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The end of the financial year presents a unique opening for mortgage brokers to diversify into a space that is far less complicated than it appears, says the director of a non-bank lender.
“Small business lending is remarkably easier than people actually think. If a broker has been doing mortgages for some time, they already have many small business customers in their existing database,” said Olly Guilleaume of Limba Loans.
With today marking the end of the financial year, small businesses are likely in the midst of tax discussions with their accountants, with many being alerted to the existence of pending tax debt for the first time. However, while accountants are able to identify the signs of the incoming issue, they aren’t usually able to offer solutions to mitigate the impact.
According to Guilleaume, “Brokers have the opportunity at this time of the year to reach out to those customers and say, “If you’ve got this pending, you need to talk to me before it actually happens.”
“Once the tax debt does hit, the small business’ access to funding is going to be heavily restricted and come at a much higher rate,” he explained.
Guilleaume has encouraged mortgage brokers to check in with their home loan clients who are also business owners or self-employed to see if they are in need of such assistance, but advises newly diversified brokers to avoid lenders that rely on algorithm-based loan assessments.
He explained, “In these situations where it is a little more unique, brokers need to lean on the expertise of the lender themselves. The lenders who have the ability to discuss directly with the broker become a hugely valuable asset to those who are lacking experience.”
While small business lending is oftentimes lumped into the commercial lending category, Guilleaume claims it is far simpler. Usually, the financial statements required for complex commercial deals are unnecessary for small business lending, with bank statements being sufficient.
Additionally, the director addressed the misconception that brokers often wait half a year or longer for the commission from a small business loan.
“For a new broker who’s dealing with mortgages primarily, it can be three months before they get that first commission check. If they’re dealing with a small business transaction, it can be a week. That’s a big difference,” he pointed out.
“In fact, we’re now dealing with brokers who primarily deal in this market because they can turn over the customers quite quickly, they can make long term relationships, they get paid relatively fast, and they’re not difficult to write.”
