Commercial opportunities hiding in plain sight

For mortgage brokers seeking growth, the most valuable conversations may be with clients they already know. That premise underpins Wave Money's move into small-ticket commercial lending and the experience of Mark Petterwood of Astute Financial Geelong, who has been finding commercial business within his existing residential client base. Two real transactions from Petterwood's Geelong practice illustrate the point: one for a fish and chip business owner buying his own premises, another for a 19-year-old apprentice acquiring a commercial investment property. Neither required the broker to build a new client base. Both were written through Wave Money's Small Ticket Commercial product, built around a residential-style servicing philosophy applied to eligible commercial scenarios.

How can mortgage brokers find commercial lending opportunities without finding new clients?

The answer, Wave Money founder and managing director John Flavell says, is already in the database. 'There's [a] wonderful commercial opportunity inside existing relationships. You don't need to be going out there trying to find new relationships.' Small business owners who have rented the same premises for years may reach the point where buying those premises is the logical next conversation. Existing residential property investors represent another source of opportunity as they consider commercial property as an additional asset class. For brokers, commercial lending need not require building an entirely new client database. The opportunity is often the person who already calls with a question about their home loan.

What is Wave Money's Small Ticket Commercial product and who is it designed for?

Wave Money is an Australian independently owned non-bank lender. It launched Small Ticket Commercial after hearing from brokers that the same self-employed borrowers and property investors they were helping with residential lending were presenting commercial opportunities. The product offers maximum loans of $1.3 million, up to 80% LVR and terms extending to 30 years across eligible metropolitan commercial properties. Wave Money applies the same underlying servicing philosophy it uses for residential lending to straightforward commercial scenarios, with commercial property as the security. Brokers can engage directly with Wave Money's credit and sales teams from scenario through to settlement. Further analysis on products like this is available through Australian Broker's premium reports.

How did a Geelong broker help a fish and chip business owner buy his own premises?

Mark Petterwood, who co-founded Astute Financial Geelong with his wife in 2007, brokered this deal for a client who had been renting commercial premises from his father for $4,000 per month. The father was approaching retirement and needed to free up capital. The client's financials did not support borrowing under a conventional full doc assessment, so Petterwood used Wave Money's accountant verification pathway. Rather than requiring the accountant to declare a specific income figure, the letter focused on the accountant's comfort that the borrower could meet the proposed loan commitment. Petterwood describes it as 'a much more palatable letter for accountants to sign.' The loan was approved unconditionally at $480,000. Repayments were only around $100 per month more than the rent already being paid.

Can a young or first-time borrower get a commercial investment loan through Wave Money?

Yes, as Petterwood's second case shows. The client was a 19-year-old second-year apprentice seeking to purchase a commercial investment property worth around $480,000. His father gifted the balance of the purchase funds. The property carried an established commercial tenant, with rental income covering the proposed repayments and tenant options to extend the lease. Servicing was tight. Challenges during assessment included the company structure and a valuation returning a lower rental figure than anticipated. Petterwood worked directly with Wave Money's credit team to resolve each issue. The loan was reduced by around $15,000 to approximately $335,000 and received unconditional approval.

What income verification options does Wave Money offer for small-ticket commercial loans?

Wave Money's Small Ticket Commercial proposition accommodates different borrower circumstances through three income verification pathways. Full Doc uses the same servicing approach Wave Money applies to residential mortgages, assessing the individual's ability to service the debt. Alt Doc provides alternatives for self-employed borrowers: accountant verification, BAS statements or business banking statements. The third pathway, Lease Doc, is for commercial property investors. It assesses servicing against the net rental income generated by the property rather than the borrower's personal income. Each pathway reflects a borrower's actual situation rather than requiring every client to fit the same assessment mould.

What is Wave Money's Lease Doc option and when does it apply?

Under Wave Money's Lease Doc solution, an eligible commercial investment property with at least two years remaining on its lease can be assessed using the net rental income it generates. Wave Money deducts relevant property outgoings from that income to establish the net amount received by the borrower. If that net income covers the mortgage repayments, servicing can be assessed against the lease without assessing the borrower's personal income and outgoings in the same way. Flavell says Lease Doc can open another pathway for investors who have equity available but have reached the limits of their personal borrowing capacity under traditional servicing models.

How should residential brokers approach commercial lending for the first time?

'A lot of brokers are scared of doing commercial transactions, and they really shouldn't be because most commercial transactions are not complicated,' Petterwood says. His practical suggestions: use resources available through your aggregator, speak to brokers with commercial experience and engage with lender BDMs to workshop scenarios before submission. Petterwood discusses deals with Wave Money's broker relationship team before lodging, so both parties can consider structure and potential issues together. A retention argument also applies. A client whose broker cannot meet a commercial lending need may find another adviser, putting the broader relationship at risk.

Featured experts

Mark Petterwood: co-founder, Astute Financial Geelong; co-founded the business with his wife in 2007; writes around $65 million annually across residential and commercial lending, including approximately $5 million to $10 million in commercial; client base originates largely from accountant referrals.

John Flavell: founder and managing director, Wave Money; Wave Money is an Australian independently owned non-bank lender focused on self-employed borrowers and investors whose needs may not be met by traditional lenders.