Why you shouldn't fear commercial lending

by Miklos Bolza23 Nov 2017
Branching out into commercial lending can be intimidating for brokers due to the added challenges and complexity behind the typical loan application process.

“The very words ‘commercial lending’ are often enough to send a shiver up a broker’s spine as it is often simply too hard and too time consuming to attempt a commercial loan submission,” Steve Lawrence, vice president and head of credit at La Trobe Financial, told Australian Broker.

Aspects such as navigating through the different lending policies, collecting the many required documents and completing technical serviceability assessments mean this is often put into the ‘too hard’ basket by brokers.

For assistance, Lawrence suggested looking to non-banks active in the commercial space as these will have products tailored for brokers who have never written a commercial loan.

“The non-banks have a service-first mentality which has resulted in a more streamlined and efficient process for brokers to use, often mirroring the process for their own residential loan products.”

The most common challenge facing new brokers in the commercial space is the perception that they do not have the knowledge and support to assist them. Although the view is that commercial lending is complex, it does not need to be, he said.

“It is important for a broker who is new to commercial lending to partner with a lender who is willing to invest time with them to guide them through the process.”

It is also not uncommon for new brokers to say they don’t receive commercial loan applications. However, Lawrence said this was often because the broker doesn’t advertise or ask for this type of business themselves.

“Like anything, if you don’t ask, you don’t get, and understandably if you’re not comfortable with these transactions you won’t go and look for them.”

The problem is that many other brokers are already seeking these opportunities, making it more urgent for new brokers to focus on leads and future-proofing their businesses.

By reviewing clients’ assets and liabilities through their CRMs, brokers can identify potential borrowers seeking commercial loan solutions, which is a great starting point, Lawrence said.

“Apart from the broker’s existing database, brokers might consider aligning themselves with complementary partners such as financial planners, accountants or real estate agents who are often a good source of referral for commercial transactions.”

Now is the perfect time to get into commercial lending as it allows brokers to expand their product offerings without intensive training or capital investment. Commission is generally very attractive as well, he added.

“By adding commercial lending to your repertoire, brokers are able to service more customers by volume and unlock a new, potentially lucrative demographic of client as commercial property is often part of sophisticated investors’ property portfolios.”

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