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How can a finance broker increase the dollar value of their business when they’re ready to exit the industry?

Business people having a conversation

Today, all brokers work hard to establish a good name and reputation to ensure they receive regular referrals and repeat business. Without this, the business is going to go south pretty quickly.

There are lots of good reasons to be a Finance Broker, one of which is the fact that when you are ready to retire or change careers, there is a fairly predictable formula used to calculate the value of your business. There is some certainty in what you can expect to receive (Royal Commission outcomes not withstanding!).

Depending on how and how often you can demonstrate communication with your clients (trail book) can also deliver a better or worse payday for you, as any purchaser of your business will look to take over this relationship. Also, they may pay a bit more for goodwill if there is the guarantee of new business coming in after the sale.

Now, if you compare the formula used to determine the value of a single broking business against the formula used to determine the value of an broking group’s business, you will see a huge discrepancy in the numbers used:

A single broking business could usually expect to receive between 1-2 times the annual trail book income, as well as a bit extra for goodwill, whereas an broking group can receive anything up to a 20 times multiple or more of the revenue of the business.

Why is this so?

There could be many reasons. Some of which are:

  1. The purchaser of an aggregation business could look at the potential to distribute their own products through the broker network, thus increasing profitability;
  2. The broking group could be on a growth trajectory, meaning the purchase calculation could be based on the future potential;
  3. The purchaser may own a similar business, therefore the ability to consolidate duplicated costs will have an instant positive impact of the bottom line;

and so on…

The good news is, there is now a way for broking businesses to seriously multiply the value of their business.

How… by owning a piece of your own broking group!

Purple Circle Financial Services allows brokers to earn shares in the aggregation company, simply by doing what you do, writing loans.

You will still build up the value in your own business as you always have, but now you will also own shares in your own broking group.

This has been described by many brokers who have seized on the opportunity as a ‘no-brainer’.

Once earned, the shares are yours for life, no handcuffs or unfair conditions.

As with all things good, this amazing opportunity is strictly limited and is offered on a first-come, first-in basis.

If you would like to know more, please contact the team.

Small and Medium Enterprises (SME) Guarantee Scheme

The Scheme will enhance lenders’ willingness and ability to provide credit and will be available for new loans made by participating lenders until 30 September 2020.

The Government will provide eligible lenders with a guarantee of 50% per cent of new loans. Some generic terms are:

  • Businesses with a turnover of up to $50 million.

  • Maximum total size of loans of $250,000 per borrower.

  • Loans will be up to three years, with an initial six month repayment holiday.

  • Unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Reduced Interest Rates

Consider your current banking arrangements. The Reserve Bank has recently reduce the cash rate and lenders have passed this on to various loans they have.

Instant Asset Write Off

An increase in the instant asset write-off threshold from $30,000 to $150,000 30 June 2020.

Deferment of Loan Repayments for up to 6 Months

The banks are developing their own approach as to how to deal with requests from their clients for repayment holidays. Some are automatically granting the request, others are assessing the requests individually.