If there was ever a time for residential mortgage brokers to add a commercial arm to their business, it’s now. 

Record numbers are now writing commercial loans, with $13.4 billion in settled loans in the six-month period of 1 April to 30 September last year. 

The proverbial doors have opened for brokers that can offer business customers a range of lender options, structured deals and simplified application processes.  

Fortunately, the opportunities are already there for brokers ready to conquer commercial lending, as is the support.

First things first: what exactly is commercial lending? 

Commercial lending includes loans to purchase commercial property, equipment, vehicles or assets; or loans to boost cash flow, fund business expansions and assist with the costs of running a business.  

For the most part, commercial lending isn’t too far removed from residential lending. For example, the process and engagement between client and lender is largely the same.  

The complexity comes in various business structures, new loan types, multiple and composite securities, complicated/inter-related streams, loan terms and terminology.  

For example, commercial property loans typically have shorter loan terms between two and 15 years, compared with the typical 30-year terms of residential property loans.  

As Mike Barbarich, AFG’s Team Leader Commercial Scenario and Support Desk explains, commercial lending really helps to take the relationship between you and your SME clients to a new level: 

“It takes time to build trust with a client and as a finance broker you are in a unique position to leverage off that trust.  Your self-employed (SME) clients are likely to have financing needs outside of buying a residential property for investment or to live in” he says.  

“Like many of us, SME clients are time poor and need the services of a finance professional to help them make good decisions around their commercial financing needs. Your SME clients will appreciate a finance broker who already understands their financial circumstances and is able to use that knowledge to find solutions to their financing needs – commercial and residential.” 

“It saves them a great deal of time and effort in dealing with just one person and not having to tell their ‘story’ over again to other parties.  In helping your clients with their commercial finance needs the benefits to a broker are obvious with increased revenue streams, greater client retention and greater client advocacy.” 

3 key reasons to expand into commercial lending 

• Reason 1: To create a consistent income stream: diversifying through commercial lending is a natural hedge to ensure a consistent stream of income during flat periods in residential lending. 
• Reason 2: To fulfil a need in the market: a lot of business customers work directly with the major banks, where their representative may only have limited experience and thousands of small to medium enterprises (SMEs) in their portfolio. 
• Reason 3: Better serve your existing customer base: given the sheer number of SMEs in Australia, it’s highly probable you’re already working with customers who own their own business. Looking for commercial opportunities within your current base can lead to new revenue sources, but also safeguard your residential income sources. 

Commercial lending may not be the right move for every broker, but it’s a good way to future-proof your business income strategy, as David Drinkwater, AFG’s National Sales Manager Commercial & Asset Finance, elaborates: 

“Given the sheer number of SMEs in Australia, it’s highly probable you’re already working with customers who own their own business. Looking for commercial opportunities within your current base can lead to new revenue sources, but also safeguard your residential income sources,” he explains. 

“If another broker or a lender directly reviews a customer’s business facilities, it’s likely they’ll review their residential facilities as well to make a play for refinancing,” he explains. 

“The analytics in our CRM show us that approximately 25% of residential applicants generate income streams from their own business. Residential broking keeps growing as it provides customers with great choice and competition which leads to great customer outcomes. The same thing is happening in business lending. The spread and variance in commercial products make it a minefield for a customer to navigate by themselves. Brokers are uniquely positioned to provide guidance, and AFG will be there to support.” 

Thinking about diversifying through commercial lending?  

While there are complexities to diversifying through commercial lending, the support available through AFG has never been better. We provide: 

• Training and education pathways via Learn; 
• A simplified accreditation process; 
• Ongoing support with set-up, applications and lodgement; 
• Access to a broad panel of lenders; 
• A dedicated business technology platform that allows you to find and process applications for a range of commercial products; 
• Customer relationship management (CRM) capabilities; 
• Sales tools and marketing collateral.
  

Download our guide and learn about the mortgage broker’s big advantage 

In our Better Brokers’ Guide to Diversifying your Business into Commercial Lending, we will teach you the advantages of diversifying your business and how you can set yourself up for future success.