Bank Transformation presents opportunities for Borrowers and Investors.

The rigorous transformation of the Australian Banking Industry has presented several opportunities, but people need to know how to tap into them.

For Borrowers

Borrowers can benefit from the increase of non-bank lenders as they need raising capital and limiting losses. When a borrower goes through financial hardships they tend to worth closely with the client.  Consumers do not need to go branches because of technology and this usually gets passed down to borrowers as lower costs of borrowing.

Investors

Looking at the “Capital Structure”, lenders rank highest in pecking order in terms of the capital structure of a company, above equity holders. What this means for investors:

Two Investors Scenario

 Investor A holds $100 of equities in company X,

Investor B holds a diversified portfolio of corporate securities in the same company X

In the case of Company X going under the corporate securities have a higher preference of pay-out before equity holders.

This is an overlooked advantage by investors as Australian Legislation offers protection around this.

Investors and Borrowers should talk to a specialist to review their option for lending and portfolio diversification option to secure steady return which may range anywhere between 3-5% above the Reserve bank Interest Rate.

Source: Money management magazine, https://www.moneymanagement.com.au/news/financial-planning/property-sector-and-investors-benefit-banking-transformation,