Tight finance poses growth challenge for advisers
Small financial practices looking to gain scale through acquisition are finding the going tough in circumstances where the major banks are proving unwilling to lend less than $1 million without some form of security.
According to financial planning business brokerage principal, John Birt, the reluctance of the major bank lenders to provide sub-$1 million loans for the acquisition of financial planning businesses is making things for small players looking to gain scale in the changing environment.
“Traditional lenders to financial planners and accountants have raised their minimum loan requirement. The big four banks are now asking for any approved loan to be at least $1 million which has stopped financial planners and accountants from expanding,” Birt said in a client newsletter.
“It has caused several non-traditional lenders to surface to accommodate loans of between $250,000 and $500,000 by merely using the equity in the business they are buying. Naturally, interest rates are higher due to the lender taking on a higher risk,” he said.
Birt said vendor finance was also becoming an alternative if sellers were finding it difficult to attract a suitable buyer who needed traditional finance.
Notwithstanding the attitude of the banks to smaller loans, he said the market for financial planning and accounting practices remained active, particularly in NSW and Western Australia with a number of well-resourced buyers looking for mid-sized practices.
The changed approach on the part of the banks comes at the same time as AMP are faced with key decisions about their future stemming from the company’s new strategy and amid expectations of a class action being filed on behalf of some AMP advisers.
Recommended for you
“Challenging flow patterns” at J O Hambro Capital Management have led to $16.2 billion in asset management outflows for Perpetual in FY25, as its CEO admits the firm can gain new assets but then has problems retaining them.
Income Asset Management is set to launch two managed accounts of investment grade assets and syndicated loans in FY26, responding to adviser demand.
Pengana Capital Group has detailed the impact of its move into private credit, with chief executive Russel Pillemer describing plans to “become a force in the non-institutional market”.
Investment partnership firm Perennial Partners has entered a binding agreement to partner in the development of Ziller Funds Management led by former Maple-Brown Abbott deputy portfolio manager, Joseph Ziller.
