Interesting Times

Interesting Times


Adam Tyler, Chief Executive, of the National Association of Commercial Finance Brokers offers an insight into the current market and explains how the Association is supporting its members through these tricky times.

Reports from the commercial finance front line suggest that things are getting tougher for brokers. I have had numerous conversations with members of the association which have revealed that lenders have tightened their criteria, making it increasingly difficult to place a deal. But despite these immediate problems, one particular broker was extremely cheerful. He explained: “As the market gets harder, our clients need us more and more. It’s just not possible to find a lender willing to lend on certain kinds of business without a certain amount of expertise at the moment.” As this member has been in this market for the last 17 years, he has this expertise. Another story reached me of a broker who had a client come to him after having been turned down by his own bank. The broker looked at the deal, and restructured it, and represented it back to the client’s own bank. The bank accepted the deal – but only after the broker’s intervention.

But there is another side to the story. Some brokers are really beginning to struggle as money dries up. Often it’s not a lack of clients which causes the problem, but a lack of lenders wanting to fund that kind of business. Brokers are having to think creatively to get deals agreed. High loans-to-value are a thing of the past, so any shortfall needs to be made up using alternative forms of finance. At the moment, the Association is travelling around various venues to educate brokers about these alternative forms of finance. Leasing and asset finance; factoring or invoice discounting; bridging; or payroll finance: these can all help to release funds for a business to help with any funding plans and reduce a commercial mortgage lender’s exposure. This offers comfort to a lender about any given deal, and therefore more likely to lend.

The number of sub-prime or self-cert deals available to the broker has dwindled away to almost nothing and those which are still available require more supporting paperwork than they did before. Small, specialist lenders are working at capacity and can afford to cherry pick the deals they want to do. They are also requesting more supporting information than they did 6 months ago. For the time being at least, sub-prime or non-status lending has again left the mainstream and shrunk back into being the niche proposition it was five years ago. These lenders have neither the capacity, nor the inclination, to take up the slack left by Commercial First.

The NACFB was founded in 1992 to raise standards of proper professional practice in the commercial broker industry. The aim was to secure the integrity and future well-being of the broker market for the benefit of both brokers and their customers. Since that time, the Association has grown from its original six members in 1992 to the current membership of 750 members firms, which represents around 1,500 individual commercial finance brokers. These brokers operate across the whole spectrum of commercial finance. While the majority offers commercial mortgages to their clients, there are also those who specialise in leasing and asset finance, bridging finance, factoring and invoice discounting or fleet finance.

At the moment the Association is concentrating on working with members to keep them informed of any changes in the market to keep them one step ahead of the game. When, in recent months, a couple of high profile lenders withdrew from the market, they turned to the Association first to help communicate with and support their brokers. These are difficult times, although commercial brokers do seem to be having an easier run of it than their residential colleagues (well, for the moment anyway). The recent unfortunate trends seen in the residential mortgage market, of lenders turning their backs on brokers, has not yet been followed in the commercial sector. Commercial lenders are still committed to the broker market and, if anything, are as keen now as they were twelve months ago to secure their share of broker introduced business. In difficult times, such as we are witnessing now, brokers need as much help and support as possible – and we aim to provide it.

Leave a comment