Judo Capital throws its weight into the SME ring

By Chong-Wen Hong on 4th April 2018

P2P/Marketplace Lending

With a specific focus on SMEs, this new challenger has applied to be a full bank.

Judo Capital throws its weight into the SME ring

There remains a AU$60 billion shortfall in funding for Australian SMEs with the country’s four 'Big Banks'. Judo aims to fit this niche role, adapting a ‘Judo Strategy’ that targets the underbanked SME sector. Headquartered in Melbourne, the bank is expected to raise AU$100 million in funding by April.

Founded by former head of National Australia’s business bank Joseph Healy and National Australia Bank alumnus David Hornery, Healy noted that he “saw a huge opportunity to go back to relationship-centric banking”, praising the UK’s own challenger bank movement as an influence.

Judo expects its smaller size to be an advantage over the Big Four. Their ‘Judo Strategy’ pens out using speed and creativity to ‘defeat’ their stronger rivals. Hornery expects loan applications to be considered in around five days. “The banker sitting across the table from the customer is actually empowered to make decisions.”

A nation of small and medium enterprises looks for alternatives

Australia’s SMEs number at about 2.1m companies, employing around 68 per cent (7.3m) of the country’s workforce. Yet there is noted dissatisfaction with the ability of SMEs to secure lending leading to the rise of alternative funding. SMEs intending to use traditional banks dropped from 38 per cent to 24 per cent. The Big Four Banks do not tend to lend unless it is secured against property, a difficult tasks for many SMEs.

The Big Four currently hold about 80 per cent of the SME market with the remaining serviced by alternative lenders. However, these online lenders tend to focus on the ‘small’ end of SME business lending, under AU$50,000. Judo intends to service larger companies and wants to bring “back the craft of SME lending”.

Minding the gap for SMEs

Numerous alternative lenders have emerged to fill the 'under $100,000 unsecured business loan' category but the question is what is available for larger businesses, particularly in asset-light services industries.

Dermot Crean, founder and co-director of Allbridge Capital notes that larger SMEs employing between 20-199 staff make a disproportionate economic contribution compared to other firms.

“The number of businesses in this key segment has been stuck at just over 50,000 firms since 2012. About 2.6 million jobs are involved, mostly in services sectors. That’s 1 in every 4 jobs in the private sector.”

He questions what is holding them back.

“Is growth finance a demand or supply problem in this segment? Are these businesses actually getting the access to credit that they need to grow when our banking system is directing most of its capital at home loans and mortgage-backed small business lending?”

Judo is not the only bank seizing on the SME funding shortfall. Tyro, launched in 2004, also specialises in SME banking and prides itself in responding to the banking needs of SMEs. The company recently launched a ‘Tap & Save’. Bronwyn Yam, Director of Product at Tyro noted the popularity of contactless with SME owners. “Our aim is to remove barriers from business success”.

Interested in the challenges of Australian SMEs? Then join our panel leaders of Australia’s alternative lending industry, David Hornery, CEO of Judo Capital, Dermot Crean of Allbridge Capital and Bronwyn Yam of Tyro at AltFi’s Australasia Summit 2018, 16th April in Sydney. Register now for Early Bird ticket prices.

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