or part of that process.
Kim
And when we use the term broker, just to explain that a little bit more, you deal with all banks, you know, generally speaking brokers will bother nature deal with any bank on any tier, etcetera, etcetera.
Bruce
Yeah. That that’s a really good question. Again, it comes back to our client, you know, the predominantly SME businesses that we deal with, depending on the stage of their business cycle, does impact which sort of financier they can go to. So a well established business ordinarily you would place with one of the big four banks, maybe a second tier bank.
Second tier bank, I’m talking, like, a Suncorp, a Bendigo and Adelaide bank or a Judo Bank, the the big four, obviously, the big four. And then there are some, finances that are more suited to other clients, for example, property developers, property owners. There’s a lot of specialist financiers out there that, make the process for property developers a lot easier than some of the major banks. And so they’re a little bit more expensive, but their conditions and covenants are a lot, more simple.
So again, it comes back to your client and really matching your client with the best for next year that suits their needs.
Kim
So, typically, what sort of problems do you seek to resolve? What sort of issues do clients come to you with in terms of their banking and finance needs? And how do you, you know, package that up and present to banks? Yeah.
Bruce
I could go, on and on with this, the answer to this question. So I’ll give you a couple of examples maybe. So a lot of our clients, ask us to effectively test the market for them, and invariably, That’s not just around rate. Sometimes it’s around the security structure.
Sometimes it’s the facilities that they’re looking to get from a bank. And it’s just testing that their their current bank is looking after them. So that’s quite a common request we get from a lot of our SME and private business owners.
The other one will be the client may have, had recently won a big contract or a big tender. And they need quick access to working capital. Again, sometimes the banks can be quite slow in responding to that. So finding a financier that’s quick and able to react in a timely manner to enable the client to proceed with that contract is something that we we do as well.
So And they’re two quite simple examples that we see when we’re dealing with our clients.
Kim
Sometimes some of the things I see and hear around the traps in our work is that people are very fixated on interest rates and trying to get the best interest rate and trying to get the best interest rate at all costs seemingly.
And sometimes, particularly with business finance, you know, they almost give up too much security as you talked about and collateral to get it, when, you know, with a little bit more careful sort of planning, they might end up not planning the security and that’s kind of what you were talking about just there.
Was it just focusing on the interest rate?
Bruce
That’s right. So you can inadvertently give the bank too much security. There’s a there’s a great opportunity to negotiate the security that you provide with the banks, and that’s where we add value for our clients. So For example, banks will ordinarily want some form of landed security.
When I say landed security, I mean property, and invariably they go for the the home of the director or the directors. And there are situations where that might not be necessary. You can provide obviously a a GSA or security over the company. The company’s got a strong debtor book, a strong client base.
Then sometimes it’s some of the finances out there will rely on that. As their security. So again, as you mentioned before, Kim, that the rate might be more expensive, but the product and the facility that the client is actually getting is far more suitable for their needs.
Commonly, when you see finance problems as in people come to you and say, I couldn’t get finance because or even within your own world, you know, things that don’t quite go you don’t get the finance approval first time and things like that. What’s commonly the issue seemingly at the moment with regards to finance and getting approvals through?
Yes. So it’s it all comes down to the information that you provide to the banks. So again, we’ve got a team of seasoned bankers within Perks finance who understand what it is the banks need to see. That’s from, you know, the the really simple example is the management accounts or financial statements, but having the ATO portals and providing banks with clean ATO portals is actually very, very important.
Unfortunately, for whatever reason banks did not like seeing outstanding ATO debt. And so if you can present your case with clean portals, that will help. So again, it comes back to understanding what information the client may have provided to the bank to work out what questions the bank would have asked when they receive that information and how best to respond to those questions?
Kim
Is that something you’re saying more often you mentioned the experience in the Perks finance team, and this would be the same for lots of brokers out there. But essentially, you need the experience to be able to go to the bank and explain to the bank. What it is they need and having a really good relationship with banks is actually a really positive thing. They shouldn’t necessarily be seen as the enemy. They are for helping you to facilitate finance and, you know, you need to understand what they’re looking for and you understand, you know, the the challenges the bank has got in terms of criteria they need to see for people to get finance, and you just you work within those parameters to get a mutually good outcome the bank for the client for, you know, to try to make it work for everyone.
So that’s a bit of a change in mentality.
Bruce
It is the brokers will develop strong relationships obviously with their client, but they also develop strong relationships with the banks as well. So over that period of time, the bankers will get to know who are the good quality brokers out there and, who they want to deal with. For example, with Perks finance, the banks know that the information they get from us is quality information.
The applications that we put together on behalf of our SME clients and private business owners are quality submissions.
Why is that important? That’s important because it leads to quick decisions being made by the banks because they are given all of the information that they why in one hit, they’re not giving it in dribs and drabs.
As a banker is a very frustrating thing to deal with. So we again put everything together in one package for the banks and deal with them very quickly because of that.
Kim
Really good segway for me there, Bruce, so that segways into my last question of this section. So, I mean, looking internally for a moment on the, Show Me The Perks podcast episode. What is it that sets Perks Finance apart, but we could insert Perks Finance, or we could insert any good finance broker. What is it that sets the good brokers apart? From the others.
Bruce
Yeah. So that’s a really good question, Kim and it comes back to what we spoke about at the beginning of the podcast, and that’s really understanding what it is you your client is after. Understanding their problem.
So I use the example before with SME clients that a lot of them are going to their banks or wanting to make sure they’re getting the best out of their bank. So understanding, what it is the bank can provide or the financier can provide, understanding their policy and process because each one is different and so certain banks will suit certain clients better than others. So it’s important to understand that. But having the experience to know what to put in an application finance and what not to put in an application for finance, And it’s really important to stress there that I don’t mean avoiding giving banks certain information. What I mean by that is you don’t wanna provide too much information that you’ve got information overload and so the bank can’t see the wood for the trees when it comes to making a decision. So we do believe that, and we effectively we take the pain out of the process for our clients.
Kim
So did you act for the clients?
Bruce
We act for the client absolutely, and we can go to a number of banks. If the client goes, does it themselves, they have to deal with each bank Individually, that can be very, very time consuming. It can be quite painful for the client, understanding how banks think and how they talk is quite hard. They use bank terminology that not everyone’s familiar with. And so again, we take that pain out of the process for our clients.
Kim
Fantastic. Thank you, Bruce. So thank you for giving insight into finance broker environment.
Gonna move on to a case study or scenario for the week, which we normally do. So this time, we’re looking into giving the theme of Bruce and his English background, proud English background, I should say, Prince Harry and Meghan, or as an easy target for any English tabloid, where I’m gonna take advantage of that as well. So let’s imagine that instead of going to Canada, Prince Harry and Meghan left to went over to Australia and set up in good old Adelaide alongside ourselves, and they set up a manufacturing business specialising in military equipment given Harry’s background in the military, He would have some specialist knowledge perhaps.
So that’s the example I’m setting up, unashamedly English, as is Bruce. So I’m gonna hand over to Bruce. Let’s imagine after two years, Harry’s and Meghan’s business is going well. Getting lots of clientele, they’re getting lots of demand for more of their equipment from, let’s say, Australian defence sort of government organizations.
So, unfortunately, when you have a lot of growth, you have a lot of demand for cash flow. And sometimes when you start out your business, doesn’t you know, you don’t think through the cash flow and then you just wanna win more work and make more profit as much as you can, but that can lead to some cash flow issues from time to time. So just in that scenario, let’s say they came to Perks Finance or yourself and said, you know, we don’t think the facility we have with our bank is really working for us. Take me through the process of what you would do for Prince Harry and Megan and how you would review their existing situation and then package it up to, you know, maybe present to a bank or otherwise.
Bruce
Yeah. Well, the first question I’d obviously ask them is that, welcome them to Australia and, ensure that they’re enjoying themselves here.We’re looking after them
Kim
You’d host them.
Bruce
I’ll join my certain week. Kim my certain week. And once we’ve got through that and, established that they’re here. They’ve I’m assuming they’ve been here a couple of years. They’ve become residents. So, we’ve got to overrule that those problems.
Kim
They’re Australian residents. Yes.
Bruce
So, the first question I’d wanna do is really understand their business, and so that would be sitting down preferably at their place of business rather than and them having to come to Perks so I can get a, maybe do a tour of their factory, understand their client base, who are their key clients? What does their order book like? Right now and how do I see it going in the future? And the reason why you wanna do that is because you mentioned before they might have been growing, so demand on their cash flow will be quite strong depending on what terms they’ve provided their clients.
So understanding that and then working with them and, invariably with their accountants, which obviously is a benefit when the client is a client of Perks because it invariably means I’m working with the same ability.
Working with you, for example, Kim. So we put together a cash flow forecast. I would encourage Harry and Megan to support that forecast with assumptions, in terms of how their their business has performed, and how the business is looking to perform, and tie that back into their historical financial statements. And so that would be the initial phase in terms of getting the information required to properly understand what sort of facilities they need? Is it an overdraft facility? Is it a debt of finance facility? Do they need some asset finance for machinery, for example?
Or do they need some minor premises?
Yes. Some long term debt for the premises. So really getting Underneath the bonet, so to speak, and understanding their business.
Kim
And assuming they yeah. What sort of time frame are you talking on these things? You know, is this two week exercise. It’s just a six week exercise. How long does it, you know, typical review and submission take for these sort of things?
Bruce
Yeah. So, again, it depends on the size of the business. It depends on what the client is actually seeking from us. But for the example, we spoke about for Harry and Meghan.
I would imagine they’ve got the or the information is all readily available. If it’s provided, say if I got all the information tomorrow, I would probably have an application for finance together within two or three days and ready to go to the banks. And again, we’re guided by our clients in terms of how they’d like us to proceed. We can put the finance application out to tender to a number of banks.
It might be that they’ve got a good relationship with their current bank and always encouraging clients if you’ve got a good relationship with your current bank, it’s better to stay with your current bank.
They know you better than anybody else, grass is always greener as they say. So I’d be trying to understand that from Harry and Meghan as well.
Kim
Yeah. And just on that when you’re talking about other banks, Let’s imagine, for example, they’re coming to you for multiple, you know, for a full finance review if you like. It’s cash flow needs they’ve got relating to working capital to asset finance or otherwise, but they could also add property related ones. I mean, do you normally try to have everything with the one bank, or do you normally try to spread it out across coupled, you know, in terms of different banks might specialise in, for example, how do you see that normally?
Bruce
So, That’s a very good question because a lot of our client SME businesses or private businesses invariably, the, owners have got their own properties. Residential property, their home loan, for example.
I try to keep the two separate where I can, and again, depending on the client’s circumstances and their risk appetite might want to be with one bank. Sometimes it’s easier to be with one bank, but sometimes it’s better to split the two so you’ve got your business banking with one bank. And your residential lending with another bank. So again, it’s all down to the clients that need them and that they’re risk appetite, I guess.
Kim
Prince Harry’s a pretty confident sort of chap. So sometimes, you know, what would you say to Prince Harry if he said he took or just Harry if he’s no longer a prince, but what would you say to Harry if he said, I’m a smart person. I could probably go to the bank myself and, you know, try to work this out yourself, you know, the difference between what Harry might be able to achieve going to the bank himself versus yourself, you know, the challenges he might face.
Bruce
Yeah. So, again, it’s really comes back to if Harry’s got experience of dealing with banks, then he might want to do that. I mentioned before that if you’re doing that, you’re going Harry’s gonna have to go to each bank separately. You know.
That could be a one hour meeting with four banks. He’s gotta understand exactly how they work. Does he understand their policy in process? Does he know that, for example, one bank might only go to a loan to value ratio of sixty percent whereas another bank might go to seven percent.
Will some banks take security whereas others banks might not. So if Harry’s got all that knowledge, then maybe he might want to do that himself but that’s where we can help our SME and private business owners a lot because we understand how the banks work. We deal with a number of banks at one particular point in time as I said before, we take the pain away from the process.
Kim
Essentially, you could give the Bank of England a call, you know, I’m sure the royal family’s got some money they can lend, Harry.
Bruce
Yeah, I could also include the queen on the application.
Kim
I just yeah. She’s got some money.
Bruce
Yeah. I’m sure. I’m not sure if she wants to oh, no. She’s dead now, isn’t she?
Kim
Yeah. Better not put that in there, the king, perhaps.
Bruce
Yeah. He could go to the king. Yeah. That that’s right.
Kim
He’d have a couple of mil in his ashtray surely. Yeah.
Bruce
But you you know, it might not be too keen on lending Harry money, you know. Keep on what he’s done. So it’s got a bit of repair work to do there, I think.
Kim
Maybe this is his way of doing it. Yeah. Anyway, I’ll move on to the next part. So, dealing with the question of the week, I’d like Bruce’s assistance with this one. Bruce doesn’t know this question’s coming, but, every week we like to get a question of the week, and this is the first one come from anonymous, which is pleasing because we don’t have to put someone in. So I’ve asked, what do you think of the changes to the stage three tax cuts throw that across to Bruce for his initial thoughts. We’re bearing in mind, we’re not expecting Bruce to be a tax expert.
Bruce
You know, that’s certainly not a tax expert, but It’s interesting times, I guess, at the moment, we’ve got an interest rate that’s been going up for, of course, the last twelve to eighteen months, which is provided a bit of a burden on some families.
We’ve seen a little bit of, mortgage stress coming into that because of the rise in interest rates. So to answer your question, I think those the tax benefits that are gonna come to a lot of Australians are gonna be very helpful over the course of next six to twelve months depending on where interest rates go. Of course, I, like, I can’t give you any advice in terms of that.
But, certainly, we saw yesterday, not yesterday the day before, she stayed on hold.
Yeah. RBA in her first meeting, I think it was. She’s kept them on hold, but she did warn that then they may go up.
Kim
Changes to the stage three tax cuts will make them go up.
Bruce
Potentially. Yeah. You don’t know. It depends on what this really inflation is everything that government’s focusing on at the moment. So as long as we keep that in control, then hopefully that will help along with those stage three tax cuts.
Kim
And final question from me before I, close out.I know you’re not gonna give me guarantees on this, but your view on the interest rates and where they’re headed in if there’s a cut when that might happen. We won’t hold you to this, but I will pick up this episode in twelve months from now and check when you said that come in from this.
Bruce
So, obviously, I gotta stress this as an advice. So this is a Bruce Debitham’s view, but I’m going along with the view that there’ll be a cut around October this year. I think things will stay on hold until then, and then we’ll see a cut maybe in October, which is what a lot of the economists are saying. And then the next one, this going early in twenty twenty five.
Kim
Excellent. I think we’ll look forward to that later in this year. I’ll make sure we keep a track of that later in the year and do a call out to Bruce in October depending on what’s happening.
Bruce
I’ll look forward to it.
Kim
Excellent. Alright. Well, thank you very much. Just to recap a little bit. So Bruce has taken us through what it is that our business finance broker does and how they assist businesses and SMEs with their finance and how they review and present to banks some of the advantages of a broker over pursuing the process yourself.
I mean, I guess, just another Now the illustration of how Perks supports their SME and private owners with their financial affairs, we’ve historically on this podcast talked about tax and super and other items like that obtaining finance and the right finance facility for their needs is another avenue that we support our clients with. So thank Bruce for coming along. First one of the year. Bruce’s first podcast. So not the last. I’m sure. And we’ll get him back very soon.
Hopefully, when Arsenal was a bit further down the ladder.
Bruce
Up the ladder you mean. And it’s called its table, actually, a table.
Kim
Yeah. is that what it’s called over there. Yeah. Premiership ladder. Excellent. Alright. Well, thank you, everyone, and thank you, Bruce for coming along.
Thanks very much. I look forward to seeing everyone on the next episode. Episode 6.
Thank you
