Commercial finance offers a wide range of benefits and covers a broad spectrum of lending including commercial and residential investment, owner-occupiers and asset and cash flow finance – so why does it still have a relatively low profile in today’s lending market?
Unlike the bulk of the market which is made up of traditional high street intermediaries, commercial finance is not about standard products. One of the reasons why some intermediaries do not consider this particular form of finance is due to the antipathy they sometimes feel towards commercial enquiries. The perception of difficulty in placing commercial enquiries, the paperwork required and the time spent to get to completion are regularly cited as key reasons why intermediaries have tended to steer away.
As a result, a significant proportion of intermediaries believe this form of finance is complex, simply because they don’t fully understand it as it is not an off-the-shelf product. As a result of this level of uncertainty, it is often more difficult for intermediaries to consider it as a potential finance option.
It’s all about perception
Commercial finance has a wide variety of pricing margins as there are credit differences between the type of tenancy, the property location and the client profile, for example. In other words, because it is a multifaceted form of finance, to get a strong grasp on the market you have to know the sector inside out, and that is why some intermediaries often do not consider it as a feasible option.
However, there has been a real upswing in the commercial finance industry in the last few years. Therefore, although the commercial mortgage market can be a tough area, it can also be very rewarding.
Using a specialist distributor partner can eradicate any time wasting and also provides intermediaries with a resource which means their enquiries can be dealt with in an efficient and professional manner.
Interestingly, although the market share of high street banks has come down over the last few years, they are still the first port of call for many commercial clients. This means that although the amount of business going through intermediaries is on the increase, a significant amount of customers are still going directly to their bank and are not always getting a positive response. These are the key clients that would be assisted by a good intermediary.
The value of specialist knowledge
It is common for intermediaries to have repeat clients taking out buy-to-let mortgages, but there is a growing number of investors now looking at properties outside of the ‘standard’ residential buy-to-let. They may want mortgages on shops with residential upper floors, multi-unit freehold blocks or stand-alone commercial units, for example. In these situations, specialist commercial lending can provide the answer, but it comes down to having access to the right specialist knowledge and knowing which solution is most suitable for the client.
By working with the right specialist, intermediaries can have access to all the information to guide a client; it doesn’t have to be difficult, intermediaries just need to have to use the right resources. Therefore, in my opinion, it is no surprise that demand for specialist assistance in the commercial sector has continued to increase, suggesting that commercial finance is growing in profile.
Busy times ahead
It is clear that commercial finance is a multifaceted sector within the market and can add to an intermediary’s client base and income. Intermediaries don’t have to learn the whole process, but should be able to spot the opportunity and use all the expert advice available in order to enhance their business proposition.
Although the commercial lending sector has endured some lean times in recent years, demand is continuing to grow in the intermediary market and, with renewed confidence and greater appetites for lending emerging, it is evident there are exciting times ahead.