The finer details

Most of my blogs tend to lean towards the macroeconomic, probably due to the fact that I still like to keep an eye on the wholesale markets and economic data in...

Section: Opinion

Most of my blogs tend to lean towards the macroeconomic, probably due to the fact that I still like to keep an eye on the wholesale markets and economic data in general, while having misty eyed recollections of my days in the City (though they weren’t very ‘Wolf of Wall Street’. My experience with the FX traders was a bit more British; lunchtime – pub, evening time – pub followed by KFC at Bishopsgate and repeat until Friday).
So, for this week I thought I would look at the microeconomics of the commercial market and the sorts of things that brokers should be looking for to identify commercial opportunities.
This is really aimed at the brokers that specialise in residential and buy-to-let mortgages rather than commercially experienced introducers.
So, the most obvious place to start is with your current database of customers. I receive a lot of enquires from residential brokers that have concluded mortgages for clients that are business owners.
If the client has been happy with the service and product that they received on their residential mortgage they will quite often come back to the same broker if they have a commercial need. That might be to purchase premises or plant / equipment or possibly some form of cashflow funding for expansion.
I appreciate that for many brokers these types of enquiries are outside of their normal scope of experience, but that is where specialist partners (such as Brightstar) offer the broker an opportunity to earn further commissions without getting bogged down in a process that is unfamiliar to them.
Subject to individual circumstances it is possible to get as high as 80 per cent LTV for these customers with rates from around 3.5-4 per cent. However, as an introducing broker all that is needed to get the ball rolling are some contact details to the specialist partner of choice and you could be earning as much as 50 per cent of the total commission on the case.
How many of these types of customer are sitting on your database right now? How often do you speak to them about their commercial requirements? More importantly, how much commission are you missing out on?
The mainstream commercial lenders have been (slowly) improving their offerings to trading businesses and you might be surprised at what can be done for both property backed and non-property backed commercial lending for trading business clients right now. 
The other step-up for brokers is current or former buy-to-let clients that are either looking for a portfolio refinance to capital raise or want to expand their portfolio with commercial or semi-commercial properties.
This area is still relatively under serviced by the mainstream commercial providers and the credit parameters are still tight. However, this is where the three challenger banks, Aldermore, Interbay and Shawbrook are really providing a great alternative to the traditional banks.
Interest-only funding, gearing up to 75 per cent (or even 85 per cent in some circumstances), capital raising for further purchases, flexible debt service calculations – all the things that are anathema to the traditional funders can be obtained from the challengers and they are all looking to grow their loan books.
So, generally the market seems to be moving for the resi / BTL broker, but don’t forget about other opportunities that might come across your desk and the additional income that you could be earning.

Source: Bridging & Commercial — https://bridgingandcommercial.co.uk/the-finer-details