Madd about commercial lending

Around September 2014.

Why did you decide to start writing commercial loans? Why not just stick to residential lending?

I used to refer out business to another commercial broker, because I acknowledged that I was a residential broker first and foremost and wanted to nail writing home loans first. But after a while, I became uncomfortable with the service my clients were getting through the referrals I was giving, and the number of people that were calling me looking for commercial loans became too high, so I decided to put more time and effort into it.

I also discovered that a lot of my residential clients had commercial loans and that I was missing the opportunity to better service my existing clients and write more business. So, I hired an ex-commercial broker to assist me in writing these loans.

Brokers need to be constantly evolving to remain relevant with clients – they expect that you know about more than just home loans.

How difficult is it for a residential broker to master commercial lending?

They’re two different areas of lending – commercial is not so black and white. You have to dig a lot deeper and make pages of notes for each loan so you can understand what’s required and convince the bank why they should fund each client. And it’s because of this that commercial loans are a lot more time-consuming to write. A residential broker might be able to write five loans in a day, but it might take them a week to write one commercial loan.

It takes a while to be able to build up the knowledge to write commercial loans, so brokers need to align themselves with a good bank which has good BDMs who can help every step of the way. But I would recommend mortgage brokers who are looking to diversify into commercial lending to master resi loans first.

What percentage of your total loan book is commercial lending? Do you plan to grow that percentage over the next 12 months?

Probably around 5 per cent currently, and I plan to grow that to around 15 per cent this financial year.

How do you find commercial clients?

The more that I do commercial lending, the more I get referrals from the commercial space. Essentially, you’ve just got to make people aware of what you do and the services you offer.

From a broker’s point of view, how competitive is commercial lending compared with residential lending?

I don’t think it’s very competitive at all – I haven’t had to compete with any other brokers for the deals I’ve done. I think brokers would be mad not to be looking at commercial lending as a way of diversifying their offering and increasing their volumes.

Do you see more residential brokers moving into commercial lending in the future?

I think so, because there is a need for it, like there is a need for home loans. Commercial clients want options when looking for funding – why would they walk into one bank with one option and probably get declined when they can go to a broker who offers multiple options with multiple lenders and who knows what they’re doing?

Not only that, you’re becoming a jack of all trades by offering commercial lending, so your self-employed clients won’t look to go elsewhere when it comes to lending for their business – it can be all done under one roof.

What advice do you have for a broker looking to diversify into commercial lending?

Don’t be afraid to take it on – the only way you’ll learn how to write commercial loans is to actually do it. If it’s your first commercial deal, be honest and make the client aware, but reassure them that you will put a lot of effort into it in order to get the best result for them. You can even suggest going away and workshopping their file with some BDMs and getting back to them in two days’ time.