Commercial loans 'not for everyone', brokers say

Another 34 per cent said they were too busy with residential loans to bother with commercial finance, while 18 per cent said they weren't interested in the sector.

The commercial property market is on the rise, with NAB's Commercial Property Index rising two points in the third quarter – its first positive read since March 2011.

Green Finance Group director Daniel Green told The Adviser that the best thing a residential broker looking to enter the commercial lending space can do is partner with a commercial broker and split the commissions.

"That's something I've seen residential guys do," Mr Green said. "They'll try and do a deal, they'll be looking at a deal with $10 million and a trail of 0.03 or 0.04 per cent and they're counting the number before they've even written it," he said.

"Eighty per cent of the time the deal will fall apart and the issue then is they will ruin the relationship with their referrer, obviously the client and potentially the bank."

Mr Green said that if residential brokers are good at what they do, they should stick to their knitting and form an alliance with a broker who specialises in writing commercial business.

"Commercial is probably not for everybody," said Greg Wells from Wells Partners.

The Australian Broking Awards Finance Broker of the Year warned residential brokers not to weaken their current business by overstretching themselves and losing focus.

However, if the opportunity presents itself, Mr Wells said education is key.

"Brokers who play in this space should be able to read balance sheets and profit and loss accounts and understand the key risk areas in business and how to mitigate them," he said.

Brokers keen to get into commercial lending should look to their aggregators for support.

FAST chief executive Brendan Wright told The Adviser that when you look at the numbers, commercial lending is a compelling story.

"We've got 2.8 million SMEs in Australia," Mr Wright said.

"These businesses are the engine room of our economy and their owners are generally motivated, intelligent individuals who care about their financial future," he said.

"They are crying out for the kind of specialised service that only a broker can provide."

[Related: Making their business your business]

The Adviser magazine will explore commercial finance in greater detail in its January edition, due out in mid-December