Small business, big opportunity

First, they tend to have more financing needs than just a simple, one-off mortgage – meaning more repeat business – and second, they tend to have close relationships with employees and other business owners, meaning potential referrals.

Unfortunately, that doesn’t mean a broker can walk straight into this space and start winning business. There are certain things that small business owners usually need from their broker that most other clients would not.

For example, cash flow is a huge issue for many small businesses so brokers who can provide solutions in this area can really prove their value. 

Debtor finance

Debtor finance is a great way for small businesses to improve their cash flow – and it’s also a great way for brokers to improve their business’ bottom line.

According to Peter Langham, chief executive officer at Scottish Pacific, which specialises in debtor finance, many residential brokers will already have small business owners on their books whom they can target.

“A lot of [small] business owners will use a broker to get them their home loans because it’s not as though they can just go along to the bank and give them a pay slip. There is more work required so hence they tend to use the services of brokers,” he says.

Brokers should see this as a great opportunity to talk to their clients about other financing needs, according to Mr Langham.

“If brokers have a client who has got their own business, then the broker should be looking at the business too and saying, ‘how can I now help you to fund your business?’”

Debtor finance is actually an easy space for brokers to break into.

“The beauty of debtor finance is that there are a lot of providers like ourselves out there who are willing to spend time with brokers and introduce the product to them and help them identify opportunities,” says Mr Langham.

“All they have to do is identify opportunities and then refer them to the debtor finance company.”

Servicing small business clients via debtor finance has many benefits. Not only are there the repeat commissions that the area offers but there are also other valuable opportunities.

“For brokers who look at the big picture, what they’re finding is that not only does debtor finance provide exceptionally good ongoing income but it creates the opportunity to expand their core business,” says Bernie Kelly, chief executive of ARAP Capital.

“Once they have built a relationship, a finance broker can then say, ‘by the way, when did you last review your home loan?’

“It creates the opportunity to talk about their home finance as well as to get referrals to the employees that work in that business,” he says.

Leasing

Leasing is another great way in which brokers can improve their own business while serving their small business customers. Many brokers avoid leasing because it seems rather removed from their standard business of writing loans. However, the space actually represents a huge opportunity for brokers.

Like debtor finance, leasing allows a broker to offer their small business owner clients a more holistic service, improving relationships and winning more business to boot.

While leasing is closely linked to commercial finance, there are many reasons why residential brokers should consider this space too, according to Bob Burden,  leasing director at Iden.

“A lot of residential mortgage brokers would have clients who are self-employed that we could assist with machinery or vehicles that they need for their business,  so it can certainly be another valuable avenue of income for them,” he says.

While acknowledging that leasing is substantially different from mortgages, Mr Burden says it is not a bridge too far.

“Leasing is a different type of application to a mortgage application, but we adopt a hands-on approach with the mortgage brokers who get into leasing because we acknowledge that it is a little bit different,” he says.

“In addition, we don’t have volume requirements, which helps brokers to get into the leasing space because it means they don’t need to build up a big portfolio initially,” Mr Burden adds.

Why small business is good for business