Broker News – CFI Tools – Customer Quote Tool

Quote - Save - Send

Did you know that you can quickly quote your customers directly from the CFI broker portal, and any resulting finance application links straight back to you!

CFI’s quote tool allows you to quickly and easily estimate pricing for a range of scenarios and save it for future reference or use it to kick start the application process on simple transactions.

If you choose to, you can send quotes directly from within the CFI broker portal. Your customer will receive an email that let’s them know you’ve originated the request. We’ll also include your mobile number and email address for any queries.

If the customer clicks the application link in the email they’ll be taken to our short-form application to get the process started, and any application will be linked back to your broker-ID automatically.

Callouts

Quickly check pricing for a range of different scenarios and deal types

Save quotes for your own reference, or go back and edit them if required

If you choose to send a quote to a customer we'll tell them it has been sent at your request, we'll include your contact information, and we'll link any resulting application back to you!

Heating Business Acquisition

Business Acquisitions made easy with CFI

Michael is an engineer, with experience in installing and maintaining a wide variety of equipment types. When the opportunity to purchase this established and profitable heating business arose due to the owner relocating, Michael knew that it was the perfect opportunity to leverage his experience and become his own boss.
Couple_buying_busines_with_cfi

With the help of his finance broker and CFI, Michael was able to pull together a purchase offer for this established and profitable business.

The purchase required a number of elements to come together with contributions from family helping Michael get some ‘skin in the game’, and an amount of vendor finance bridging the gap to help make the deal happen.

It's never just one thing...

Almost every deal is the final result of a complex range of inputs, from servicing to security, from the experience and history of the applicant to the agreements with other parties such as landlords, vendors, and more. It’s this ‘on balance’ approach to transactions that makes CFI different, with a deeper dive into those applications that our brokers truly believe make sense.

What's the vibe?

Michael and his partner did own their own home, but as a recent build and without significant owner equity, other lenders hadn’t really taken this into account. For CFI home ownership showed stability and tenacity on the part of the applicant. Seldom is it all about the equity sometimes it’s more about the vibe.

How much can CFI lend?

This is a question we were asked and it’s one hear often. We get it, it would make life easier if we could always give a straight answer. The basic answer is that it depends on what the borrower can service (taking into account expected business income), but of course there are other factors at play such as tangible security and industry appetite. In short though we’re looking for applicants that show us (with their broker’s help) how much they need and that they can service the debt.

Get your workshop on.

Business acquisitions can be complex transactions, but can reward you with long term customers that will sing your praises to anyone that will listen. The first step on the journey is workshopping the deal with one of our finance specialists. You can also use our “Buying a Business” playbook in the broker portal to help tease out the answers to important questions early and set yourself up for success!

Win more business and delight your customers with CFI Finance.

If you’re not yet accredited with CFI, click here to get started or call one of business development managers on 1300 659 676 for more information.

Names in this case-study have been change to protect customer privacy – Learn more

How can we help?

Request a call-back

Let us know how and when you'd like to be contacted and one of our lending specialists will contact you at a time that's convenient.

Give us a call

Ready to chat now? Just Call 1300 659 676 and talk to one of our friendly team.

Have a question

Check out our Frequently Asked Questions with answer to the queries we get most often.

Broker News – Basics of Financial Analysis

Basics of Financial Analysis

When a lender asks for ‘Financials’ what do they actually want? And once they have those Financials, what exactly are they looking at to determine if they’re good or bad? In this article we’ll dive into what documents typically make up the Financials for a business (and some of the less typical ones), we’ll also look at some basic concepts of financial statement analysis with a focus on those things most relevant to lenders and brokers alike.

Two-men-business-loan.webp

Mastering the art of financial statement analysis is indispensable for a lender but can also be highly valuable for commercial brokers, helping to identify potential issues early and come pre-armed with answers to lender questions.

Financials is shorthand for Financial Accounts, typically made up of a Balance Sheet and a Profit and Loss (or Income) Statement. There are also some other documents that may or may not form part of the financials depending on the type of business you’re dealing with.

Three tiers of financial statements

W. Edwards Deming, an American management theorist is credited for the quote “In God we trust; all others must bring data.” It’s fair to say that many lenders have adopted this mantra, and it’s also fair to say that not all data is viewed as equally valuable. So, what are the three tiers of financial statements?

Tier 1 – Management Accounts

These are the accounts prepared for internal use. Some management accounts may be of high quality, and they often have the advantage of being more recent as they may be prepared monthly or upon request. That said management accounts are typically taken with a large pinch of salt, as they may contain unresolved errors, they might not contain critical information, and there is very little oversight on their preparation. If you’re going to rely upon management accounts it makes sense to augment this information, perhaps with quarterly or annual tax returns.

Tier 2 – Accountant Prepared

This is the basic level of financial reporting for most SME’s. Accounts that are compiled by external accountants are usually held as a good representation of the truth, particularly if prepared by a reputable firm. Of course, they still rely upon data that has been provided to them by the customer, but glaring errors or omissions are far less likely.

Tier 3 – Audited Accounts

This is the ‘gold standard’ as it means that the information in the accounts has been verified against independent data sources and (assuming no audit qualification) the auditor is comfortable that they represent a true and accurate picture of the business. Auditors may also qualify their opinion or draw attention to particular matters of note if they deem it appropriate to do so.

Great, we've got the data. Now analyse what?

Most of the time Financial Statements represent business performance on an annual basis, as at a given balance date. (As mentioned previously Management Accounts might be more recent and may be requested if a lot of volatility between years is expected, or if formal accounts are more than 6 months old).
So, with the above in mind, what can the Financial Statements tell us? In many cases quite a lot. Firstly, as financial statements will usually provide a comparison to the prior year, we can look at what’s stable and what’s not. Is revenue up or down? What about expenses? Have they moved in line with revenue? What are the business borrowings? Is it asset rich and cash poor? Let’s dive a little deeper…

The Balance Sheet

The balance sheet presents the assets and liabilities of the business, split into two key groups, current and long-term, and in simple terms results in equity (assets minus liabilities).

Assets represent what the company owns and include tangible assets like property, equipment, and inventory, as well as intangible assets like patents and goodwill.

Liabilities encompass what the company owes to external parties, such as loans, accounts payable, and accrued expenses.

Equity is the result we get from deducting the liabilities from the assets. It comprises common stock, additional paid-in capital, retained earnings, and other comprehensive income.

Some key information from the balance sheet can also be used to calculate common ‘ratios’ that can give insights or indicators around business health, we’ll look at these in more detail shortly. At first glance though some key questions can be asked (and hopefully answered).

Solvency & Liquidity – Solvency refers to the ability of a business to meet its financial obligations in the long term, for example a business may be owed a lot of money by its customers and in turn may owe money to its suppliers. In simple terms we might say that the business is solvent if it is owed more than it in turn owes to others. Liquidity on the other hand refers to the ability of a business to meet its obligations in the short term, generally this means cash and liquid assets such as stock vs. short term debt.

Aged Debtors

On paper a business can appear liquid, but if a significant portion of the current assets of the business are debtors instead of cash it can be useful to review an Aged Debtors report. This shows all the debts that make up the amount owed to the company, breaking down who owes how much, and how long they’re taking to pay. Liquidity and even solvency can often depend on just a few large debtors, so it pays to make sure that customers are paying. This is particularly relevant for service based businesses or those in the construction industry.

Profit & Loss Statements

The P&L sets out the revenue and expenses of the business for the period, resulting in either a profit or loss.
At the top of the report we start with revenue which shows the income of the business from its core activities, such as sale of products, as well as revenue from other sources if applicable. For some types of businesses, it’s also common to see the ‘cost of sales’ deducted from Gross Revenue, yielding a Net Revenue amount before the rest of the business operating expenses are deducted ‘below the line’.

Expenses show all the costs incurred by the business in the period including operating expenses, depreciation, and interest expenses.

The resulting profit or loss might be shown in a few different ways, each slightly different:

  • EBIT (Earnings before Interest and Tax) – Net Income before paying income tax and with interest costs removed.
  • EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) – Similar to the above, but with depreciation and amortisation also removed, this is a common measure for businesses that have a large number of fixed assets.
  • NPBT (Net Profit Before Tax) – A more simplistic measure of net profit, interest and depreciation are included in this amount.
  • NPAT (Net Profit After Tax) – A very simple measure, after everything is said and done, how much did the business make or lose?

All of the above can provide significant insights into business performance. Is revenue stable or increasing? What does the business spend its money on? Is it profitable? Is it drowning in interest costs or showing a profit only through abnormal income? Do costs align to those of other similar businesses? Does it make money?

The Cash Flow Statement

To really get your finger on the pulse of a business, a cash flow statement can be exceptionally useful (although this is often now being superseded somewhat by digital bank statement downloads which can often provide a more detailed and up-to-the-minute picture of cash movement).

The cash flow statement shows cash coming in and out of the business over time, usually broken down by month and grouping cash into operating, investing, and financing activities. 

Key elements of the cash flow statement include:

  • Operating Activities: Showing cash flows from the company’s primary operations, such as receipts from customers and payments to suppliers.
  • Investing Activities: Showing cash relating to the acquisition and disposal of long-term assets, such as property, plant, and equipment.
  • Financing Activities: Showing cash movements relating to obtaining or repaying debt, raising equity, or paying dividends.

All of this information can help a lender (or broker) understand a company’s cash-generating capabilities, liquidity position, and most importantly its ability to meet its financial obligations.

Ratios

To wrap up this little primer, let’s look at some of the key ratios that analysts use to get a handle on business health, and the relevance of each one. These quick calculations can provide a useful benchmark, but as with everything the devil is in the detail, so it pays to make sure that the ratios you’re looking at make sense for the type of business you’re dealing with.

  • Current Ratio: The current ratio is all about liquidity, measuring a company’s ability to meet its short-term obligations with its short-term assets. It assesses the company’s liquidity position by comparing its current assets to its current liabilities.
    • How it’s calculated? Current Ratio = Current Assets / Current Liabilities
    • Why it’s relevant: A high current ratio indicates that a company has more current assets than current liabilities, suggesting strong liquidity and the ability to cover short-term obligations. Conversely, a low current ratio may indicate liquidity issues and difficulty meeting short-term liabilities.
    • Example: If a company has current assets worth $500,000 and current liabilities amounting to $300,000, the current ratio would be 1.67 ($500,000 / $300,000), indicating that the company has $1.67 in current assets for every $1.00 of current liabilities.
  • Quick Ratio: Also known as the acid-test ratio, the quick ratio is a more stringent measure of liquidity compared to the current ratio. It excludes inventory from current assets since inventory may not be easily convertible to cash in the short term.
    • How it’s calculated? Quick Ratio = (Current Assets – Inventory) / Current Liabilities
    • Why it’s relevant: The quick ratio provides insight into a company’s ability to meet its short-term liabilities using only its most liquid assets. It offers a conservative assessment of liquidity, particularly relevant for businesses with slow-moving inventory.
    • Example: If a company has current assets of $500,000, including $100,000 in inventory, and current liabilities of $300,000, the quick ratio would be 1.17 ([$500,000 – $100,000] / $300,000), indicating that the company has $1.17 in liquid assets for every $1.00 of current liabilities.
  • Interest Cover: The interest cover ratio, also known as the ‘times interest earned’ ratio, measures a company’s ability to meet its interest obligations on outstanding debt. It assesses the company’s profitability relative to its interest expenses.
    • How it’s calculated? Interest Cover = Earnings Before Interest and Taxes (EBIT) / Interest Expenses.
    • Why it’s relevant: A higher interest cover ratio indicates that the company generates sufficient earnings to cover its interest payments comfortably, signifying financial stability and lower default risk. Conversely, a low interest cover ratio may indicate financial distress and an increased risk of default.
    • Example: If a company has EBIT of $500,000 and incurs $100,000 in interest expenses, the interest cover ratio would be 5 ($500,000 / $100,000), indicating that the company’s earnings cover its interest expenses five times over.
      NB: It’s worth noting that Interest Cover does not necessarily equate to servicing, as loans often require both principal and interest payment which both consume cash, but this ratio deals only with the interest portion.
  • Gearing: Gearing, also known as leverage, measures the proportion of a company’s capital that is financed by debt relative to equity. It assesses the company’s financial risk and indicates the extent to which it relies on debt financing.
    • Why it’s relevant: A high gearing ratio suggests that the company is heavily reliant on debt financing, increasing its financial risk and susceptibility to economic downturns. Conversely, a low gearing ratio indicates a conservative capital structure with lower financial risk.
    • How it’s calculated? Gearing = (Total Debt / Shareholders’ Equity) x 100%
    • Example: If a company has total debt of $2,000,000 and shareholders’ equity of $3,000,000, the gearing ratio would be 66.67% ([$2,000,000 / $3,000,000] x 100%), indicating that 66.67% of the company’s capital is financed by debt.

Phew! You’ve made it! If you’ve read this far, hopefully you’ve gained some insights into what makes up the financial statements of a business, some of the things to look out for, and perhaps some questions to ask that will help you better prepare loan applications or understand what a lender is asking for and why.

If you’re not yet accredited with CFI, click here to get started or call one of business development managers on 1300 659 6756 for more information.

Win more business and delight your customers with CFI Finance.

How can we help?

Request a call-back

Let us know how and when you'd like to be contacted and one of our lending specialists will contact you at a time that's convenient.

Give us a call

Ready to chat now? Just Call 1300 659 676 and talk to one of our friendly team.

Have a question

Check out our Frequently Asked Questions with answer to the queries we get most often.

Broker News – CFI Tools – Application Requirements

What does that little (?) do anyway?

We're rolling out some new contextual help elements to make life a little easier for our introducers. The first one was one of our most requested features....

Every deal is different, and at CFI we’re often willing to look at those complex transactions that other lenders shy away from, things like start-ups and business acquisitions.

When it’s not the type of deal you do every day it can be tough to remember all of the things to look out for or include in your application, enter the first of our contextual help tools.

 

How does it work?

You’ll notice little clickable (?) symbols starting to appear in our broker portal. These provide cues to help users understand what’s being asked for (or why we’re asking).

The first one is our Application Requirements prompt. All you need to do is enter a Loan Amount and Funding Purpose, then click on the (?) to see what will be required for a typical application. 1-2-3 too easy!

What will you see?

You’ll get a pop-up window showing the typical information that we require to assess a deal of that type. Of course every deal is different, so there may be some things specific to that transaction that we can’t anticipate, but this ensures a great start to the process and translates to a smoother experience for everyone, particularly your customer.

Callouts

Look out for the (?) symbol appearing in more places, providing tips and explanations to help make applications easier

Remember to enter a Funding Amount and Purpose to get help tailored to your transaction

You can email us at [email protected] with feature requests or suggestions.

Broker News – Is Your Privacy Consent Up To Date?

Is Your Privacy Consent Form
Up To Date?

Privacy

Fintechs (including CFI Finance) are constantly looking for efficiencies and ways to improve speed and customer experience. One of the developments in recent years that has been adopted by many lenders is the real time checking of ID. You may have heard financiers refer to the ‘DVS’ (Document Verification Service). This service is particularly useful to lenders attempting to verify individuals as a part of their KYC processes.

The DVS is a secure, online system that allows lenders to obtain Identification from an individual, then with their consent, compare it to the original document that was issued by the relevant government agency. Examples of documents that can be verified by the DVS include passports and driver licences.

 
The outcome is that the identification provided by a borrower can be verified in a matter of seconds, improving the turnaround time on deals. However, (this is the bit you need to pay attention to) in order for lenders to use the DVS, they need to have received explicit consent enabling the verification of the information provided to them with the official record holder.

 
It is not uncommon for broker privacy consent forms to be missing this express consent and results in lenders having to issue the borrower with a copy of their own privacy consent form to be signed. This extra step can slow down the application process and remove the benefit of many of the efficiencies gained.

It is a good idea to review your privacy consent form and ensure that it complies with DVS requirements along with any other updates that may have occurred within the Privacy Act. Often it is only a minor adjustment that is required, which will make applying for finance a much smoother process for both your customer and the lender.

 

* CFI does not provide legal advice and this article is general in nature. Brokers should seek their own legal advice before making any changes to their documents.

 

Broker News – Maldives Holiday Winner

Broker Promotion Maldives Holiday Winner

Congratulations to Lucas Parker from Jade Equipment Finance on winning the CFI Finance Maldives Holiday Broker Promotion. 

We would love to share with you some pictures of Lucas and his partner soaking up the sun on some beautiful Maldivian atol, however Lucas elected to choose the $8,000 in flight centre vouchers instead so that he could visit family in the UK at Christmas time. 

Congratulations Lucas, we hope you have a great time in the UK. 

We also delivered a number of consolation prizes including Apple AirPods, Apple Watches, GoPro Hero, Sonos Speakers and Bose Headphones. Thank you to all brokers who participated in the promotion. Keep an eye out in the new year for our next big broker promotion.   


Broker News – CFI Tools – Bank Statements Request

Automatic Secure Bank Statement Collection

It's easy to get customers to complete the bank statement collection process as part of their finance application. Here's how...

CFI requests bank statements from all applicant businesses and primary individual applicants. Bank statements must be provided through our secure link to bankstatements.com.au

 

When you submit an application via our broker portal you will be prompted to select which applicants should receive a request for bank statements. They’ll get an email from CFI letting them know you’ve submitted an application on their behalf an what to do next. The email will automatically include your contact details.

 

What happens if I miss somebody or want to add them later?

No problem! Just pop into the broker portal and select ‘Customer Application Request’ – Choose Bank Statements Only as the application type and you’ll be prompted to fill in a name and email address for your request.

Callouts

Our online bank statement collection via Illion's bankstatements.com.au is fast and secure

Just select which applicants you want to request bank statements from at the end of the application

If you need to request bank statements from a customer outside of a normal application just go to "Customer Application Request"

Broker News – CFI Tools – Playbooks

CFI's Broker Playbooks make information gathering easy....

It's often a challenge to cover off all of the questions a lender might ask, particularly with more complex transactions like start-ups and acquisitions. CFI has the answer.

It can be a challenge to remember all of the questions to ask when trying to pull a deal together, particularly if it’s in a space you don’t operate in often. At CFI we recognise we’re a little different, we don’t have a ‘matrix’ and the way a deal is packaged can often make a signficant difference to approvals (both in terms of time and whether the deal is approved at all).

Enter CFI Finance Playbooks

Playbooks present questions that are relevant to different types of deal in a logical order, helping you and your customer to build a picture of the deal. To access the Playbooks, login to the CFI Broker Portal and select Broker Resources – Playbooks…

 

Our Playbooks are resources for you, so they don’t automatically send the notes to us, we’ve done this deliberately as we understand people might go a little ‘short-hand’ when they’re on the phone to the customer, and then flesh out the details later, perhaps after receiving some supporting information…

 

Once you’ve finished your call and your notes, just click the “Email Details” button and all of your notes are sent to you. It couldn’t be easier.

 

Callouts

Playbooks are a great help when it comes to putting together deals and extracting the story from a customer, whether in person or on the phone.

They also make great training aids for staff that don't deal with transactions of this type often.

Playbooks are for you, so they don't automatically send CFI the info. You have chance to flesh out notes and decide when and how to submit transactions.

If you have ideas for improvements to playbooks, our broker portal, or the resources we provide, please email [email protected]

Broker News – Data Security

How are you handling the challenges of data security?.

Privacy and Cyber Security are hot topics right now. Attacks on Optus, Medibank, and now Latitude have customers reeling, and plenty of people asking “what next?”

It’s easy to think that criminals only target big businesses and holders of large amounts of sensitive data, and that smaller organisations simply aren’t worth the time trying to breach, unfortunately the reverse is often true. Smaller organisations often have less robust policies and procedures when it comes so cybersecurity and data management, they may have less sophisticated software for detecting and blocking attacks, and they can often be seen as a weak ‘back-door’ into information held by larger companies.

It’s also worth noting that it’s not usually all about flashing lights and whizzing bits of Matrix code as these ‘hackers’ bash away at the cyber-doors of their targets. We just need to look at some of these recent high profile breaches to say that an alarming number come from something as simple as stolen login credentials. When the burglars have the keys it’s easy to get through the door.

Consider…

  • The Optus data breach occurred from someone finding a door that didn’t even have a lock on it. It should have, but it simply didn’t, an unsecured API (effectively a data portal) requiring no username or password at all.
  • Medibank’s breach was the result of someone getting hold of a Medibank username and password from one of Medibank’s IT service providers.
  • Latitude’s breach also appears to have been caused by stolen login credentials, which then allowed the person to pose as that employee and access other third-party systems.

It’s perhaps not hard to understand why so many emails are received trying to get you to ‘click here’ or to open an attachment. These emails are baited hooks fishing for login details to anything and everything. (In fact, whilst writing this I received an email purporting to be a saved voicemail, all I need to do is click the link to hear the message….)

So, what are some of the things brokers can be doing to safeguard themselves and their customers from potential breach?

  1. Use strong passwords and two factor authentication. If your password is the same, or close enough, over a variety of sites then you’re only as secure as the very least of those places. Consider how many times a user might use the same password just changing a number or adding a ‘!’ to the end. If their password is breached on Spotify or Facebook, your network could easily be next.*
  2. Use archives that are less accessible. It might be necessary for a large number of staff members to access information when a deal is in progress, but once it has settled it may pay to lock big chunks of customer information away in less accessible storage areas.
  3. Have a written policy round information retention. Consider what information is required from customers, where and how that information is stored, and how long it should be kept for. It’s easy to say ‘we keep everything’ but that significantly increase the damage that could arise from a breach.
  4. Keep software up-to-date. Hackers work by finding a small opening and then working to widen it or squeeze through. The fewer openings you have, no matter how small, the lower your risk.
  5. Continually educate your employees. It’s not enough to write ‘use strong passwords’ in your employee handbook and forget about it. Employees should be warned regularly about the risks of attacks and shown examples of things like phishing emails. Ensure that your staff members are aware of best practices for data security and train them on how to identify and report potential security breaches. This will help prevent accidental data leaks or breaches due to human error.

Finally, consider engaging a data security expert. A good specialist will look at all of the items above and much more. They’ll try to break into your systems in ways you can’t imagine, and whilst they may cost a little, consider it no different to an insurance premium; a necessary expense to protect against much larger consequences.

* This is not to suggest in any way that either of these platforms have lax security.

Callouts

Plenty of people manage security by adding a number or exlamation mark to passwords used elsewhere. Don't do that.

An alarming number of data breaches are caused by indavertent disclosure of staff passwords.

Consider what information you need to keep, how long you need to keep it for, and who should have ready access to it.

The Attorney General’s recent review of the Privacy Act is available here: https://www.ag.gov.au/rights-and-protections/publications/privacy-act-review-report – There are over 100 recommendations contained in the report, many of which will impact smaller businesses that collect and manage information.