The idea of diversification is hardly news to brokers. Aggregators and lenders have been pushing the necessity of diversification for years. For brokers who are looking to add new revenue streams, commercial lending can often end up in the “too-hard” basket. But according to La Trobe Financial vice president and head of distribution Cory Bannister, commercial lending is not as frightening as many brokers seem to think.
“By far the most common misconception we hear regarding commercial lending is that it is incredibly complex; best left for specialist brokers; and certainly not for the faint hearted. Our view is that it doesn’t need to be,” he said.
Bannister said lender choice can make all the difference for brokers looking to break into commercial lending.
“One of the most crucial decisions a broker will make when lodging a transaction is which lender to use as this will often dictate the level of difficulty or complexity. Brokers should investigate a lender’s policy and process for the specific transaction prior to lodging to avoid any unnecessary delays or surprises,” he said.
Debunking the myths
Bannister said there are a few common reasons brokers tend to hold the misconception that commercial lending is best left to specialists. First and foremost, he said, is having previously had a bad experience.
“The broker may have attempted a commercial transaction and chosen the wrong lender partner, which typically means that the lenders policies and procedures are too complex, or they received no support from the lender BDM to package the transaction, and they probably had no access to a credit team willing to guide them through the process; or simply they may have chosen the wrong “first transaction”, like anything, often you need to crawl before you walk,” he said.
Another reason many brokers feel commercial lending is out of their reach is simply because of rhetoric in the market. Or, as Bannister puts it, “because ‘they’ said so”.
“The often-told fable that commercial lending is too hard or too complex has been around as long as Aesop, and it has been told so often that it is hard not to believe or ignore it. Think about who told you this fable, chances are they don’t want you to get involved (because they already are), or they too are afraid to try. Try for yourself and decide.”
La Trobe Financial is a credit specialist fund manager with over 60 years’ experience covering $10 billion of institutional and retail investment mandates.
Since 1952 we have continually proven our commitment to innovation, product quality and superior service. Our cause is to make a difference by creating “wealth for our investing and borrowing clients, by improving their financial standing".