SME lending has been a tough market for specialist lenders, as the December half results for Prospa Group show.

The company originated A$180.7 million of loans during the half – 41.1 per cent down on the previous corresponding period.

Receivables fell from $453.8 million at the end of December 2019 to $341.7 million at the end of the latest half.

The loan impairment expense was $10.9 million and the company’s total provision was equal to 10.4 per cent of receivables.

Interest income fell 25 per cent to $49.1 million and the business went from a small profit of $551,000 in the December 2019 half to a loss of $3.2 million in the latest half.

The company said it was affected by weaker demand, as businesses took a cautious approach to borrowing during the pandemic.

In addition, Prospa made adjustments to its underwriting parameters and credit assessment model “to reflect the changing macroeconomic environment, as well as sensitivities in industry-specific small business trading models”.

The company is cash flow positive and said it is well funded to support its activities.