Shared from the 3/27/2018 The Age Digital Edition eEdition

Heat on big four

The big four banks are facing competition in the small business sector with the launch of Judo Capital, which is planning to tap into a $60 billion shortfall in lending to SMEs.

The SME-focused challenger is on track to raise more than $100 million and has applied to become a full bank under the Australian Prudential Regulation Authority’s regulatory framework.

Judo is co-founded by the former head of National Australia’s business bank, Joseph Healy, and NAB alumni David Hornery.

It is looking to tap into demand for lending in the market that is not being met, with a Macquarie bank 2015 report identifying a shortfall of $60 billion for the SME segment.

Small Business and Family Enterprise Ombudsman Kate Carnell says Judo’s launch is well timed with the shortfall continuing to grow. ‘‘There is no competition,’’ Ms Carnell said. ‘‘The big four banks have 80 per cent-plus of the SME lending market and they mostly don’t lend except if it is secured against property and that means access to capital is very difficult for many SMEs.’’

Judo is heavily influenced by the challenger banks in Britain that emerged after the global financial crisis, including Aldermore, Shawbrook and Oak North.

‘‘We saw a huge opportunity to go back to relationship-centric banking, which is banking as it used to be and banking as it should be,’’ Mr Healy said.

Judo will focus on the ‘‘four C’s of banking’’, the character and risk profile of the consumer, the cash flows in the business, the existing capital base and the collateral which is security to support the lending.

‘‘There has been a growing level of dissatisfaction of small to medium-size businesses with the service proposition they have been receiving from banks, a one-sizefits-all cookie cutter approach to lending with a heavy bias to real estate-based lending,’’ Mr Hornery said.

The bank will operate through a mobile banker workforce who will go to a customer’s premises rather than through a branch network.

‘‘At a practical level we will turn everything around in five days, we have a judgment-based lending service that looks at the complete business picture,’’ Mr Hornery said. ‘‘It takes one person to say yes and two people to say no. The banker sitting across the table from the customer is actually empowered to make decisions.’’

Judo defines SMEs as businesses with under $20 million turnover and Mr Healy said Judo would be very different to fintech lenders.

‘‘While we absolutely have cutting edge technology, we don’t define ourselves by that technology we define ourselves by the relationship proposition,’’ he said.

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