Private credit's field day as big banks revamp small business loanbooks
As banks look to improve the credit quality of their SME loanbooks, private credit and private equity see opportunity amid stress and reduced borrowing options.
The small business lending market is rife with stress - and opportunity. Non-bank lenders like private equity and private credit see a chance to pounce. The banks meanwhile are happy to let customers go even as they grow their market and improve the quality of their book.
The stresses on the sector are not going away as inflation - particularly in services like staff, accounting and legal - continues to bite, higher interest rates constricts demand, and the Australian Tax Office calls in more debts.
So where’s the opportunity? For the banks, there’s a return in lifting the quality of their credits - fewer bad debts down the track - and the chance to use their increasingly sophisticated data to lend against the cash flow and receivables of the customers they want.
They are also constrained by the Australian Prudential Regulation Authority in their lending to SMEs.
