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Australian businesses are facing significant financial pressures, with insolvencies reaching record levels. According to the latest financial insights report from Alares, insolvencies in November 2024 were 70 per cent higher than the historical average.
Peter Arnold, director at GAP Business Loans, a non-bank lender, has highlighted the crucial role that brokers play in assisting business clients to manage debt and alleviate financial stress. Arnold believes that for many business owners, debt is not just a financial figure, but a representation of their livelihood.
“For many of a broker’s clients, their financial obligations are not just numbers on a balance sheet,” Arnold said.
“They represent livelihoods and the survival of their businesses. This is where brokers play an important role.”
Arnold said that brokers can help clients by facilitating strategic deleveraging, a process that goes beyond simply paying off debt as quickly as possible: “It’s also about a carefully planned approach to optimise the debt structure and reduce overall financial strain.”
The first step in this process, Arnold said, is for brokers to help clients understand their debt portfolios.
“Many business owners juggle multiple loans with varying interest rates, terms, and security arrangements, not to mention credit card debt. A thorough review of their financial obligations can uncover opportunities for improvement,” he said.
Once a clearer understanding of the client’s financial position is gained, Arnold said, brokers can then offer solutions. One potential solution is debt consolidation.
“By consolidating multiple debts into a single loan with more favourable rates or terms, you can significantly reduce monthly repayments and free up cash flow,” he said.
Arnold said that non-bank lenders often provide more flexibility in debt consolidation than traditional banks.
Another option that could assist businesses is accessing untapped equity to help restructure unsecured debt, such as credit cards, lines of credit, or unsecured loans, into loans with more favourable terms.
“Many small to medium enterprises have untapped equity in their assets, including their properties or equipment,” Arnold said.
“This can be used to restructure their unsecured debt more effectively. By switching to secured facilities, clients may not only reduce monthly repayments but also free up working capital to reinvest into their business.”
After exploring various options and choosing the best solution, Arnold highlighted the critical role of brokers in negotiations.
“A broker’s established relationships and market knowledge can be important in securing competitive interest rates and flexible repayment schedules. This can make a substantial difference to a client’s bottom line,” he said.
Perhaps most importantly, Arnold said, is the broker’s role in providing ongoing education and support.
“Debt restructuring is only part of the equation; the goal is to prevent clients from falling into the same cycle of stress,” he said.
Brokers can offer information and education as needed and regularly review a client’s financial situation, making adjustments when required.
“This proactive approach can prevent small debt issues from escalating into major problems,” he said.
“In my experience, a good broker does not just resolve their clients’ immediate debt issues but also empowers them with the knowledge and confidence to build a more secure financial future.”
[RELATED: 3 tips for brokers to help SMEs strengthen cash reserves]
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