Finance & Investment

Bridging trap: How businesses can avoid getting caught by short-term loans

EXPECTING the unexpected and forward planning are the keys to avoid being caught in the bridging loan cycle, according to Grow Capital CEO, Gus Gilkeson.

Mr Gilkeson said the latest ScotPac Business Finance SME Growth Index found 94% of SMEs are seeking new capital, while 29% believe they’re at risk of insolvency if they were to lose a major supplier or client.

Mr Gilkeson said while short-term loans “can and do have a place in business” they should be part of a longer-term strategy. 

“Short term bridging loans are great if they’re helping you achieve your longer-term goals,” he said. “Buying an asset for example might require short term cash for a longer-term return.

“However, if your business is constantly requiring short term funding to bridge cash flow gaps or address planning shortfalls, then you might need to reassess your business plan and determine whether you have a broader problem.

“A bridging loan should be exactly that – a bridge to get to the other side. But you need to have that pontoon on the other side in the first place.”

Credit score risk

Mr Gilkeson warned that using bridging loans too often could have a detrimental impact on a company credit score and affect future lending opportunities.

“Having multiple credit inquiries in a short space of time will have a negative impact on your commercial credit file,” Mr Gilkeson said. “Similarly, if you enter into a lending deal with a high-interest-rate short term funder, there’s a potential for mainstream funders to view that negatively and refuse you credit in future.

“It’s similar to someone who frequently uses pay-day lenders being refused a home loan by a major lender down the track. The financial institution looks at that history and thinks there may be a bigger, underlying issue.”

Mr Gilkeson said there were steps businesses could take to “avoid getting caught” in the bridging loan cycle:

  • Know where your business is currently at: There are five stages of growth that businesses go through, including Existence (Startup), Survival (Viability), Success (Stabilise or Grow), Scale (Expansion) and Maturity. Where is your business sitting currently and where are you planning to be six, 12, 24 months?
  • Expect the unexpected: What is the business contingency in case of personal or family illness, weather and seasonal events, or supply chain issues, for example. While all these potential scenarios are outside your control, “you can control your contingency planning and have strategies in place for if and when those scenarios come to pass”.
  • Regulatory change: Mr Gilkeson said it was vital to stay up to date with industry developments and changes “so your business can be as prepared as possible, and not be caught on the hop”.
  • Build buffers: Whether it be a time or monetary buffer, it’s important to give yourself and your business some wiggle room. “It’s better to over-estimate how much time or money a project will require and end up pleasantly surprised, as opposed to finding yourself running out of either and requiring that short-term bridging loan simply to get through to the end.”

Mr Gilkeson said plans for 2025 should ideally be well-advanced.

“Right now, I would expect that most business owners are already considering the end of the 24-25 financial year, what that looks like and starting to plan accordingly,” he said.

“Those that have a solid business plan are looking even further ahead – at least one to two years. This is particularly important when you consider that a potential long-term lender is going to want to see your projections for that far in advance, if not further.

“If you’re serious about securing long term finance, then you also need a long-term strategy.”

www.grow-capital.com.au

 

About Gus Gilkeson

Gus Gilkeson is the CEO of Grow Capital. His identifies his mission as being “to bridge the information gap between funders and those seeking finance, ensuring that the needs of both parties are clearly understood and met”. Having worked for many years in strategic business development for major banks and lenders, Gilkeson saw the difficulties SMEs had in getting business finance and wanted to change that.Now, he takes  his business financing expertise to the business owner “to help them gain funding from what’s out there”. When it’s time to take a break, he likes to spend it outdoors with his family, friends and a menagerie of animals, is an avid martial arts practitioner and volunteers with the NSW Rural Fire Service.

 

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Finder acquires Grow My Money to help shoppers turn spending into future wealth

FINDER has acquired Grow My Money, an Australian based cashback platform – founded by Australian female entrepreneur and gender equality advocate Pascale Helyar-Moray – that uses members’ everyday spending to contribute cash to home loans and superannuation balances.

Through Grow My Money, consumers can shop thousands of Australia’s leading brands, such as Appliances Online, Chemist Warehouse and The Good Guys by linking their credit or debit card or by shopping through the website.

Retailers offer cashback of up to 20 percent of their spend – paid automatically into the user’s nominated mortgage account or superannuation fund – chipping away at debt and boosting super balances in the process.

On average, users get 2 percent of their spending credited back to their nominated account.

When you remove housing costs, Finder data shows the average Aussie household spends $2,010 a week on living expenses. That could mean an extra $2,090 of cashback a year paid towards mortgage debt or retirement savings. 

Over 30 years, this amount contributed annually could grow a super account to $629,789*. 

 

CEO welcomes Grow My Money

Finder’s CEO Frank Restuccia said he was “excited to welcome Grow My Money into the Finder Group”.

“Investing for the future is so important and super and property are two of the biggest assets you can build in your life,” Mr Restuccia said.

“Grow My Money presents an exciting opportunity to acquire a fast-growing rewards platform with significant potential for further expansion.

“The Grow My Money team have successfully built a loyal customer base experiencing a boost to their long term financial position without paying an extra cent from their paycheck.”

Turning spending into a future nest egg

Pascale Helyar-Moray, founder of Grow My Money and recent recipient of the Medal of the Order of Australia in 2024 for service to business and to women’s affairs, said the platform turns necessary spending into a future nest egg.

“Aussies are doing everything they can to reduce their expenses with little left over to grow their wealth,” Ms Helyar-Moray said.

“This innovation basically means bonus money is paid into your home loan or superannuation account as you go about your life.

“As living costs skyrocket, these cashback amounts become even more meaningful.”

With women increasingly managing household finances, a substantial 66 percent of Grow My Money members are female.

Although the service was created with women in mind, it is open to everyone aged 14–75, regardless of gender or work status.

Finder data revealed that 53 percent, an estimated 11 million Aussies, did not think they would have enough in their super to get by in retirement.

This is particularly acute for women as 62 percent aren’t sure they will be able to stop working, compared to 44 percent of men. 

Ms Helyar-Moray said she wants to close the gap.

“It’s unrealistic to think you can cut back all spending, but pairing sound budgeting with monthly top-ups, can get you further ahead than you might think,” she said.

“The super balances of women don’t accurately reflect their extremely valuable contribution to society. No woman should be facing financial stress in retirement.”

Grow My Money, and its workforce, will continue to operate in its own right and brand, benefiting from sharing resources across the wider Finder Group.

www.finder.com.au

www.growmymoney.com.au

*Assumptions: $50,000 starting balance, $2,090 added annually, compounding annually, 30 years to retirement, median net return of 7.4%p.a. (over 10 years, balanced fund category): Source: moneysmart.gov.au
Do you think you’ll have enough superannuation to get by in retirement?
  Women Men
I’m not sure if I will or not 34% 22%
No, not in my super or other investments combined 28% 22%
Yes, I’ll have enough to get by but will probably have to cut back on my spending 19% 24%
Yes, I’m confident I’ll have enough money to live comfortably in retirement 11% 23%
No, not in my super, but I’ll have enough through other investments 8% 8%
Source: Finder survey of 1,049 respondents, July 2024  

 

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Buy Now, Pay Later revs up purchases and debt says Finder

By Leon Gettler, Talking Business >>

THERE has been a huge uptake of Buy Now, Pay Later (BNPL) in recent years.

But according to Finder research, much of the growth is coming from Gen Y and Gen Z.

According to Graham Cooke, the head of consumer research at Finder, it’s just a lot easier for that generation. 

“It’s really been the credit option of the youth now for quite a while,” Mr Cooke told Talking Business.

“We’ve seen quite a number of young people avoid the credit card market completely and go straight to Buy Now, Pay Later because it is an easier to access credit product,” he said.

“It’s usually lower risk, you’re not opening up that huge debt trap you can potentially have with a credit card and we’ve seen a lot of young people going for By Now, Pay Later and ditching the credit card.”

Credit cards on the ‘up’ too

That said, Finder research was also showing that the cost of living crisis had pushed people closer to credit cards with up to 16,000 credit cards being added to the market every month.

However, even though BNPL was lower risk, it was not without risk.

“There is no such thing as a free lunch, there is no such thing as risk free debt,” he said.

“It’d definitely be lower risk than credit cards, but it’s not risk-free. It does give you the potential of building up a load of debt that you will have to pay back, especially if you’re not paying it back on time.

“By Now, Pay Later companies make a quarter of their profits from late fees which can build up dramatically over time.”

He said the average amount owed on BNPL systems was “north of $1000”.

“Our advice would be don’t get involved in Buy Now, Pay Later unless you’re going to pay later. That’s the key point.”

BNPL not risk-free

The point is that whoever was lending the money was taking on some risk.

“It’s a lower cost option but it’s definitely not risk-free and you need to be as aware of paying your debt back on that as you would with your credit cards,” Mr Cooke said.

He said the difference between credit card debt and BNPL debt was that with BNPL debt, there was no interest owed to the company.

“The whole balance could be considered debt to a degree because you have to pay it back. It’s not the same nature as credit card debt, it’s not as risky as credit card debt,” Mr Cooke said.

That said, there are many people who might have missed on paying, say, an electricity or gas bill because they owed so much on BNPL.

Finder research showed that one in eight Australians, or 12 percent of the population, had not paid a bill because they owed money to BNPL.

It also showed that cost of living pressures had been in the ‘extreme range’ for a couple of years. Which, he said, is leading more people to BNPL with less ‘risk’.

“So it’s the high cash rate, high interest which is making credit products like BNPL and credit cards essential,” Mr Cooke said.

www.finder.com.au

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

https://shows.acast.com/talkingbusiness/episodes/talking-business-38-interview-with-graham-cooke-from-finder

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Taking the LongView on investing in family home markets

By Leon Gettler, Talking Business >>

IMAGINE a fund that allows property investors to invest in a slice of the more lucrative/better-performing family home market – without either the hassle of being a landlord or owning the entire property outright. 

That describes LongView, a fund partly set up by Evan Thornley.

Mr Thornley, who is also the chair of LongView, said every property market in the world is a trade-off between capital growth and rental yield. 

It turns out that Australia has the best capital growth market in the world “which means as a matter of mathematical certainty it’s one of the worst rental yield markets in the world”.

He said despite this, people kept focusing on rental yields when the real game was capital growth.

“Let’s put this in context. The capital growth on Australian residential property … this year, and pretty much every other year, will be roughly the same size as the entire Federal Government budget,” Mr Thornley told Talking Business.

“$680 billion – roughly four times the size of the earnings of all the companies on the ASX combined.

“The biggest wealth engine in the country – by the length of the strait – is capital growth on residential property and yet there is no way to participate in that other than being a home owner or a landlord.”

LongView provides an opening

This is why Longview was established a decade ago – as a platform for people to invest in home equity as an asset class.

“We’re equity investors, we’re not debt providers, we’re not lenders, we’re not in the mortgage value chain,” Mr Thornley said. “We’re about investing in properties that will have good capital growth and giving investors access to and exposure to a diversified portfolio of high capital growth properties.”

One mechanism to do this is by co-investing with homeowners and home buyers.

“We give them a portion of the equity in their home and they give us a share of the capital growth,” Mr Thornley said.

“But we only do that on properties which we think are highly likely to get very strong capital growth.

“That effectively gives the investors access to high capital growth properties in a diversified portfolio across Sydney, Melbourne and Brisbane. These are all quality family homes typically in the $1-4 million range.

“We give them equity equivalent to roughly 10 percent of the value of the home and they give us a third of the upside.”

Starting from $100,000

Mr Thornley said investors could come in “from as little as $100,000”.

“Most people can find that more accessible than even a single investment property,” he said.

In another part of the business, LongView is the top-ranked rental manager in the country, managing about 4000 rental properties.

In effect, LongView operates much like a managed fund.

“It’s must remarkable to me that there is no managed fund environment in the quality family homes of Sydney, Melbourne and Brisbane. It’s remarkable,” he said.

“The entire managed funds industry in this country has roughly a trillion dollars in it. The landlords of Australia have roughly $2.2 trillion invested in this asset class, most of it badly, so we’re starting to find landlords looking to invest through a fund as well as, or in addition to, or instead of direct investment property ownership.”

www.longview.com.au

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

https://shows.acast.com/talkingbusiness/episodes/talking-business-32-interview-with-evan-thornley-from-longvi

Digital wallets may rule the world by 2027 says Worldpay

By Leon Gettler, Talking Business >>

THE GROWTH of digital wallets is remarkable.

Research conducted by Worldpay, the global company that powers businesses of all sizes to make, take and manage payments, has found the growth of digital wallets is currently close to exponential.

Right now, digital wallets account for 50 percent of all global e-commerce transactions and it will keep growing to 2027, according to Worldpay research.

Worldpay forecasts the digital wallet will be the leading payment method online across all regions in 2027. 

Paul Koopmans, the Australia New Zealand vice-president of Worldpay, said there was a number of factors at play: the decline of the use of cash with the pandemic; the number of digital natives coming in; the extra ease and security of using contactless payments; and trust.

Mr Koopmans said digital wallets in the Asia-Pacific region now accounted for 70 percent of all e-commerce transactions. Much of this was being driven by China, where digital wallets account for 82 percent of transactions processed by apps such as WeChat Pay.

New markets tend to use local providers

Mr Koopmans said major tech companies including Apple, Google and PayPal have a large presence in the Australian, European and US markets but developing nations were now using local providers.

“The use of traditional cards, debit and credit cards, continues to grow but that’s now being used as a pass-through to digital wallets,” Mr Koopmans told Talking Business.

He said one of the big improvements for digital wallets would be in the area of fraud detection.

“As the market continues to digitise, there is a lot of pressure on the industry to ensure there is a lot of mitigation around fraud,” Mr Koopmans said.

He said artificial intelligence and machine learning would play a key role in this.

“There’s a lot of machine learning and AI involved in the patterns of spending with certain consumers but there’s also ways to alert your issuing card provider in terms of when you are going on holiday just to ensure there are no false declines when making purchases online or when you’re overseas,” Mr Koopmans said.

He said Worldpay currently covers 40 billion transactions per year.

“That obviously gives us a rich database of information that we can use (with) merchants not only to detect fraud but also to improve their authorisation rates and top line revenue as well,” Mr Koopmans said.

Geolocation, tokenisation to fight fraud

Mr Koopmans said the use of geolocation and tokenisation would also increase, for digital wallets to prevent fraud.

Mr Koopmans said Apple was one of the first to introduce tokenisation in digital wallets.

“That is where the personal account number on your card is replaced by a token and there is a lot more protection for the consumer and the merchants who handle it,” he said.

Looking at the trends ahead, he saw the digital wallets being incorporated into devices as part of the Internet of Things.

“Everyday devices you interact with will become your payment devices, so whether that’s the car you drive being able to pay for parking, or pay for petrol at the bowser, or even having your fridge as a payment device,” Mr Koopmans said. 

“You may be having payment devices in your active wear that you’re wearing outside. There will be a lot of cases that evolve over time.”

www.worldpay.com

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

https://shows.acast.com/talkingbusiness/episodes/talking-business-28-interview-with-paul-koopmans-from-worldp

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Markets will always react to geo-political events says Sharewise chief

By Leon Gettler, Talking Business >>

THE MARKETS have been reacting to, and will continue to respond, to geopolitical events. Everything from the invasion of Ukraine to the Gaza war to the outcome of the US presidential election in November.

Alex Perry, the managing director of stock investment company Sharewise, said investors were always adjusting to these new realities.

He said when Russia invaded Ukraine in 2020, the US S&P Index fell by 35 percent in the first month. It was quite significant.  

“Generally when a war happens, you get a contraction of global GDP by at least 1-2 percent because what happens is people don’t have the confidence to keep spending or the confidence to keep trading or to keep investing because they’ve de-risked which is only natural,” Mr Perry told Talking Business.

“It there’s a fire you get out of the house, if there’s smoke you get out of the house and it’s basically what we saw during the Ukraine war, which is still going mind you.

“But if you have look now, which is four years afterwards, we’re effectively at all-time highs again ion the S&P and we’re at all-time highs in the Australian markets.”

Markets accommodate conflict

People had more or less acclimatised to the war in Ukraine. Was the response different to Gaza?

“I think the Ukraine invasion was seen geopolitically as more of a risk to global markets than the Gaza war,” Mr Perry said.

For example, the price of oil had been rallying, with Hamas being open to the proposal from the US for a ceasefire.

He said the market was now responding to the prospect of a (former US President) Donald Trump victory in November.

“Like or hate Trump, he’s certainly a polarising character,” Mr Perry said.

“I think Wall Street loves Trump because Trump loves business and Trump loves the stock market.

“He likes using the stock market as a litmus test of his presidency. He’s pro-business, pro-stock market. He’s said he’s pro-Bitcoin and pro-cryptocurrency.

“So Wall Street, traders and stockbrokers are very bullish for a potential Trump victory with less company tax and a rallying market.”

Trade war risk?

While there was concern about Trump re-enacting the trade wars with China, US President Joe Biden was doing the same thing, by imposing tariffs on China as well.

“Trump put them in and while the Democrats like to hate everything that Trump did, they’ve continued a lot of the things that Trump had in place and there’s a continuation there,” he said.

“For instance, the blocking of TikTok in the US market. So all of those things are continuing with those geo-political tensions with China.”

Mr Perry said the stock market had also gone up under the Biden regime after Biden came into the presidency just as the economy was recovering from the Covid lockdown. This saw confidence increasing in the whole global economy.

How would the stock market respond to a Biden victory?

“Let’s not forget, the great thing about politicians is they can paint a very positive picture,” Mr Perry said.

“Nobody knows, I’m guessing, but a Biden victory will be seen as positive as well. [This interview was conducted just prior to President Biden bowing out of the 2024 US Presidential race in favour of Vice President Kamala Harris}.

“Because what the United States wants, and everyone else wants, is a continuation of good times.” 

www.sharewise.com.au

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

https://shows.acast.com/talkingbusiness/episodes/talking-business-25-interview-with-alex-perry-from-sharewise

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Rethink Investing moves fast – but with greater care

By Leon Gettler, Talking Business >>

THE KEY to the Rethink Investing business model is that it is very much like the Virgin brand according to co-founder Scott O'Neill.

It adapts fast to meet the needs and wants of its clients. And, like Virgin, Rethink Investing moves fast, but with a reputation for taking greater care than its rivals. 

Rethink Investing has become Australia’s largest and most experienced buyer’s agency. Since 2015, it assisted more than 3750 clients in acquiring over $4.25 billion worth of real estate.

Rethink has strategically focused on positively-geared, high cashflow investment properties. It has built the wealth of its clients, who are all sophisticated investors and high net worth individuals.

The extraordinary part about the Rethink Investing story is it has expanded from being a commercial property buyer’s agency to a business that focuses on residential buyers and mortgage broking, with a team of property lawyers.

“We have a common goal, a common set of beliefs and values, and ours is all around helping clients build wealth,” co-founder Scott O’Neill told Talking Business. 

“We want to use our knowledge in different aspects for the better of our clients and really help them build that sustainable long-term wealth.

“It’s not a get-rich quick scheme. It’s about helping them invest smartly, leveraging properly, protecting their assets and, obviously, you back them up with insurance and lawyers so they don’t make mistakes and get caught out.”

Assisting time poor clients to amass wealth

Mr O’Neill’s firm does all the due diligence for its clients – which is to be expected as they are all busy people who do not have the time to focus on property investing themselves because they are all dedicated to operating highly successful businesses. 

“They don’t want to spend three hours a day trying to understand the commercial market, bidding on properties, visiting properties, or trying to gain access to off-market deals,” Mr O’Neill said.

“They get us to do all that hard work and leg work and we’re there to lower the risk and bring them more deals than they would be able to see on their own. The idea is that they do better (in the process) with us purchasing at a low price and getting a better yield.

“They know we’re not going to be putting risky deals in front of them.”

Rethink Investing proves its worth

And despite the state of the economy, there is a role for Rethink Investing in building wealth for its clients.

Mr O’Neil said the beauty of the commercial property market was that investors could position deals appropriately.

For example, buying office space at the moment is “not a good idea”.  He said, simply, one wouldn’t go near it with a “10-foot barge pole”.

Similarly, buying a fashion store in a time of high inflation – and the cost of living crisis hitting middle income earners – “would not deliver good returns”.

However, neighbourhood shopping centres since COVID would be good assets, he believed. As would be medical suites – but only “following a process of due diligence”,

While Rethink Investing is a Sydney-based business, it has branches right around Australia, from Perth to Townsville to Hobart.

Interestingly, 25-30 percent of the Rethink Investing workforce are former-clients. 

“They’ve invested, they’ve done well and a lot of them have walked away from their jobs … and they (later) get a little bit bored so why not stay in the property game?” he said.

www.rethinkinvesting.com.au

www.leongettler.com

 

 

 Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

 https://shows.acast.com/talkingbusiness/episodes/talking-business22-interview-with-scott-oneill-from-rethink-

 

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