1 00:00:05,790 --> 00:00:08,100 Sean Aylmer: Welcome to the Fear and Greed Business Interview. I'm Sean 2 00:00:08,340 --> 00:00:11,610 Sean Aylmer: Aylmer. More small and medium- sized businesses are being knocked 3 00:00:11,610 --> 00:00:15,210 Sean Aylmer: back for loans due to tax debt. As the ATO 4 00:00:15,210 --> 00:00:18,629 Sean Aylmer: cracks down on SMEs that owe money, the Banjo SME 5 00:00:18,629 --> 00:00:21,480 Sean Aylmer: Business Barometer is being released today and Fear and Greed 6 00:00:21,480 --> 00:00:23,880 Sean Aylmer: got an early look at the report. It reveals the 7 00:00:23,880 --> 00:00:28,260 Sean Aylmer: state of Australian small businesses. The barometer, released quarterly by non- 8 00:00:28,260 --> 00:00:32,069 Sean Aylmer: bank lender, Banjo Loans, also reveals that arrears management is 9 00:00:32,070 --> 00:00:35,609 Sean Aylmer: under control for all industries with one key exception: retail. 10 00:00:35,850 --> 00:00:38,070 Sean Aylmer: It's interesting to go through this data because the post- 11 00:00:38,100 --> 00:00:41,820 Sean Aylmer: COVID world has certainly hit that small and medium- sized 12 00:00:41,820 --> 00:00:44,970 Sean Aylmer: business space. The number of companies appointing administrators hit a 13 00:00:44,970 --> 00:00:47,700 Sean Aylmer: record high. In March, for example, it was about 1, 100. 14 00:00:48,030 --> 00:00:51,539 Sean Aylmer: That's the first time since 2015 that insolvencies rose above 15 00:00:51,540 --> 00:00:54,389 Sean Aylmer: a thousand in a single month. Guy Callaghan is the 16 00:00:54,420 --> 00:00:57,300 Sean Aylmer: CEO of Banjo Loans. Guy, welcome to Fear and Greed. 17 00:00:57,810 --> 00:00:59,250 Guy Callaghan: Thanks, Sean. It's great to be here. 18 00:00:59,580 --> 00:01:04,440 Sean Aylmer: What's the main message from your index, from the barometer? 19 00:01:04,950 --> 00:01:08,002 Guy Callaghan: Oh, there's a few really, but the main (inaudible) 20 00:01:08,160 --> 00:01:10,739 Guy Callaghan: I really think is that SME businesses have been doing 21 00:01:10,740 --> 00:01:13,259 Guy Callaghan: it tough for quite a while now. So COVID came 22 00:01:13,260 --> 00:01:16,380 Guy Callaghan: along and then we had a bit of a bounce 23 00:01:16,380 --> 00:01:18,510 Guy Callaghan: here back in '22, and then '23 has been a 24 00:01:18,510 --> 00:01:21,719 Guy Callaghan: really tough year for them. And they're still doing that 25 00:01:21,719 --> 00:01:25,410 Guy Callaghan: pretty tough. So we just watch it pretty warily on 26 00:01:25,410 --> 00:01:27,690 Guy Callaghan: where the businesses are going. We look at our data 27 00:01:27,870 --> 00:01:30,389 Guy Callaghan: all the time, obviously, and they release this report once 28 00:01:30,389 --> 00:01:33,959 Guy Callaghan: a quarter. And it's just really interesting seeing which industries 29 00:01:33,959 --> 00:01:36,630 Guy Callaghan: are doing well, which states are doing well. Your point 30 00:01:36,630 --> 00:01:40,679 Guy Callaghan: around the ATO debt is something that the ATO have 31 00:01:40,679 --> 00:01:44,490 Guy Callaghan: been pretty fierce on calling back debt at the moment. 32 00:01:44,880 --> 00:01:47,159 Guy Callaghan: So the businesses come to us with looking for a 33 00:01:47,160 --> 00:01:51,030 Guy Callaghan: loan and they have ATO debt, we're a little bit wary 34 00:01:51,030 --> 00:01:53,640 Guy Callaghan: on it and just make sure that they're well set up 35 00:01:53,640 --> 00:01:56,970 Guy Callaghan: with their income and more well set up with the ATO. 36 00:01:57,870 --> 00:02:00,810 Sean Aylmer: Do small businesses kind of use the ATO as a 37 00:02:01,500 --> 00:02:03,540 Sean Aylmer: bank, for want of a better term, or a non- 38 00:02:03,540 --> 00:02:06,000 Sean Aylmer: bank for that matter, but the idea that if they've 39 00:02:06,000 --> 00:02:10,440 Sean Aylmer: got tax to pay, they kind of just, well, obviously 40 00:02:10,440 --> 00:02:12,930 Sean Aylmer: they're not paying it, but is it a mindset thing? 41 00:02:13,200 --> 00:02:14,400 Sean Aylmer: Why aren't they paying it? 42 00:02:14,820 --> 00:02:19,709 Guy Callaghan: Yeah, look, you've hit the nail on the head there, particularly during COVID, 43 00:02:19,710 --> 00:02:23,578 Guy Callaghan: they really used it as a quasi- bank really where, 44 00:02:23,850 --> 00:02:26,280 Guy Callaghan: let's just hold out on paying the ATO because the 45 00:02:26,700 --> 00:02:30,870 Guy Callaghan: ATO was being soft on government directions too, to help 46 00:02:30,870 --> 00:02:35,369 Guy Callaghan: businesses during that really, really tough time. That continued and 47 00:02:35,370 --> 00:02:38,070 Guy Callaghan: some of the businesses let that get a little bit 48 00:02:38,070 --> 00:02:40,199 Guy Callaghan: higher than it should have, which then became a scary 49 00:02:40,199 --> 00:02:44,370 Guy Callaghan: prospect to start to get under control. So that relaxed 50 00:02:44,460 --> 00:02:48,150 Guy Callaghan: nature of the business owner could be now coming back 51 00:02:48,150 --> 00:02:52,650 Guy Callaghan: to bite them because the ATO was soft, but now 52 00:02:52,650 --> 00:02:55,920 Guy Callaghan: it's really coming back and they need to stop using the ATO as their bank. 53 00:02:55,920 --> 00:03:03,419 Sean Aylmer: Okay. So what are the areas that you as a lender, Banjo Loans 54 00:03:03,419 --> 00:03:07,770 Sean Aylmer: as a lender are seeing struggling more, which sectors are 55 00:03:07,770 --> 00:03:10,828 Sean Aylmer: doing okay? You mentioned that you have data on geographies 56 00:03:10,830 --> 00:03:13,649 Sean Aylmer: in that too. I want to get a feel for 57 00:03:13,650 --> 00:03:16,260 Sean Aylmer: it, where construction sits, where retail sits, et cetera. 58 00:03:17,459 --> 00:03:21,418 Guy Callaghan: Yeah, look, it's really wide and varied. The services industry and 59 00:03:21,450 --> 00:03:25,079 Guy Callaghan: health and pharmaceutical type industry are going really, really well. 60 00:03:25,320 --> 00:03:29,070 Guy Callaghan: So healthcare, social assistance, that side of things. Services, as 61 00:03:29,070 --> 00:03:32,008 Guy Callaghan: we know, are going well, and they're still quite inflated 62 00:03:32,008 --> 00:03:35,969 Guy Callaghan: with their prices at the moment because everybody's still paying them. The ones 63 00:03:35,969 --> 00:03:41,430 Guy Callaghan: that are really struggling are retail and hospitality particularly, mainly 64 00:03:41,430 --> 00:03:46,020 Guy Callaghan: because the consumer's been really hurt during this time with 65 00:03:46,139 --> 00:03:49,889 Guy Callaghan: inflation, rising interest rates so that they're starting to really 66 00:03:49,889 --> 00:03:52,589 Guy Callaghan: tighten their belts, which is now having a pretty strong 67 00:03:52,619 --> 00:03:56,910 Guy Callaghan: flow on effect to the retail industry. Manufacturing has also 68 00:03:56,910 --> 00:04:00,660 Guy Callaghan: started to take a slowdown of late. The ones that 69 00:04:00,930 --> 00:04:05,490 Guy Callaghan: has surprised us till now is construction. And it's not 70 00:04:05,490 --> 00:04:07,830 Guy Callaghan: to say there's not businesses out there that are hurting 71 00:04:07,830 --> 00:04:10,500 Guy Callaghan: because we've all seen it in the news, but things like 72 00:04:10,709 --> 00:04:16,560 Guy Callaghan: the Victorian, the government initiatives on infrastructure really helped a 73 00:04:16,560 --> 00:04:20,969 Guy Callaghan: lot of construction businesses. So they were going okay, but 74 00:04:21,178 --> 00:04:23,160 Guy Callaghan: we are seeing a slowdown in that as well now. 75 00:04:23,190 --> 00:04:29,999 Guy Callaghan: So yeah, it's really mixed across different industries. The states, what 76 00:04:30,000 --> 00:04:33,419 Guy Callaghan: we're seeing recently is a real slowdown in Victoria and 77 00:04:33,420 --> 00:04:37,349 Guy Callaghan: New South Wales, which is not great considering they're our 78 00:04:37,350 --> 00:04:42,210 Guy Callaghan: two largest states economies in Australia, and they really drive the 79 00:04:42,210 --> 00:04:47,159 Guy Callaghan: whole economy. Queensland and WA until now have been going 80 00:04:47,250 --> 00:04:51,330 Guy Callaghan: okay. And I think the thing that's driving that mainly 81 00:04:51,390 --> 00:04:55,710 Guy Callaghan: is that they're rural- based, they're mining- based, so they're really 82 00:04:56,099 --> 00:05:00,178 Guy Callaghan: looking at investing in asset finance type products to get 83 00:05:00,178 --> 00:05:03,180 Guy Callaghan: them going. So we're still seeing a lot of inflow from there, 84 00:05:03,540 --> 00:05:06,960 Guy Callaghan: but they're not much in the business lines sets of things. 85 00:05:07,650 --> 00:05:09,359 Sean Aylmer: Stay with me, Guy. We'll be back in a minute. 86 00:05:16,440 --> 00:05:20,039 Sean Aylmer: I'm speaking to Guy Callaghan, chief executive officer of Banjo 87 00:05:20,040 --> 00:05:25,049 Sean Aylmer: Loans. What about how businesses are managing their money? Now, 88 00:05:25,050 --> 00:05:27,690 Sean Aylmer: obviously, if they've got an ATO debt, that's something that 89 00:05:27,690 --> 00:05:31,200 Sean Aylmer: they will have to repay, but SMEs often live and 90 00:05:31,200 --> 00:05:35,339 Sean Aylmer: die on cash flow. Are you seeing them managing their 91 00:05:35,339 --> 00:05:38,580 Sean Aylmer: cash flow okay given the time of the economic cycle, 92 00:05:38,730 --> 00:05:40,649 Sean Aylmer: and particularly when they're coming to you for a loan? 93 00:05:41,399 --> 00:05:45,210 Guy Callaghan: Yeah. Some (inaudible) . And I might take, we release, 94 00:05:45,210 --> 00:05:48,719 Guy Callaghan: also release an annual report of the SME compass where 95 00:05:48,720 --> 00:05:53,010 Guy Callaghan: we survey over a thousand Australian SMEs, and that came 96 00:05:53,010 --> 00:05:55,919 Guy Callaghan: out about a month and a bit ago. So I'll use a bit 97 00:05:55,920 --> 00:05:59,160 Guy Callaghan: of data from that as well. But what we saw 98 00:05:59,219 --> 00:06:02,279 Guy Callaghan: towards the end of last year, and particularly the first 99 00:06:02,279 --> 00:06:07,529 Guy Callaghan: few months this year, was a spike in less than thirty- 100 00:06:07,529 --> 00:06:10,500 Guy Callaghan: day arrears, which means people were really managing their cash 101 00:06:10,500 --> 00:06:12,928 Guy Callaghan: flow that well. They were bought out a bit, they 102 00:06:12,928 --> 00:06:15,719 Guy Callaghan: thought revenue flows were still going to flow, and then 103 00:06:15,719 --> 00:06:19,109 Guy Callaghan: the higher interest rates started to bite them and they 104 00:06:19,110 --> 00:06:23,820 Guy Callaghan: were bought out a bit. Since that time, we've really, 105 00:06:23,880 --> 00:06:27,118 Guy Callaghan: in probably the last three months, so the last quarter, 106 00:06:27,120 --> 00:06:30,510 Guy Callaghan: we've really seen a shift in businesses being on top 107 00:06:30,570 --> 00:06:35,939 Guy Callaghan: of their cash flow, and therefore they're low repayments on that side. 108 00:06:36,450 --> 00:06:38,010 Sean Aylmer: A shift in a positive manner? 109 00:06:38,010 --> 00:06:41,549 Guy Callaghan: A positive manner for us. Yeah, yeah. Positive manner for being able to manage their 110 00:06:41,550 --> 00:06:44,700 Guy Callaghan: arrears and sorry, us manage the arrears and them manage 111 00:06:44,700 --> 00:06:48,959 Guy Callaghan: their actual repayment timeframe and frequency. And I think it's 112 00:06:48,960 --> 00:06:53,159 Guy Callaghan: just becoming more of a normal market setup in their 113 00:06:53,160 --> 00:06:56,880 Guy Callaghan: own mindset. And so, the craziness, like you think of 114 00:06:56,880 --> 00:07:00,690 Guy Callaghan: the retail guys with the retail industry with COVID, they 115 00:07:00,690 --> 00:07:04,290 Guy Callaghan: were gangbusters, so were manufacturing, and all this revenue was 116 00:07:04,290 --> 00:07:08,700 Guy Callaghan: flowing in just because of online sales. And now that's 117 00:07:08,700 --> 00:07:11,339 Guy Callaghan: slowed down and everybody's starting to hurt, so they got 118 00:07:11,430 --> 00:07:15,030 Guy Callaghan: bought out a little bit with managing their repayments. But now they seem 119 00:07:15,030 --> 00:07:17,700 Guy Callaghan: to have that back into control as they've got used 120 00:07:17,700 --> 00:07:20,489 Guy Callaghan: to the new real. What we have noticed they're doing, 121 00:07:20,490 --> 00:07:26,910 Guy Callaghan: and this came out of our SME Compass survey, is in 2023 was kind 122 00:07:26,910 --> 00:07:30,690 Guy Callaghan: of a year or 2022, '23 was a year of increasing 123 00:07:30,690 --> 00:07:35,280 Guy Callaghan: prices as inflation went about. Now, over the last six 124 00:07:35,280 --> 00:07:39,030 Guy Callaghan: to eight months, they've really focused on decreasing their cost 125 00:07:39,030 --> 00:07:42,000 Guy Callaghan: space. So what can we do to save money? What 126 00:07:42,000 --> 00:07:44,789 Guy Callaghan: can we do to be more efficient rather than trying 127 00:07:44,790 --> 00:07:47,129 Guy Callaghan: to increase the prices because we know the consumers aren't 128 00:07:47,129 --> 00:07:50,850 Guy Callaghan: going to pay more now? So it's been a mental shift and 129 00:07:50,850 --> 00:07:52,320 Guy Callaghan: a bit of a change in shift in the way 130 00:07:52,320 --> 00:07:55,260 Guy Callaghan: they actually deal with the new realities they're living in. 131 00:07:55,980 --> 00:07:58,980 Sean Aylmer: Are they still asking for as much money as they 132 00:07:58,980 --> 00:07:59,790 Sean Aylmer: were previously? 133 00:08:00,120 --> 00:08:03,330 Guy Callaghan: Yeah, they are. They are. So I'm still seeing applications up. So 134 00:08:04,170 --> 00:08:07,560 Guy Callaghan: the Banjo Barometer, the quarterly data showed, what it showed 135 00:08:07,560 --> 00:08:11,130 Guy Callaghan: was, even though, look, historically, the last quarter we have 136 00:08:11,130 --> 00:08:15,959 Guy Callaghan: is usually the softest in application data that we get 137 00:08:16,139 --> 00:08:19,109 Guy Callaghan: throughout the year, the third quarter of the financial year. 138 00:08:19,500 --> 00:08:22,140 Guy Callaghan: However, what we saw was it was still the softest 139 00:08:22,199 --> 00:08:27,180 Guy Callaghan: of the quarters, however, it was up about 28 to 30% from 140 00:08:27,180 --> 00:08:33,210 Guy Callaghan: the year before. So they're still asking for money. And the good businesses now that are knowing how to manage 141 00:08:33,210 --> 00:08:35,939 Guy Callaghan: their money well are the ones that are coming, because 142 00:08:36,870 --> 00:08:39,450 Guy Callaghan: I think what's happening is they understand now that there 143 00:08:39,450 --> 00:08:42,600 Guy Callaghan: won't be any more rate rises. So there's a little bit 144 00:08:42,600 --> 00:08:46,559 Guy Callaghan: of feeling of contentment of where the market's at and 145 00:08:46,559 --> 00:08:50,069 Guy Callaghan: that they know where things are going. Whereas all of 146 00:08:50,070 --> 00:08:52,001 Guy Callaghan: last year, all we got was rate rises and (inaudible) 147 00:08:52,001 --> 00:08:55,679 Guy Callaghan: . It scared them. So now the new businesses, sorry, the 148 00:08:55,679 --> 00:08:59,760 Guy Callaghan: strong businesses, they are planning well, can actually start to 149 00:08:59,760 --> 00:09:02,520 Guy Callaghan: plan for the future and how they're doing things. So we're 150 00:09:02,520 --> 00:09:05,578 Guy Callaghan: still seeing really good volumes in loan applications. 151 00:09:06,450 --> 00:09:09,539 Sean Aylmer: Okay. So the takeaway for a small business owner listening 152 00:09:09,540 --> 00:09:13,078 Sean Aylmer: to this, if they're going to Banjo Loans, you want 153 00:09:13,080 --> 00:09:15,929 Sean Aylmer: a loan, make sure you've got your tax paid, or 154 00:09:15,929 --> 00:09:20,010 Sean Aylmer: at least have a payment plan. And I presume, what 155 00:09:20,010 --> 00:09:22,410 Sean Aylmer: else would they need? Make sure cashflow is all right 156 00:09:22,800 --> 00:09:24,150 Sean Aylmer: so that they can repay? 157 00:09:24,780 --> 00:09:28,110 Guy Callaghan: Yeah, look, essentially. So we want to see if there 158 00:09:28,110 --> 00:09:32,759 Guy Callaghan: is ATO debt that is under a plan or they have engaged 159 00:09:32,759 --> 00:09:36,210 Guy Callaghan: with the ATO. You want to see that their forecasts. 160 00:09:36,330 --> 00:09:38,340 Guy Callaghan: We also look at a bit of their forecasts, where 161 00:09:38,340 --> 00:09:41,340 Guy Callaghan: necessary, for those larger lines to see what they're doing 162 00:09:42,090 --> 00:09:44,910 Guy Callaghan: in there with their client, where their revenue is coming 163 00:09:44,910 --> 00:09:48,809 Guy Callaghan: from, and their debtors and creditors obviously under control. So 164 00:09:48,870 --> 00:09:52,170 Guy Callaghan: we can see good cashflow management within the business, then 165 00:09:52,379 --> 00:09:55,949 Guy Callaghan: we're happy to start looking at lending them money too. 166 00:09:55,949 --> 00:10:00,088 Guy Callaghan: If their finances and everything's all over the place, then 167 00:10:00,360 --> 00:10:03,000 Guy Callaghan: you're really pushing things to try and get a loan 168 00:10:03,000 --> 00:10:06,480 Guy Callaghan: from anyone, and the banks have got harder and harder. 169 00:10:06,480 --> 00:10:09,240 Guy Callaghan: So the non- bank lending sector where we play is 170 00:10:09,240 --> 00:10:11,338 Guy Callaghan: probably the area where they are going to get some 171 00:10:11,850 --> 00:10:15,600 Guy Callaghan: joy, but we also want to see them being in 172 00:10:15,600 --> 00:10:17,820 Guy Callaghan: a really strong cashflow management position. 173 00:10:18,300 --> 00:10:20,010 Sean Aylmer: Guy, thank you for talking to Fear and Greed. 174 00:10:20,250 --> 00:10:21,420 Guy Callaghan: No problem. Thanks a lot, Sean. 175 00:10:21,690 --> 00:10:24,630 Sean Aylmer: That was Guy Callaghan, the CEO of Banjo Loans. This 176 00:10:24,630 --> 00:10:26,969 Sean Aylmer: is the Fear and Greed Business Interview. Join us every 177 00:10:26,969 --> 00:10:29,279 Sean Aylmer: morning for the full episode of Fear and Greed, daily 178 00:10:29,279 --> 00:10:32,010 Sean Aylmer: business news for people who make their own decisions. I'm 179 00:10:32,010 --> 00:10:33,480 Sean Aylmer: Sean Aylmer, enjoy your day.