Home' MFAA Prosper : Credit Adviser May 2014 Contents 12
VOLUME 1 | ISSUE 1 | 2014
THE ESSENTIAL RESOURCE
"We advance cash to the business for a period generally ranging from six to nine
months, although there is no fixed term," says Silverpath's Miller. "The business
repays the advance or loan as it makes sales through its EFTPOS terminal."
Silverpath structures the loan in such a way that the repayment is seven to 15 per
cent of EFTPOS sales, ensuring it does not put undue stress on the business.
"This way, if the business experiences an upswing in sales, the loan can be
repaid more quickly," Miller says. "However, if the business has a difficult month,
its repayments will be reduced. For many businesses this product is an attractive
opportunity because it can be difficult to take a loan out with a bank and the process
can be drawn out with requirements for a great deal of documentation."
Silverpath is able to be flexible with a fast approval process and little
documentation; it is also unsecured.
180 Group o ers two principle alternative lending products: full ser vice factoring
and confidential factoring.
"Full ser vice factoring is a disclosed facility where [our clients'] customer knows
that a facility is in place," Hassan explains. "We send out statements and perform
the collections on behalf of the client, which gives them the benefit of a professional
collection service that is tailored to suit their requirements."
Confidential factoring is undisclosed, so the client's customers are unaware
that factoring is being utilised. The client sends its ow n statements and performs
its own collections. Hassan says this product suits those clients who prefer to
maintain control of their debtor collection activity and are perhaps sensitive to their
customers being made aware of the facility.
Since the GFC, alternative lending products have had to become simpler and
"Customers can now easily determine their interest rate, loan size and term,"
says Holmes. "These kinds of developments have come out of the GFC and,
combined with the NCCP requirements, have produced a more professional
approach in the industry."
Miller says that Silverpath works hard to fully inform clients and credit advisers
about the details of their product, including written materials and seminars.
"We pay brokers an upfront referrer fee for finding a new client and also offer
brokers a renewal fee for repeat customers," Miller says. "We are seeing a high
renewal rate so we must be doing something right."
180 Group has a user-friendly online system with state-of-the-art technology to
automatically reconcile a client's account on a daily basis.
Hassan says that all client relationship managers are actively involved in the
relationship with their clients and perform regular site visits to ensure they are
happy and comfortable with the product.
"With any further queries that an introducer or client may have, a BDM or client
relationship manager is always at the end of the phone to explain any details about
the product or the day-to-day running of an account."
Think about it: financing
models and arrears rates
"Unsurprisingly, arrears rates
are higher for low-doc and non-
conforming loans," w rote Jessica Tu n
from UWA's Faculty of Law following the
2009 NCCP reforms. "The arrears rate
for prime low-doc loans was 1.2 per cent in
June 2008, which was more than double the
arrears rate for prime full-doc loans.
"In comparison, the arrears rate for
non-conforming loans was much higher, at
8.5 per cent. The arrears rate for securitised
low-doc loans has also 'increased noticeably
over the past year' as has the rate for non-
conforming loans, which has 'increased by
more than 3 percentage points over the past
year'," Tu n w rote, citing both RBA and
"Rates of arrears also highlight the
di erences in lending standards across
di erent types of lenders," she continued.
" The arrears rate of full-doc loans
originated by non-bank lenders 'is higher
and has increased by more than that for
equivalent loans originated by banks and
other ADIs', indicating that customers of
non-banks may be more likely to experience
di culty in financing their loans."
Source: Tuffin, Jessica. 'Responsible Lending
Laws: Essential Development or Over reaction'.
Queensland University of Technology Law
and Justice Jour nal 9.2, 2009: 280-310.
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