Picking up the bank’s slack

By David Tuckwell on Thursday 29 December 2016

Alternative Lending

Clamping down on banks is a defining issue of our times. 

Banks in Australia take around 3 per cent of GDP, and are some of the most profitable per capita in the world. Polls show that a strong majority want banks taxed more.

The Labor Party is particularly sensitive to banking mischief, and always has been. Under Prime Minister Ben Chifley in the 1940s, the party proposed to nationalise all private banks (it was struck down by the High Court). Today’s ALP, which is pretty tame by contrast, is threatening a Royal Commission.

Few know more about banking than Allen Cullen (pictured above), an industry veteran and former CEO of the Australian Bankers Association. Cullen, who now heads a Melbourne-based corporate advisory firm called the Cullen Capital Group, has launched Channel Finance, a vehicle for funding alternative business which aims to pick up corporate finance customers.

“I saw the pendulum was swinging to a situation where banks were more heavily regulated and a serious gap in the marketplace for alternative finance,” he says. “We decided that we would enter the marketplace because we could provide corporate banking service out of alternative finance sources.

“People’s attitudes towards the banks is very favourable to us. And you feel like you’re on the side of the angels a bit. So we tested this to prove there was a market. Now we’re rolling out and we’re delighted with the demand.”

Channel Finance passed through a two-year beta phase and has now been operating for six months. The group acts as a non-bank lender, sourcing deals and then channelling loans from its wide network of investors. Its funding supply-chain is based mostly in Australia, but to some extent in the US and China too.

Deals tend to be large, typically upwards of $10 million. The company is selective about who they work with. “We see no reason to lend to people who don’t fit into our high quality client base,” says Cullen. The company profits through fees. When approaching a potential client with an offer, the group’s charges are part of the deal.

Going forward, the company plans to continue growing in the alternative finance sector. “We think the market is very large, we aim to be a lot bigger. We want to continue to spread the word and do more to expand.” And though they pick up the slack for the banks, Cullen says his group harbours no hostility towards them: “We’re not antagonistic to the banks.”

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