Banks will always play a central role in business lending, but the idea that they will continue to dominate the distribution of commercial finance without serious competition is becoming harder to defend.
For decades, commercial lending has been treated as the private territory of the major banks. If you were a small-business owner looking for finance, you walked into your bank, sat down with a manager, and hoped they understood your business well enough to approve the facility.
That model is breaking down.
Mortgage brokers already write more than three-quarters of Australia’s residential home loans. Now they’re moving into commercial lending, and the same forces that reshaped the home loan market are beginning to play out in business finance.
In my view, the commercial lending market is the next major frontier for the broker channel.
The reason is straightforward. The typical mortgage broker client is not just a PAYG borrower. Many are self-employed contractors, builders, consultants, or small-business owners. They come to their broker for help with their home loan, but their financial needs rarely stop there.
These same clients also need working capital, equipment finance, commercial property loans, and sometimes, development funding.
For years, those opportunities were automatically handed back to the banks, but that is changing.
More brokers are recognising that commercial lending is simply the next step in servicing the clients they already have.
The numbers reflect that shift. The number of brokers writing commercial loans has grown significantly in recent years, and the value of commercial loans settled through brokers continues to rise. What we are seeing is the early stages of a much bigger structural change in how business lending is distributed in Australia.
There is a simple reason this shift is happening: brokers are often better placed than banks to serve small and medium-sized business borrowers.
Banks assess lending through centralised credit systems and rigid policy frameworks. That approach works well for standardised residential loans, but it often struggles when dealing with the complexity of small business finances.
Business owners rarely have simple income structures. They might draw a mix of salary, dividends, and retained earnings. Their income can fluctuate depending on contracts or seasonal demand. Their lending needs can also change rapidly as their business grows.
Brokers, on the other hand, are used to navigating complexity.
They work across multiple lenders and understand how different credit policies apply to different borrowers. They also tend to have longstanding relationships with their clients, which means they often have a far better understanding of the borrowers’ broader financial position than a bank credit team assessing the deal from a file.
The commercial lending market itself has also evolved.
Over the past few years, a growing number of specialist and non-bank lenders have entered the market, particularly in areas such as property development, asset finance, and SME lending. These lenders are actively working with brokers and creating more choice for borrowers who previously had limited options beyond the major banks.
This is very similar to what happened in residential lending two decades ago. As more lenders entered the market and borrowers sought better advice and choice, brokers steadily grew their share of home loan originations. Those same forces are now appearing in commercial lending.
Of course, commercial lending requires different skills from residential lending. Understanding business financials, cash flow, and deal structures takes time and experience. Not every broker will want to specialise in this area.
But even brokers who choose to remain primarily residential will increasingly find that their clients expect more. Business owners do not think in silos. They do not separate their home loan from their business facilities, their equipment finance, or their property investments. They want one trusted adviser who understands the full picture.
That adviser is increasingly the mortgage broker.
Banks will always play a central role in business lending, but the idea that they will continue to dominate the distribution of commercial finance without serious competition is becoming harder to defend.
Because the reality is that mortgage brokers are already sitting in front of the clients, and once they start bringing those commercial opportunities to market at scale, the banks’ long-held grip on business lending will slip significantly.
Tim Brown is the CEO of Australian residential mortgage group Recludo.
