It wasn’t until a new interstate highway reduced traffic to Colonel Sanders’ modest fried chicken shop and left him nearly broke that he decided to pack up his pressure cooker, his unique blend of 11 herbs and spices, and start selling his recipe to restaurant owners around the country.

Many mortgage advisers today find themselves at a similar crossroads. With the housing market facing headwinds, more are looking beyond residential properties to secure their financial future with lending to small-to-medium enterprises (SMEs) – a $20bn industry that's beckoning advisers to expand their horizons.

Like Colonel Sanders, mortgage advisers are sitting on a goldmine without realising it. According to industry estimates, some 40% of mortgage holders who use brokers are also small business owners. These clients, already in the adviser's database, represent a latent asset waiting to be activated.

"These customers are already in your database and are most likely looking for access to capital,” says Camilla Tumai, NZ general manager at leading non-bank SME lender Bizcap. "You're already the trusted source for mortgages, so by partnering with the right lenders, you can be their trusted source for business loans as well."

Tumai points out that by adding commercial lending to their product offering, mortgage advisers can earn additional income without cannibalising their existing business. She explains that

It's a side hustle in your own business.

Navigating the transition into SME lending

For mortgage advisers considering the leap into SME lending, Bizcap recommends a three-step approach: understand, educate and leverage.

Understand your clients

The first step is to analyse your existing client database. How many are self-employed? These small business owners are likely already taking out loans for their businesses, either directly from lenders or through another adviser.

Educate yourself and your clients

Next, advisers need to educate themselves on SME loans and where to find them. Obtaining funds from non-bank lenders like Bizcap is far less complicated than securing a mortgage; all that’s required for a conditional approval is the client’s name, contact details and bank statements.

Equally important is educating clients about this new offering. Senior business development manager Nathan Evans suggests opening conversations with questions like, "How is your cash flow going?" or "What business opportunities did you say no to in the last six months because you didn't have the necessary funds?"

Leverage lender support

Finally, advisers should take advantage of the expertise and support offered by non-bank lenders. Bizcap, for instance, provides a range of resources, from marketing templates to educational webinars, events and one-on-one information sessions.

Moreover, when an adviser joins Bizcap’s network, they’re assigned a dedicated business development manager and adviser support specialist who can assist with enquiries, workshop scenarios and ensure efficient funding.

For advisers who lack time or expertise in SME deals, Bizcap offers a 'Tick 'n' Flick' referral model. "We aim to make it easy for our referral partners: we equip you with the content to craft engaging email communications that you can send out to your database with a custom Bizcap referral link. The customers then flow into our system with your referral details noted, our in-house team acts on your behalf, and you get paid the commissions," Del Rio explains.

A unique approach to approving deals

Bizcap has emerged as a game-changer in the SME lending space, having funded $1bn in loans while maintaining a stellar 4.9/5 TrustPilot rating. Unlike traditional lenders who often look for reasons to decline a deal, Bizcap actively seeks ways to support viable businesses in achieving their goals.

Tony Truong, Bizcap's chief credit officer, explains the unique approach: "When assessing a small business' loan application, we focus on their current cash flow and, though we do take their history into account, we don't let past blemishes like defaults or low credit scores automatically disqualify them. Instead, we assess real-time potential and believe in giving businesses a chance to rebuild."

This holistic approach to credit assessment allows Bizcap to approve 76% of eligible loan applications, often supporting businesses that other lenders might reject.

One plumbing business owner, for example, was turned down by both his bank and another non-bank lender due to his industry and an existing tax debt. Bizcap, however, saw potential in his long-standing business with good cash flow and account conduct.

The business owner credits the loan from Bizcap with saving his operation, citing the speed, the personable approach, and the willingness to listen to his story rather than just look at the financials.

Another factor that sets Bizcap apart is speed. Time is often of the essence with business opportunities, and Bizcap has positioned itself as a leader in this space, offering loan approvals in as little as three hours with same-day funding.

This speed is not just about convenience; it's a crucial factor in helping businesses keep up with a changing and competitive marketplace. Whether it's purchasing discounted stock, refurbishing premises, securing a new block of land for development or expanding operations, quick access to funds can make all the difference.

A win-win situation

The benefits of this diversification extend beyond the advisers themselves. Small businesses in New Zealand are increasingly looking for alternatives to traditional bank financing. A recent study by CPA Australia Asia-Pacific found that around 52% of New Zealand small businesses did not use banks as their main source of finance in 2023.

In fact, around 66% of small businesses in New Zealand report difficulty in accessing external finance. This underscores the importance of open-minded lending practices like those espoused by Bizcap.

As mortgage advisers evolve into finance advisers, they're not just safeguarding their own businesses against market fluctuations; they're also providing a valuable service to SMEs struggling to secure funding through traditional channels.

As markets ebb and flow, the ability to offer a comprehensive suite of services is becoming increasingly important. By embracing SME lending, mortgage advisers can move beyond simple survival – they can blossom, one small business at a time.

Much like Colonel Sanders, who converted latent potential into new business in the face of adversity, today's mortgage advisers are finding that diversification into SME lending could be their own secret recipe for success in a challenging market.

This article first appeared in Good Returns NZ