Ben Tuszynski Managing Director Victoria & Tasmania talks why Judo Bank was started and it's core focus on helping SME businesses. In it's short but very successful history Judo Bank has reinstituted relationship banking, partnering with owners to enable them to focus, improve and grow their small business.
@Ben Tuszynski from @Judo Bank, shares his insights on the importance of banking relationships for small business owners.
Ben is currently the Managing Director of Judo Bank in Victoria and Tasmania. He has over a decade of experience in the banking and finance sector. Joining Judo in 2017 as one of the pioneering employees, Ben has played a pivotal role in the bank's substantial growth over the years.
His primary focus lies in supporting small and medium-sized enterprises, aligning with Judo's commitment to providing tailored financial solutions to businesses, in an age of #industrialisedbanking.
Our conversation covers;
"No one business is the same from the other, so how do you industrialize that whole process? We really want to have a look at what's their management experience, what's their skill set, how have they gone through the ups and downs of the economy and weathered those storms?" Ben Tuszynski
Timestamped summary of this episode:
00:00:14 - Introduction and Technical Difficulties
Michael and Julie from Judo talk about technical issues regarding Ben's recording for the podcast.
00:03:13 - Catching Up and Personal Background
Ben and Michael catch up on their personal backgrounds, discussing Ben's move back from Perth and his role at Judo.
00:07:02 - Judo's Mission and Target Audience
Ben explains Judo's mission and target audience, focusing on small and medium-sized enterprises (SMEs) with turnover up to $100 million.
00:13:07 - Judo's Approach and Importance of Personalized Banking
Ben elaborates on Judo's approach, highlighting the importance of personalized banking relationships for SMEs and the industrialization of the banking market.
00:17:21 - The Importance of Reviewing Banking Relationships
Michael and Ben emphasize the importance of reviewing banking relationships and the role of a trusted banker in supporting the growth and success of SMEs.
00:20:02 - Importance of Collaborating with Accountants and Business Coaches
Ben emphasizes the importance of engaging with accountants and business coaches to navigate complex business situations and provide added value to customers.
00:21:48 - Judo's Customer Base and Industry Focus
Ben discusses Judo's industry-agnostic approach, catering to SMEs across various sectors such as accommodation, manufacturing, financial services, and property investment.
00:25:17 - The Four C's of Credit
Ben explains Judo's credit assessment framework based on character, capacity, capital, and collateral, with a focus on character and the ability to walk the factory floor for a deeper understanding of the business.
00:29:39 - Importance of Credible Cash Flow Forecasts
Ben emphasizes the significance of credible cash flow forecasts and the business owner's ability to endorse and explain the assumptions, fostering trust and communication in the lending relationship.
00:33:29 - Funding Opportunities for Growing Businesses
Ben highlights Judo's approach to lending against trading businesses, supporting growth plans beyond traditional equity in property and enabling businesses to access funding based on their strong balance sheet and income generation.
00:35:25 - Understanding Debt Servicing Capability
Ben explains the importance of understanding a client's capability to service debt on a case-by-case basis. He emphasizes the need for deeper conversations and not missing out on growth opportunities.
00:36:43 - Business Growth and Financing
Ben discusses the dynamics between business owners and potential buyers when it comes to taking on debt for growth. He highlights the role of trusted relationships and the importance of considering alternative financing options.
00:40:54 - Vendor Finance and Business Sales
Ben and Michael explore the concept of vendor finance and its potential in facilitating business sales. They emphasize the need for effective structuring and collaboration between the buyer, seller, and banker.
00:43:32 - Loyalty Tax and Customer Relationships
Ben delves into the concept of "loyalty tax" and emphasizes the importance of delivering strong relationships and support to existing customers. He also discusses the role of finance brokers as an effective channel for improving banking relationships.
00:47:34 - Economic Outlook and SME Support
Ben shares his views on the economic outlook for small and medium-sized enterprises (SMEs), highlighting factors such as labor market conditions, property market trends, and sector-specific considerations. He reaffirms Judo's dedication to supporting SMEs.
00:53:09 - Building Trust and Long-Term Relationships
Ben discusses the importance of building long-term relationships with customers and becoming Australia's most trusted SME bank. The focus is on delivering quick and confident solutions to customers for their business needs.
00:53:46 - The Value of Banking Relationships
Ben emphasizes the importance of evaluating the effectiveness of banking relationships and suggests reaching out to judo or a finance broker for a better understanding. The conversation highlights the mission of fintechs like judo in providing special opportunities to clients.
00:54:19 - Experienced Business Bankers at Judo
Ben reinforces the fact that judo, as a new bank, is staffed with experienced business bankers. He encourages businesses to start chipping away at any loyalty tax they may be paying and acknowledges the efforts of other fintechs in the industry.
00:55:11 - Access to Opportunities and Different Ways of Financing
The conversation touches on how judo and other fintechs have enabled clients to tap into opportunities that may not have been accessible before. The focus is on freeing up capital and exploring different ways of financing for businesses.
00:55:33 - Ways to Reach Out to Judo
Ben shares the various ways to reach out to judo, either through their website, phone, or LinkedIn. He emphasizes their willingness to help and collaborate with businesses, concluding the conversation with a message of appreciation for the opportunity to share insights about judo.
Michael (07:43.834)
All right. Okay. So welcome in to another edition of Small Business Banter podcast. Ben Tuszynski joins me today. Ben is the Managing Director of Judo Bank in Victoria and Tassie. Welcome in, Ben.
Ben Tuszynski (08:00.563)
Thanks, Michael. Thanks for having me on the show.
Michael (08:04.458)
Look, you manage a team of 60 bankers. We're pretty representative of the growth of Judo over the last few years. We were just chatting about our first meeting back in when Judo was, I think in your bio, listed as a PowerPoint, and it was a startup, and you were right there at the very beginning. So you've overseen a lot of growth since then.
Ben Tuszynski (08:21.491)
That's right, yep.
Ben Tuszynski (08:29.935)
Absolutely, it's been an amazing journey since 2007, 2017 sorry, back when we first met till where it is today. It's been incredible and amazing to be part of as well.
Michael (08:34.855)
Yeah.
Michael (08:39.694)
Yeah. Well, it is, it is, we're going to, we're going to rip right into why you're pleased to be a part of or excited to be a part of it. And why, you know, I think, um, judo's, you know, really doing an incredible job of, of funding small medium enterprises. So, um, do you want to just start with a couple of minutes on your personal background, Ben, and then, um, then we'll get into why we're chatting today, which is.
It's, it's a, it'll be a discussion about what Judo does and why it's different to the, to the big banks. We're going to talk about, you know, just why is funding, effective funding of small and medium businesses is so vital for not just the businesses, but the broader economy. We're going to get into how you'd suggest the owner of a small and medium business could better prepare for
a meeting with a potential banker, how they might, you know, make more out of their existing relationship, how they might come across to talk to you at judo, but, you know, and your take on what is a good business credit, but, or, you know, a good lend. So could you just give us a couple of minutes on your own pathway up to, to judo and what you do currently?
Ben Tuszynski (09:58.407)
Sure, so yeah, started at Judo in January 2017, so coming up to seven years ago, which is pretty amazing to think about it. So, was one of the beginning cohort, I suppose, of employees into Judo, the banker number one, which I'm pretty proud of, but.
Michael (10:15.146)
Oh wow, that is something to be proud of.
Ben Tuszynski (10:17.795)
Yeah, absolutely. And then, you know, from there, we've gone with obviously grew and grew and grew, but prior to judo was at the major banks for the proceeding kind of eight to 10 years worked in the UK as well. For for a few banks over there. And as you can tell, always been in that banking and finance space. But my kind of journey
journey, sorry, at Judo has been incredible from, from 2017 coming in as that first banker writing our first transaction, which we're really proud of is actually still a customer of ours today, all those years later, and has grown considerably over that time. But, you know, I've had the fortune of spending the first year in a bit of really helping build with a number of the other, you know, starting team. And then went into what we call original director roles,
looking after a team of bankers, which was our first group of real bankers that we went externally to hire. And then from there...
got the asked to pick up and move across to Western Australia and start up our WA business, which I did pretty much at the start of COVID actually. So March, 2020, which was an incredible time for all of us living through that very strange time. But yeah, picked up my wife and two kids and our dog and off we went across to WA and set up the Western Australian business, which was an incredible journey, literally starting from myself,
Michael (11:32.196)
Yeah.
Michael (11:45.506)
Another startup almost like it territory.
Ben Tuszynski (11:47.965)
much. Yeah, but now my kind of my opportunity to really get it up and going and obviously had the fortune of the backing of judo at the time but moved over there and started up in a in a little tiny shared office and started recruiting and getting out there into the market to
Michael (11:52.071)
Mm.
Ben Tuszynski (12:04.935)
And by the time I left after just under two years, we were a team of 17 and supported over 300 customers and had our own office and really made our mark into WA, which was absolutely incredible. And then April 2022, moved back to Melbourne, where I now, as you said, managing director, looking after the Victorian and Tassie relationship team. And here have an incredible team. It's not 60 bankers, but 60 bankers and analysts and our third party team that are really out there every day.
supporting SME customers, along with our risk teams that do an incredible job. And we're super proud of the number of SMEs and the type of SMEs that we support in the market, which is really why Drudo was why we were created at the end of the day.
Michael (12:52.91)
Yeah, so if you haven't, if someone hadn't heard of judo, what is it in a, your tagline is boldly backing business, but what is it in a couple of sentences?
Ben Tuszynski (13:06.167)
Yeah, well, I think, I mean, the name Judo kind of says it all, to be honest, and it's really taken from the Judo strategy, which is the martial art strategy of being nimble, agile, quick, responsive. And it's a play on us being the small player in the market, being able to respond quicker to our competitors and really be there to support our customers, I suppose, at the end of the day. And, you know, I think there's a few things that really form our foundation. One is the four C's of credit.
that we follow with character being the first ones of who we're banking and why, yeah, absolutely why they're so important. And then at speed and being able to, you know, that responsiveness around the judo strategy. So being able to respond quickly to our customers. It's common sense. And it's really about having empowerment, we know in the front line so that our bankers have the ability to actually make decisions and support customers. So we, you know, in a nutshell, we, oh, sorry.
Michael (13:39.034)
Yeah, we'll dig into that for sure.
Michael (14:03.17)
And bike and sorry, been by customers. I mean, we're talking purely about small business customers. Aren't we? That's.
Ben Tuszynski (14:10.627)
Yeah, so we identify SMEs as businesses with turnover kind of up to $100 million.
there are thereabouts and debt requirements starting at $250,000 and going up to $35 million. So majority of our customers, well and truly below that $5 million mark, probably average about $2 million. So we see a lot in facilities. So we see a lot of mom and dad operators through to those emerging type customers, emerging corporate type customers and really everything in between, which is what I love most because you get to see so many varieties.
Michael (14:33.579)
in facilities.
Ben Tuszynski (14:47.306)
of customers out there.
Michael (14:49.122)
There are hundreds of thousands of businesses that might potentially fit into that size range, right?
Ben Tuszynski (14:55.875)
Absolutely. Well, you know, we know that majority of our economy in effect sits within that SME space. It's where most employment is, it's where most top businesses are. So you know, it's absolutely a part of the market that really needs to be represented from a bank banking point of view, because it does require a lot of funding to do what they need to do.
Michael (15:17.666)
And was the reason Judo started a bit of a statement about where the lend, where lending to small business was at the time, or if, if not going back even earlier.
Ben Tuszynski (15:32.359)
Yeah, I mean, I think there's really been this shift over probably the last couple of decades anyway to this, what we would call an industrialization of the banking market. And we've all kind of seen it, obviously, with the advancements of technology, which is a great thing. But it also is kind of to the detriment of SME customers who really want that personalized relationship experience banker who they can talk to about their business and what they're looking to do.
Ben Tuszynski (16:02.353)
why I suppose our co-founders started the business was because no one business is the same from the other. So how do you industrialize that whole process? Yes you can extract information out of financials or an industry code or whatever it might be but you know we all know when you know a simple example I always love to give is you're lending to a cafe as an example you walk into one cafe versus another cafe. Same industry, same segment but they're completely different.
And that's really what we bring to life, is to understand how they're different, and why they're different, and why we should back one more, so then maybe we should back the other one.
Michael (16:42.746)
Yeah, well, so yeah, one, that cafe versus the other cafe might just be structured differently and not need finance. But I guess what we want to get owners to do is really, I have a sense that there's a lot of business owners that do think it's just too hard to even contemplate shifting banks and there's good reason if you've got, if you're locked in with a lot of operational accounts, trading accounts. But.
Ben Tuszynski (16:48.563)
Absolutely.
Michael (17:12.838)
But also, no doubt that there are ways and means to minimize the pain from that. But at the end of the day, if your business is growing, and you're missing out on opportunities by not having a good banking relationship, well, you've got to ask the question and maybe go a bit harder at considering what your options are and...
Yeah.
Ben Tuszynski (17:43.107)
Yeah, absolutely. And I think, you know, I think
in particular for business customers, you shouldn't set and forget your banking relationship. I think it's so important, no matter what you're doing, to review it and understand where it's at. And not only the actual facility itself, but that banking relationship that you spoke about, because I think one of the most important things that we try and bring to the market is that trusted relationship. We want to be Australia's most trusted SME business bank. And I think when you do that,
you're there for the journey with the customer. And things happen in business, we all know, they need some increased working capital because they wanna grow, they wanna acquire property, or maybe they wanna do an acquisition or whatever it might be. And to know that you've got a banker and a bank on the other side that firstly picks up the phone when you call, so it's not going through to a call center, but actually picks up the call and knows you and your business can really help the...
Michael (18:37.191)
Yeah.
Ben Tuszynski (18:43.495)
the customer grow their business and succeed.
Michael (18:47.034)
Look, I agree wholeheartedly because there's, I deal with a lot of small business owners and I deal with them day in, day out. And they're all, they all face their challenges. And I think even as an ex-business banker myself, I've seen how it's, you know, a banking relationship could be so critical.
and the banker could be a part of the team that is the team of trusted advisors to that business. And I can see how it is all too hard and you just don't worry about it. But I saw the, for example, the annual review of a facility, which is part and parcel of banking, as an opportunity to
Michael (19:47.354)
how the business has gone, but more importantly, probably where it's going and how the bank can play a role in that. It's a bit like there's a missed opportunity in potentially in the same way as with accountants. You go in and do your annual tax return and you get it done. You do all your compliance stuff, you feel good, but you've missed an opportunity to, if you've got a really engaged accountant, and there are some excellent accountants who can actually be part of that team that you need. And
And it's not a formal team, but it's a, when things are tough or when things are complex, it's very hard doing it all on your own as a business owner. So to be able to have a, you know, bit more of an open discussion with an accountant, a banker or a business coach is so valuable. And that's...
Ben Tuszynski (20:34.491)
Yeah, absolutely. And for us, we want to work in with that as well. We know we can't do everything ourselves, and not all the customers want us to, so it's how do we work in with them? But yeah, I think it's your idea. It's how do we, and whether it's the accountant or the advisor, how do we add value? What does that look like? Doing the transaction is one thing, but it's actually adding value along the journey and is what customers want at the end of the day.
Michael (20:51.323)
Yeah.
Michael (21:00.71)
Yeah, well, you bring another set of eyes to a business and it's financials. And if you're not experienced in finance, maybe you're really good at running your business. Have an expert come in and tell you if there's some potential to take on some more borrowings or restructure it because it could help the bottom line, but also help better position the business for whatever the opportunities are. And that comes...
as a banker or as an advisor, you've got to be curious about the business and got to want to see the business succeed. Um, what, what kind of businesses does Judo, so like we talked about size a bit earlier, but do you span all sorts of industries? Do you stay away from some industries?
Ben Tuszynski (21:47.025)
Thanks for watching.
Ben Tuszynski (21:51.447)
Yeah, so we're pretty much industry agnostic. So we don't really mind what industry it sits in, as long as it is that SME focus. It is probably the big part. So, you know, our book is really comprised of lots of industries, lots of segments, you know, everything from accommodation, food services, manufacturing.
hospitality, we've got a fair amount in the financial and insurances sector, professional services is a big part. So we absolutely love looking after accountants, financial advisors, financial planners that whole space, we've got a bit of a niche in their rent roles, so that real estate industry transport, we also support a lot of customers with their property investment.
It's a relatively large part of our book where...
Michael (22:44.85)
So that's the business property. So someone buys a factory for their manufacturing business or an office for their, yeah.
Ben Tuszynski (22:50.683)
Yeah, yeah, that's right. Yeah, yeah, so we support them acquiring their property. We call it a rent to debt strategy. It's where you replace that rent costs on the balance sheet with an interest cost, but also you get the asset on the balance sheet as well, and you can obviously start supporting and growing your wealth outside of the core business.
Michael (23:12.779)
Not to mention securing your... For some kinds of businesses, it's vital that you have confidence that you can be in that location for a long time.
Ben Tuszynski (23:22.995)
That's right, yeah, absolutely. Yeah, absolutely, it's so important. Because a lot of businesses clearly invest a lot in their property, where they are for their staff, manufacturing facilities, equipment, whatever it might be, and to know that you're not gonna get, have to relocate and spend that cost is really important. So yeah, again, having that ability to speak to someone.
from a bank and go, we're looking at doing this, can you support me and what does it look like? And I think that's where we feel anyway that we come into our own in that we're not bounded by the strict policy slash LVR requirements, loan to value ratio requirements that a major bank tends to operate in. We've got that common sense approach to how we look at things. And that's what we want is for our customers, I wanna do X and then it's okay, well, how do we support you? What does that look like?
we get into it.
Michael (24:17.035)
Yeah, it's a different attack on the opportunity, isn't it, to say, rather than can you fit a round peg into a square hole, it's how to, I guess, how you move the hole. This is a terrible analogy, but anyway, reshape the hole. So it's probably the thing that shines through in the conversations. I have regular interactions with...
Ben Tuszynski (24:20.463)
That's right. Yeah.
Ben Tuszynski (24:30.649)
I got what you mean.
Michael (24:43.474)
with judo bankers when there's a sale of a business and people looking for funds to buy a business. And the great thing is there is this focus on the business itself. So, but you've got the four C's. Do you wanna talk through the four C's, which is really the Bible or the, you know, the...
Ben Tuszynski (24:48.399)
Mm.
Michael (25:12.473)
the operating manual for the way you go about your lending.
Ben Tuszynski (25:16.803)
Absolutely. And it's really held us in good stead, I think. So we follow the four Cs of credit. So character being the first one, capacity, second, capital, third and collateral, fourth. And we're actually quite specific that in that order, I think it's a really important part to note because, you know, a lot of our competitors, you know, they tend to go to collateral first. So what security are you going to give me? And the most often thing that we hear is customers go
to borrow money and the bank on the other side doesn't ask who you are, what your business is. They just say, well, have you got a house? How much is your house worth? That's right, yeah, absolutely. And look, as banks, that's what we wanna do. We're gonna manage the risk, we wanna get our money back too. But the first thing that we look at is character. And it's always, I always get asked the question, what does character mean? How do you actually define it? And it is one of those things that often,
Michael (25:53.618)
Can we get our money back if it all goes pair-shite? Yeah, sure.
Ben Tuszynski (26:16.571)
it can be associated with the experience of the banker out in the market. And we're very proud of the experience that we have across our team with the bankers, because character can be one of those things. It's not the, he's a good guy test, or she's a great lady test, but it's actually much deeper than that. And we really wanna have a look at.
What's their management experience? What's their skill set? How have they gone through the ups and downs of the economy and whether those storms and what does it look like on the other side? What advisors have they got in the business? How quickly can they recall what's happening in the business when we ask them questions about it? And for us, we always go out and meet our customers. It's a really big part of our assessment. So we walk the factory floor. Absolutely.
Michael (27:01.234)
That's a deep conversation about them and their aspirations for being in business. Some of the, perhaps some of the challenges they've faced and met and you only get that through to talking initially, yeah.
Ben Tuszynski (27:11.151)
Absolutely, yeah. And actually, you know, it's exactly right, yeah, 100%. And that's what I was talking about before, you know, the industrialization has meant that, you know, a lot of finance.
banks and finance players are using technology to make those assessments, but the computer can't walk out to the customer's office and have a look at their business and have a look at their manufacturing plan or whatever it might be. For us to walk the factory floor and actually understand who they are and what they're all about is really important. In that assessment, a lot of the time it's also us having a look at their history as well. Their existing banking relationship, how has that gone? What does that look like?
We know the ATO and if there's an arrears or a default sitting there can tell a lot about their ability and want to repay facilities. And it's not always a big no from us if there is something there, but it's just let's ask more questions. And the same with things like Google checks and credit checks. Like it's actually amazing how much you can find out about a business or a customer via a Google check, simple thing like that.
Michael (28:22.246)
Yeah, yeah.
Ben Tuszynski (28:24.337)
is the first thing we look at, capacity.
is the next one and that's really all about how are they going to repay the debt and what does that look like? You know for us we're very big into trading businesses so we do hope obviously that the business we're lending into will continue to generate its revenue, meet its expenses, make money at the end of the day and then repay our debt. So for us it's having a look at that but I think you know we have a very comfortable position to be able to take a stance against forecasts because you know we know in particular over the last couple of years through COVID there have been
to their performance. So then, in combination with their character and getting comfortable with that, we have a look at the forecast and capacity and how they're gonna demonstrate to us that they can service the debt through their cashflow forecast or whatever that might mean. And a big part of that is not that, and we're not asking necessarily every customer they have to put it together themselves because we know that business owners are good at being business owners and not necessarily financial analysts or accountants.
have they got around them, who's their accountant, who's their advisor to really help them along that journey, and then how do they explain it?
Michael (29:31.15)
Yeah. And, and look, I think you can tell a lot. Uh, I'm sure we've, we've both, and all of us have seen a set of forecasts knocked up for the bank and it bears no kind of resemblance to what the, you know, the business is really capable of doing. And, and, and if you dig a bit deeper, the owner really in the end says, oh, I'll my account and put it together. And so.
What you're saying there is that credible cashflow forecast that if, if you were to probe the owner about the forecast, even if they're using advisors, they can tell you why there's particular assumptions, why there's ups and downs. And if you've got a sense that they have thought about that, which is, which is a lot of the reason for doing forecasting anyway, or budgeting is, you know, we
Ben Tuszynski (30:17.601)
That's right.
Michael (30:28.486)
trying to get a handle as good as we can on where we're going to go and where there's going to be some bumps. And, but yeah, if it's a, someone else prepared it, that's not what you're after. You're after, you know, the only kind of being able to say, well, I endorse that, you know, we're never going to get, we're never going to get right, but it, it's degrees of, you know, accuracy or credibility.
Ben Tuszynski (30:50.375)
Yeah.
Yeah, and I think that's the big thing. And, you know, it comes back to my earlier point around relationship is, you know, no one has a crystal ball when they're preparing a forecast. So we're not expecting it to be dollar for dollar accurate. It's more around what are the assumptions sitting in there that, you know, they get them comfortable and then ultimately get us comfortable, but also along the journey. So if we bank that customer, they're providing us the forecast. Something doesn't go to plan. Let's have that relationship with them that they can call us and go, Ben, I've missed X or actually even better with one
and we're gonna keep growing, we need some more working capital. You know, it's all about how do you build that relationship and trust together is really, really important.
Michael (31:31.362)
Yeah. And both sides recognizing that they're not dollar accurate, but they are, you know, you keep refreshing them and things do change. And that's, and I suppose underpinning all that is that the relationship you talk about and therefore the communication that's needed to, both ways to keep on top of things.
Ben Tuszynski (31:38.588)
That's right.
Ben Tuszynski (31:51.708)
Yeah.
Yeah, exactly. So I might just quickly touch on the last two Cs because I didn't touch on them before. So the third thing that we look at is capital. So in effect, that's capital in the business or out of the business. And I think a lot of time, not a lot, I think I know a lot of times customers will build their wealth in the business on the balance sheet of the business that we're funding. But then as they make more money, they generally try to diversify their wealth and make wealth outside of the business. And that's a really big part of our assessment
Michael (31:56.213)
Mm.
Ben Tuszynski (32:22.945)
What does that look like? Have they invested in other businesses? Have they bought other assets? Have they invested in super, et cetera, et cetera? What does that look like? And then the last thing we look at is collateral. And we...
Michael (32:31.42)
Yeah.
Ben Tuszynski (32:35.815)
We have a position that some transactions need to be secured for whatever reason. They might be higher risk, they might be earlier in their growth phase, there's something in there that means that we need to take tangible property of security. But at the same time, we're very comfortable just lending solely against the business with guarantees from the directors, which is quite a different type of lending. It's in effect cashflow or balance sheet lending against the earnings of the business with no
there and that does require a more detailed analysis of what's happening in the business for obvious reasons. So, you know, we can span the full spectrum of secured, partially secured and then completely unsecured. So we really open up a different part of the market to customers that may not have previously, you know, got access to that type of funding. And you know, I think again, a lot of businesses we deal with, well, more often they're not
Michael (33:28.176)
Yeah.
Ben Tuszynski (33:36.109)
They're wanting to grow. They've got big growth plans and their customer base is supporting them to grow. But.
they'll go to their bank and they'll want more working capital or more term debt, whatever it might be. And they've outgrown the amount of equity available in their home or in their commercial property. But they've got a really good trading business there that's generating income, has a value attached to it, or has a balance sheet, a strong balance sheet sitting there. And that's what we love. It's where do we go? Got an asset, property, great, but you've got a trading business. And how do we now start lending into that trading business and help them grow their wealth over time?
Michael (34:12.234)
Is there a formula or at least some guidelines? If a business is producing surplus cash, which is very different to profit, but are there some guideline multiples or criteria that you can share with us about, someone's producing half a million dollars of free,
free cash, you know, does that mean that you could, you could lend them half of that or four times that? I mean, is...
Ben Tuszynski (34:49.023)
Yeah, it's a good question. So there's no real formula, I suppose. And every segment and every industry will be completely different as well. You know, accounting industry, for example, you've got recurring revenue.
Michael (34:52.25)
Mm.
Ben Tuszynski (35:01.963)
so you can lend against a multiple. And again, even within that, we will take the view of, again, like I said before, one accounting practice is very different to another accounting practice. And that could be as simple as one accounting practice is sole partner, one has multiple partner. So you diversified in terms of who generates the income. So it really does, there's no formula attached to it.
Michael (35:19.846)
Yeah.
Ben Tuszynski (35:26.055)
we get asked this question a lot, but it really is case by case. And I think that's also what makes Judo quite different is that we literally look at everything based on its own merits. That's right.
Michael (35:29.357)
Yeah.
Yeah. Well, you're saying you're going to have a discussion with a potential client, and you're going to go to the bottom line, which is, in this case, what's your capability to service debt, and then have the discussion from there. So that's a great start. And you don't want to take on more debt than you need, but you also don't want to miss out on, if you're at a stage in your business where you want to grow, you don't want to miss out. And I think there are businesses that are
as I said at the very beginning, that are just jaded and have not given up, but have gone, it's just, it is too hard. Um, or, or they just, they're, they don't have those advisors and trusted relationships where they open up and say, well, I think I could grow this business. And I see, I see it mostly when, and I'm, I'm dealing with owners who probably
the large percentage of them are thinking about getting out. And so that then brings in who's coming in to take over the business. And then you always get both, you get another perspective, which is the buyer, and they're saying, well, I don't wanna give away too much, but you can see that they're thinking, I can grow this with a bit of debt or, and the owner wasn't, you know, so yeah, it's having those deeper conversations at least. And again, to...
just encourage owners to think about, you know, what you want to do with your business and don't give up on the idea that there are cashflow lenders. I mean, there's an explosion in the range of FinTechs where you can finance assets, like particular assets, you can break down your balance sheet and you could finance the working, you know, the stock bid or the debtor bid or the, you know, the vehicles and equipment bid, but yeah.
Michael (37:27.298)
that takes a lot of management. And I don't think for a lot of owners, it definitely works for some owners, but for many to just have a banker who's got a relationship perspective on it is really important.
Ben Tuszynski (37:46.811)
Yeah, absolutely. And I think, you know, that we're...
we've seen and there has been an explosion in the FinTech space and they provide good solutions for customers when they need them, when the time's right, when it needs to be quick and quick access to funding. But I think you're right, I think it's how is that solution right for the longer term relationship that we know a lot of business owners are looking for. And you touched on a good point, one of the things that we're seeing a substantial increase on at the moment is management buyouts
from the baby boomers who are looking to exit and find a way to get their capital out of the business. We're probably not seeing as many family members come through, so it's typically selling to the management team or external parties. And when that happens, you really need not only a great advisor, but a bank that can sit there alongside and help the structure something up that can be debt funded.
And it's not always, they're not always easy transactions to put in place and a lot of the time it can fall over because of the funding. So to engage early with a bank and have those open conversations is really key.
Michael (38:55.346)
Yeah.
Michael (39:03.462)
Yeah, I think one of the outcomes of that is going to be that this vendor finance idea is, is going to come into its own because I think it was talked about for a long time, but in, and a lot of owners just didn't want to partake, they just wanted out and you can't get out or if the buyers needs and it's not like,
Ben Tuszynski (39:22.843)
Yeah.
Michael (39:29.63)
lending to buy businesses is challenging, but it's not a bad thing if you've got the right people and you'd look at them on the same four C's. But also, there's a couple of, at least one, if not two, transactions I was involved with Judo and the vendor did stay in the business by way of lending or keeping some money in the business for a period of time, which gave you, the banker,
Ben Tuszynski (39:36.903)
That's right.
Michael (39:59.622)
or the bank, more confidence that the buyers are committed, the vendor, the seller was also standing behind the business. So I think that it might actually start to bring home this idea that vendor finance is possible, but also really helpful in getting some of these businesses sold.
Ben Tuszynski (40:24.231)
Yeah, we see some, you know, all sorts of structures, whether it's vendor finance, whether it's an earn out, whether it's deferred payments, you know, in a couple of years time, you know, there's so many different structures that you can go into these things with that you do need someone there who can A, understand it, but B, structure it alongside what the core debt, you know, looks like.
Michael (40:46.234)
Yeah. I mean, it's a night, like it brings together the three key parties, the buyer, the seller and the banker. So, you know, if those three can't get together and work it out, it's, you know, it ain't gonna happen. I read about, I'm not sure if it's a judo trademark term, but loyalty tax. Can you talk about, because what I want...
Ben Tuszynski (40:52.371)
Absolutely. Yep.
Ben Tuszynski (41:12.358)
Yep.
Michael (41:15.746)
out of this interview is, you know, it's great to have a discussion with a proper small business relationship bank and therefore want small business owners and their advisors to know that there's, I mean, I think due to by comparison to the big four, it's growing rapidly, but still there's many small businesses to go after. Um, loyalty tax is something I read about. I'm not sure if it was one of your founders talked about it or you, I can't remember, but what is
Ben Tuszynski (41:43.663)
Yep, no, it was our founder.
Yeah, so to be honest, there's a lot of companies that do this out there. It's obviously where they look after their, probably what I'd call newer customers over their existing customers for whatever reason. And I suppose penalize in some way, shape or form, doesn't always have to be financially. Those loyal customers, whether they might be underappreciated or not cared for or whatever it might be.
Michael (41:45.969)
Run.
Ben Tuszynski (42:16.705)
We really want to make sure when we deliver, hopefully day in, day out to not only our new customers, but really our existing customers and continue to deliver that relationship. And each customer is different, every customer wants a different type of relationship with their bank and it's really up to us to engage with the customer to ask, what type of relationship would you like? And how can we support you along that?
that journey and we do a whole lot of different things for our existing customers, whether that's engaging through our chief economist, Warren Hogan, who delivers week in, week out, updated financial advice in an easy format to really understand and help our customers understand what economy we're sitting in and how we can support them all the way through to having access to any real decision makers or people, I suppose, across our business.
For example, I'm out there seeing customers day in, day out, understanding their business, all the way through to our CEO Joseph doing the same thing. So it's how do we continue to deliver that relationship and not forget about our existing customers, but continue to support them in addition to our new customers. And that's ultimately what we're trying to, sorry.
Michael (43:22.683)
Yeah.
Michael (43:34.43)
Yeah, but I think it's no, sorry. But I think it's also what we're saying here is that you, you know, if you're an existing customer of a, of a, of another bank, you, you may well be paying some additional cost or not, not having the, uh, the cost might be, you don't have the right structure and missing out on growth. So that's, you know, I guess the, you know, again, the, the
the plea is to say, at least start to have consideration of another banking relationship. And no one's gonna deny that if you've got operating accounts and direct debits, and there's a whole lot of things that make it messy, but if the tax is high, or in whatever form, then there's another way, and it doesn't have to be done tomorrow. But, and I'm, you know,
Ben Tuszynski (44:08.324)
Absolutely.
Ben Tuszynski (44:28.527)
Yeah, that's right.
Michael (44:32.878)
I suppose you'd see, Judo as a bank would have a lot of customers that are in early stages of coming across. I mean, you build relationships, it takes a while for everyone to get comfortable that there's a good relationship there and you don't have to race to it tomorrow.
Ben Tuszynski (44:54.295)
No, that's right. No, we're always willing and able to provide, sometimes it's just a second set of eyes going, actually, and we do this, we all say to customers, you know what, that's a great offer. How about you take it, but at the same time, this is what we can offer, this is how we can help, and it may not be now, but it might be six months or 12 months or whatever it might be, and this is the relationship we want to deliver to you.
Michael (45:01.564)
Yeah.
Michael (45:07.652)
Yeah, yeah.
Yeah.
Michael (45:22.83)
Well, a fair bit of your referral work comes from finance brokers, I understand. So is that another really effective channel for owners? We didn't talk about finance brokers, but a good finance broker who can understand the market and some of the potential opportunities for...
Ben Tuszynski (45:29.659)
Yep.
Michael (45:49.95)
for a business owner that is that a good other entry point to a better banking relationship aside from just a, you know, direct approach.
Ben Tuszynski (46:00.375)
Yeah, so we deal a lot with the finance broker market. So they've been a big part of our partnership, I suppose, since day one. We engage predominantly with commercial brokers.
Michael (46:14.786)
Yeah, that's what I mean, but sorry, but you're not just, you're not just, but yeah, mortgage brokers is, you know, with housing finances is not what we're referring to here to specialise small business lenders.
Ben Tuszynski (46:22.579)
That's right, yeah. Yeah, that's exactly right. I know we're not playing in the home loan.
standalone home loan space. So, you know, that's not our market. But yeah, absolutely. You know, commercial brokers play a big part of the market and a large portion of our opportunities are generated from that part of the market. And, you know, we have great relationships with our brokers out there. Who do they understand what we offer, but they also understand what else is on the market and, and how that can best, you know, support the customers. At the end of the day, what we want, you know, is to look after great customers. And if that
a commercial broker, fantastic. If it comes direct to us, fantastic as well.
Michael (47:06.042)
Yeah, yeah, you don't mind. What's the, your economist, Warren Hogan puts out a monthly report, but where do you see?
the small business, I mean, such a broad thing, but how do you see the next 12 months or how does Warren see it in terms of confidence and output and productivity?
Ben Tuszynski (47:34.463)
Yeah, so I won't speak for Warren. I'll give you my views. So, you know, I think there's no doubt about it that, you know, all the...
Michael (47:36.949)
Mm.
Ben Tuszynski (47:42.795)
interest rate rises that have happened over the last 12 months, the inflation in the market, the labor pressures are starting to bite a little bit. You know, we're definitely seeing that. But I think, you know, one thing, and Warren does say this a lot, is that the Australian SME market bounces back. And like I said at the beginning, you know, the SME economy is the biggest part, one of the biggest parts of the Australian economy. So, you know, to be out there from a bank and support great businesses is absolutely
really important. We will...
And when we're seeing this now, the labor market has absolutely, from what we're seeing anyway, eased up slightly, you know, more migration has come in. So post in terms of a post COVID world. So that is helping free up labor to go into where it needs to go. So I think that's a really positive thing. You know, that still wages and retention of staff is a really big part
Michael (48:37.207)
Yeah.
Ben Tuszynski (48:46.101)
about customers about because they're balancing that out as well, so it's all well and good to get a staff member in, but actually keeping them is really important. So they're looking at that as well. I think that the property market is something that everyone's watching pretty closely. The rates have gone up so high, but I don't think really in any or many capital cities there has been.
a movement of prices as I think people thought. So the supply is really tight and the demand is still there. So the prices are holding. And I think in terms of sectors, I suppose, that we're watching over the next probably six to 12 months, I think the building construction sector, I don't think anyone could doubt they've gone through a bit of.
trouble and what does that look like going forward, retail as well. What's that gonna mean to discretionary spending as people's purses get a little bit tighter. So we're having a look at that. So there's, yeah, there's, whilst there's still things going on in the economy and probably bubbling away, we're still confident that we can be out there supporting as many SMEs as possible with their funding in any, in any...
Michael (49:37.788)
Yep.
Michael (50:04.143)
You haven't got enough SMEs yet.
Ben Tuszynski (50:06.483)
No, we haven't. No. And I think in any economy, whatever is happening, there's always great operators that you want to support. And that's...
Michael (50:14.438)
Yeah. I talk to them day in, day out. And I wrote an article recently, which kind of it was based on some ABS data, which talked about the balance sheet of the average Australian family household. And so no surprises, primary residents came in number one, and then there was the managed investment super and where it...
It really rocked me was you get to furniture and household content was, I think, 7% of household wealth. And then underneath that was business equity at 6%, which is pretty, pretty like there's a whole lot of things that you could argue about that. And there's a lot of businesses that, you know, I've got minimal value, but the point of me bringing up is that one of the ways that, you know, we need to recognise that
Ben Tuszynski (50:52.883)
Thanks for watching!
Ben Tuszynski (50:56.828)
Yeah, well.
Michael (51:12.87)
that business, small business is not for everyone, but there's a lot of them and it's a pathway to building wealth and it's not the 10X kind of, super growth, it's building steadily for a lot of them. But also that when a bank's prepared to back a business, for me it says there's actually some equity value for the owner and some market value by way of,
you know, buyers looking at these things. So I just think that was a, you know, like a shocking kind of stat that really, um, you know, made me wonder about, you know, where, where small businesses, everyone talks about it being the backbone and that you, you know, judo's doing something about that by lending. So, you know, kudos. Um, Ben, look, I think that's a, is there anything you wanted to, to add about judo? Um, I mean, it's a
Ben Tuszynski (51:48.444)
Mm.
Michael (52:12.474)
I'm shamelessly plugging that owners that listen should as a minimum question how effective their current banking relationship is. But if there's anything else, it's probably not a bad time to wrap it up.
Ben Tuszynski (52:34.228)
Yeah, look, I think, um...
You know, just to bring it all together, I think it's, you know, we are absolutely dedicated to SME businesses and we will continue building out our business that's here to support SMEs. We've got 18 offices around Australia, 125 odd bankers that are here to support business. You know, whether it's the industries that I mentioned before, we last year commenced our agri business. We've also got a health specialization. So we've got so much experience,
across the business that is really here to support customers. And it doesn't have to be a relationship right now. It can be for the long run and how we build that relationship, which I think is ultimately really important. We just want to be Australia's most trusted SME bank. And trust means a lot of different things to a lot of different people, but ultimately it's how do we deliver on our four Cs, how do we do it quick so we can give that confidence to our customers
Michael (53:15.751)
Yeah.
Ben Tuszynski (53:35.497)
business, buy a property, grow, acquire, whatever it might be. And we genuinely think we do something different. And I think like you said, sometimes it's just have a think about what your banking relationship means to you and then what your banking relationship could mean if it was with Judo.
Michael (53:37.551)
Yeah.
Michael (53:59.622)
Yeah, yeah, yeah. No, I totally agree. The one thing I wanted to add that notwithstanding Judo is a new bank, it's full of experienced business bankers, which is, so it's worth, I think, reinforcing that. And then you made an interesting point then. I mean, we're saying if this is some, if you're starting to question the
how effective your relationship is. You could talk to a finance broker, you could reach out to Judo. And it doesn't, you know, you just hinted at it, it doesn't have to be all in straight up either. So, but the point is to kind of, don't keep paying a loyalty tax if that's what you're paying, start to chip away at it. So, look, you know, keep up the work that you're doing. Ben, it's...
Ben Tuszynski (54:47.823)
Yeah, absolutely.
Michael (54:55.438)
It is, it's a mission and I'm really wrapped it. There is some, along with some other FinTechs who are really making, I know that I've had clients that have special opportunities have come up, they've been able to tap into something that they might not have five years ago, or it'd have been really hard and they would have missed the opportunity. So, it's freeing up and there are different ways.
I really appreciate your time. If someone wanted to reach out to you personally, Ben, what's the easiest way to find you?
Ben Tuszynski (55:32.007)
So there's a few ways. So you can jump on Google and just go to judo.bank and go to our website. There's a contact us button on there. You can ring us on 135836 or you can link in me, ben.tyszynski. And yeah, I'll happily take a message and see how we can get in touch obviously and come out and see you and see how we can help.
Michael (55:47.782)
Yeah.
Michael (55:57.898)
stuff. Yeah, I mean, and it is judo's in your Vic Tas, but it's, it's every other state. So, yeah. All right. Well, look, Ben, appreciate Tom, it's really great insights to judo. So thank you for sharing them. Really appreciate it.
Ben Tuszynski (56:04.315)
Yes.
Ben Tuszynski (56:08.783)
Yep, that's right.
Ben Tuszynski (56:18.511)
No thanks Michael, I appreciate you having me on.
Michael (56:21.01)
All right, you take care. Thanks, Ben.
Ben Tuszynski (56:22.663)
You too.
Michael (56:29.602)
I then.