Growing demand for non-bank business lending

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The exit of two Australian non-bank lenders to business from the New Zealand market isn't representative of the state of the market, according to Prospa NZ managing director Adrienne Begbie.

Thursday, May 18th 2023, 10:56AM 1 Comment

“It's a growing segment – there's real demand out there.”

Apricity, which had recently entered the local market, has collapsed, reportedly owing creditors up to A$55 million, while Zip has decided to revert to its core buy-now-pay-later business.

Begbie said Zip had come to an arrangement with Prospa to transfer its existing customers to Prospa.

“They've done it really respectfully for their customers here,” she said.

Prospa's ASX-listed Australian parent reported late last month that the NZ operations had contributed A$35.1 million to the company's A$172.8 million in loan originations in the March quarter, up 0.5% on the previous March quarter.

In the six months ended December, the NZ arm had lifted originations 85% to A$93 million.

The business line of credit product – Prospa will provide up to $150 million under this facility – launched in July last year, had accounted for 14% of the NZ business by the end of March.

Begbie said that product is accounting for about 35% of new lending now.

Prospa's main non-bank competitor is Bizcap, but the banks are now more active, or trying to be, in the small business lending space now, but most are still demanding security over business owners' homes, she said.

Not fit-for-purpose

“It slows down the whole process and it's not a fit-for-purpose product,” unlike Prospa's loans which are unsecured and based on each business' cash flow.

While Heartland Group had previously been competing hard in the unsecured space with its Open for Business product, they seem to be concentrating more on other business, she said.

Certainly, Heartland's results for the six months ended December showed its Open for Business lending receiveables fell 11.5%.

Prospa works with partners, including insurance and mortgage brokers and accountants, and they now account for between 40% and 45% of her company's business, Begbie said.

Reserve Bank data – which only includes desposit-taking non banks, and so doesn't include Prospa – also suggests non-bank lending to business has been growing strongly.

The data showed non-bank lending to business grew $98 million to $8.74 billion in the March quarter while lending to business by registered banks fell by $946 million to $123.34 billion, taking the deposit-taking non-bank share of the market to 6.6%.

Non-bank deposit-taking institutions' lending to business grew by $989 million, or 12.8% in the year ended March while lending to business by registered banks grew less than 4.5%.

The Financial Services Federation, which does include Prospa as a member but doesn't represent all non-bank institutions, is in the throes of collating this year's data. Last year's data showed at Feb 28, 2022, members had lent $7.3 billion to businesses and estimated they accounted for 5.9% of that market.

Tags: Prospa

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