Top Ten Tips to Best Practice: Tip 4

Top Ten Tips to Best Practice: Tip 4



Every week, Adam Tyler, Chief Executive of the National Association of Commercial Finance Brokers (NACFB) gives us a handy hint for brokers’ best practice…


Tip 4: Commercial fee disclosure

At a first customer meeting or when arranging commercial finance over the phone, a Terms of Business Agreement needs to be signed. This must outline the fees that any SME can expect to have to pay the broker for the arrangement of any commercial finance.

The standard NACFB TBA has been used for many years, standing the test of time and also numerous court cases when a dispute over fees has arisen with the customer. This document, available to all Association Members, is as necessary in a commercial transaction as it would be for a regulated contract. The Hurstanger v Wilson case in 2007 highlighted the need for fee disclosure in any transaction which applies to the lender as well and is now evident from most commercial lenders.

The NACFB TBA shows three fees that the customer could face, any arrangement fee to be paid to the broker for his time, the share of any lender arrangement fee that the broker may receive and possibly an appraisal fee. When these fees are due to be paid during the transaction must also be disclosed.

It is the latter that may need to be charged to assess a commercial case, this allows for the brokers time before he can judge if the case can be placed. Advance fees can be problematic and form a major part of the Association's policing of the Commercial Finance industry. This fee must be realistic and appropriate and we advise that in the majority of cases will never exceed £500 for even the most complex cases, and most of the time will be far less than this.

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