John Kolyvas, national sales manager – commercial at ING, tells The Adviser why mortgage brokers should look to diversify into commercial broking.
Why should brokers consider the commercial market?
Brokers need to diversify to help protect their business and cash flow. The residential property market can be volatile, so it’s always good to have another string in your bow so you can balance your income as a broker and where your business is coming from.
Commercial lending and business lending can be more lucrative because your average company owner or business owner doesn’t just have a home loan; they have asset finance, an overdraft, a commercial property they want to buy, and more than likely will have an SMSF account as well. So, there’s a lot more opportunity there for brokers.
What are your tips for brokers who are looking to enter the commercial space?
Start small. I find that, a lot of the time, residential brokers get large, complex deals and they tend to lose themselves. Keep it simple. Don’t try to tackle complex deals too early, because there are so many paths a commercial transaction can head down.
Talk to BDMs. A lot of the lenders provide training, so make sure you do all of that. Before lodging a commercial application, talk to your commercial BDM. All lenders have a different approach, so it’s a good idea to workshop the scenario first. It will make for a smoother credit assessment experience.
Talk to your aggregator. If you feel like you’re going to be out of your depth, there’s no harm in talking to your aggregator and trying to partner up with a more experienced commercial broker. The right support will help you ensure that the customer comes out with a positive experience.
How can brokers efficiently navigate through the commercial lending process?
Be aware of the parties involved. When you’re dealing with a business, the structure is usually complex, and there could be different entities you a company or trust, or they might have two or three companies, or two or three trusts. Look at the financials and ask the client questions about those entities and what they do, and you might need to request extra financials.
If you’re dealing with trusts, make sure you get copies of the trust deeds. The lender will need it (it’s a prerequisite). It usually lists all the beneficiaries of the trust and you’ll need to incorporate those as far as guarantees, or explain why you don’t want to offer those personal guarantees from the beneficiaries.
Gather financial information. Get three months of bank statements on a transaction account for the business, and look out for other debts that haven’t been declared or have been missed, tax payments that are listed. Make sure you get your tax portals, because if you don’t get it up front, it can easily knock out the transaction later on.
Analyse the commercial property to help you identify any potential issues early. There’s a lot more volatility in values as well, so do your research. If you’ve got need to be aware of. They might have access to CoreLogic or RP Data, use those platforms and have a look at the property and when it was sold. Have a chat with some valuers. They are happy to talk about properties, but do that before you lodge your application.
Once you’ve done all that, don’t be scared to use a scenario or discussion paper rather than lodging a full application. Summarise the transaction in a couple of pages and send it to your lender so they can have a look at it and provide you with some feedback.
What tools do you offer at ING to support brokers who are looking to use your commercial products?
For residential brokers, we offer an application process that has some similarities to that of a home loan, so residential brokers are comfortable with that. Our LVRs are a bit more generous. We’ll go up to 75 per cent LVR.
Brokers also have the support of our Commercial Credit Specialist team, with the ability to complete a Commercial Discussion Paper. The Commercial Credit Specialist team will respond to brokers within 48 hours, offering the support they need to avoid any unnecessary delays and ensure they enjoy a smooth credit experience.
We offer a product with no hidden fees — it’s quite a simple and transparent product in the way it operates. There are no monthly fees on our transactions and the entry costs are competitive as well.