The main banks historically have had a mixed appetite for taking on new to bank business & commercial lending clients. We are currently seeing a significant increase in appetite for new to bank business within our client base, driven by factors such as:

1. Economic conditions

The weaker economic environment means there is less lending growth in the “system”. Banks are keen to win new business, as the only way to grow their lending books is to win a bigger slice of the pie.

1. Relative returns on equity impacted by the amount of capital banks need to hold for different lending types

Regulatory provisions require more capital to be set aside for business lending than for home mortgage lending. At times, this can limit bank appetite to aggressively grow their business and commercial lending portfolios, as basically when residential lending is booming, it is more attractive for them to focus in that area. Currently, residential property lending is slow. Banks therefore have the desire to grow business and commercial lending.

1. Human factors

During the post-Covid “sugar rush” economy some banks had very limited appetite for new to bank business. Their teams were flat out servicing existing clients, and they were growing as fast as they wanted to from their existing client base. At the same time, regulatory changes meant banks reduced sales targets and bonuses for their front-line bankers. These factors reduced the incentive for individual bankers to write new business. Individual bankers are being challenged to drive new to bank growth as a key target due to the weaker economy.

Finance companies, both in asset finance and in the property sector, tend to be more aggressive about new client acquisition, but even their appetite for new business can fluctuate. Most commonly, the amount of liquidity they hold impacts their willingness to stretch the edges of their usual appetite. Currently, many non-bank lenders have good cash reserves and are aggressively chasing business, both for asset finance, working capital, and non-bank property lending.

For businesses with good financial strength and sustainable businesses, the bank appetite to compete for a deal is the highest we have seen for some years. Our clients benefit from our capacity to identify opportunities and place them on the right desk across our panel of funding partners. We can create competitive tension between lenders, and in some cases substantial interest cost and structural benefits are being achieved.

Below are some recent examples:

• Client request: Refinance of $5M commercial lending for a strong client operating in the retail industry.
  Reason for request: Existing main bank being non-responsive, and not engaged with the client.
  Solution achieved: We had strong interest from three other banks for this business. We achieved tens of thousands of interest cost savings, $20K cash back on residential debt refinanced as part of the package. In addition, we achieved a much more engaged main bank relationship.
  
• Client request: Refinance of $1.5M for a trade plumbing business
  Reason for request: To Create more efficiency and move client away from a call centre bank relationship to an engaged commercial bank team.
  Solution achieved: Reduced fixed debt repayment outgoings by half, and interest rate reduced by about 1.5%.

• Client request: Mix of new and refinanced $2.5M existing lending
  Reason for request: To support growth in a specialist private medical practice.
  Solution achieved: Funded with a GSA only, ensuring that the personal properties of the Shareholders were not direct supporting securities. Multiple banks showed interest in the transaction, and we obtained significant interest cost savings.

• Client request: Refinance of $3.5M Lending
  Reason for request: To move from a second tier non-bank funder to a main bank.
  Solution achieved: The lending was tendered across main banks. Lending was secured by commercial property. Two banks competed aggressively for the lending, and the funding structure will save the client hundreds of thousands of dollars in fees, rates, and have a more flexible funding structure.
  
• Client request: New $4M property lending
  Reason for request: Source the most suitable market solution for new lending based on structure and interest cost.
  Solution achieved: Two offers were received, one with an annual interest cost of $374,000 and the other with an annual interest cost of $262,000. As a result of sourcing best in market offers, we were able to save our client $275,000 of interest over a two year period.

Now is the ideal time to work with your Finance New Zealand adviser to assess your wider finance banking relationship.