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Lenders, traditionally, have given less support to finance brokers in commercial lending than to their residential counterparts. But rapid growth is transforming the sector, and lender competition for broker business is now much heavier
No-one can dismiss any longer the importance of third-party distribution in the commercial lending space. It now accounts for in excess of $15 billion per annum, or over 35 per cent, of new business for lenders.
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With most major lenders predicting further growth over the next two years, expectations are that commercial lending will soon account for more than 50 per cent of all new business in the third-party channel.
The commercial client
Clients in this market are business-savvy and appreciate specialist mortgage brokers who have access to a broad panel of lending institutions via their aggregation model.
This provides the client with cheaper interest rates, the costs required to set up the loan are lower and product diversification is superior.
Clients are now realising that using just one bank will restrict them in gaining the best product possible in the market to support their business model.
With more finance brokers now operating in this space, business clients now have access to experts with very strong commercial backgrounds in lending institutions.
Other brokers seeking to diversify into this market can do so via mentors or qualified training programs available via the MFAA/FBAA or training group AAMC to increase their level of understanding and knowledge.
Our referral program
At Vow Financial, we have set up a referral program through which our members can refer their clients to our specialists in each state for advice on both commercial and equipment finance products.
By utilising this facility, our members can get access to the correct products for their clients, giving them the ability to understand how lenders differ when providing these products as opposed to providing residential products, with our specialists assisting them during the process.
The commercial advantage
With finance brokers not providing these products, they run the real risk of their clients seeking advice elsewhere and subsequently losing all their business as a result.
The more types and varieties of product – such as insurances, wealth, tax and superannuation - that the broker can offer in- house, the more likely it is that a client will remain with them for life.
There has never been a better time for your commercial clients to get a good deal. The competition among the major players has never been a fiercer in this market.
The lenders
At Vow Financial, we currently have a panel of 17 lenders which includes major Australian banks and second-tier lenders from which our specialists can select where commercial/equipment finance is required.
Interest rates in this space are the lowest they have been in over 20 years and we are seeing an excellent spread of loans being written from straight forward property- based deals.
Lenders at the other end of the scale are also keen to write SMSF commercial, construction/development products along with the low- and no-doc facilities.
Glenn Mitchell is head of commercial and leasing at Vow Financial
