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Going commercial with NAB

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Huntley Mitchell 11 minute read

As Australia’s commercial lending market continues to grow, National Australia Bank’s commitment to helping brokers look beyond their customers’ home loan needs and diversify their income is stronger than ever

Diversification was a key theme for mortgage brokers in 2015. APRA’s crackdown on investor lending forced some loan writers to think differently about their business models and to turn on some other revenue taps.

Furthermore, tax breaks introduced by the federal government last year have given small businesses the opportunity to reinvest and to enhance their offering.

Diversification is set to be a major focus in 2016 too – particularly diversification involving commercial lending – and NAB is focused on ensuring brokers are making the most of the benefits that this market offers, both for them and for their clients.

According to Chris Thomas, head of commercial broker at NAB, Australia’s commercial sector is on a growth trajectory, and brokers are responsible for roughly 20 to 30 per cent of lending to this market.

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“That number is growing,” he tells The Adviser. “It’s on a similar growth trajectory as the residential market where brokers are now providing half of all home loans.”

With NAB having established its commercial broking business in 2013, Mr Thomas says it is enjoying double-digit growth and becoming an ever-increasing source of growth for the bank.

NAB’s commercial product offering through brokers is vast, from traditional business loans to specialist transactional facilities such as equipment finance and invoice discounting.

“In particular, the asset and equipment finance products such as finance leases and hire purchases are an important part of our wider commercial finance offering,” Mr Thomas says. “We stand proud that we can work with brokers to tailor these solutions to meet the specific needs of the customer.

“On the equipment financing side for example, we won’t require a deposit and there will be no capital outlay to fund equipment. We also offer the ability to adjust payments in line with clients’ revenue streams, and that’s something that’s particularly important when you’re dealing with customers who’ve got seasonal funding needs like farmers or manufacturers or wholesalers.”

While the major bank has been without a small business offering for brokers in recent years, NAB rolled out a brand new one at the end of 2015 after a successful pilot with a select group of loan writers from NSW and Victoria.

Mr Thomas believes it all comes down to responsiveness and making it easy for these clients, who are generally time-poor and are challenged by the fact that they’re running businesses themselves.

“They might specialise in making ice cream but finance isn’t something they have a huge amount of time for,” he says. “With commercial lending being such a priority for NAB, we’re constantly looking for ways to innovate our product range, services and support to meet our market, and that’s a really exciting dynamic for brokers.”

What’s in it for brokers?

Looking at the types of customers who go to brokers, around 25 per cent of them are business owners in their own right and will have needs beyond their residential requirements, according to Steve Kane, general manager of NAB Broker.

“So the primary benefit [of offering commercial loans] for the broker is being able to properly service all of the needs of that customer,” he says.

“Clearly, it also adds new revenue streams to their business, but because brokers are taking an ever-increasing share of the market and really becoming trusted advisers to their customers, it’s important that brokers look holistically at the customer and beyond their home loan needs.”

Mr Kane says small business underpins the economy in many areas, so the opportunity is “enormous” for brokers who go commercial.

And as the largest business bank in Australia, Mr Kane says NAB has highly qualified bankers, BDMs and credit representatives on hand to assist brokers in structuring transactions and understanding what they need to do to put a deal together.

“We see the segue into small business [lending], and even vehicle and equipment finance, initially as the pathway for those residential brokers who haven’t yet moved into the commercial space, and that pathway can then work as an education process for them so that they can eventually move on to more significant commercial transactions,” he explains.

Mr Thomas says the bank’s BDM team is specifically trained to help brokers find the right answers for their commercial clients and support them as they have discussions with customers.

“They have the experience to work through anything from very simple business transaction needs to some of the more complex deals,” he says. “In 2015 we introduced a new operational model, meaning that brokers deal with one of our team for their home and small business needs.

“We also have product specialists on hand to support our BDM team, brokers and customers about solutions involving areas such as foreign exchange, trade finance and equipment finance.”

Mr Thomas says brokers would be wise to attend professional development days run by their aggregator in order to get acquainted with the bank’s commercial¬ offering.

NAB is also constantly seeking broker feedback to ensure that its commercial offering is competitive, answers the needs of customers and assists brokers in growing their business.

“We’ve received very positive and supportive feedback from brokers around our expertise in this area,” Mr Kane says.

“For instance, we’ve now made available specialists in a range of areas including health, agribusiness and transport, enabling brokers to really concentrate on certain markets and deal with someone who not only knows the credit aspect, but also the industry that the customer is in.”

NAB also partnered with The Adviser’s inaugural New Revenue Streams Boot Camp in October last year. As one of the event’s expert speakers, Mr Thomas provided some important lessons and insights for brokers looking to diversify into the commercial sector.

“I think first and foremost you’ve got to set your mind with clarity on what you’re trying to achieve,” he told brokers at the event.

“If you don’t see commercial as something you are interested in and you don’t want to invest the time to do it properly, don’t do it.

“If you make the decision that this is something you want to focus on, then preparation is absolutely key.

“Business owners are time-poor. They do expect advice and they expect expertise, so that ‘credibility’ word comes up immediately. It doesn’t mean to say that you have to have all the answers, but you need to surround yourself with people who can add strength to your credibility.”

A bright future

Mr Kane says the time to get involved in commercial lending is now.

“We are seeing an increased penetration in commercial lending from the third-party channel, so we think it will continue to grow and that more brokers – particularly those who are established in the industry – will recognise the opportunity to service their customers in a more holistic way and build their own revenue,” he says.

“And as all financial institutions and brokers know, the more products and services that you provide to your customers, the stronger the relationship becomes.”

 

AN AGGREGATOR’S TAKE ON COMMERCIAL LENDING

Some brokers ask if it’s really worth the groundwork required to build a service offering that meets clients’ broader needs. My answer is a firm and resounding ‘yes’. Being in a position to meet more needs of your existing client base not only strengthens your existing client relationships, but it can help you to attract new clients too. And by developing your business in commercial finance, you can diversify your revenue streams and help your business grow and reach new levels of success and profitability.

Just as the broker channel has ramped up in the residential finance market over the past 20 years, so commercial finance is going to be next. It is fast becoming one of the most exciting growth opportunities for the industry. Get on board!

Brendan Wright, chief executive, FAST

 

SPEAKING FOR THEMSELVES

Greg Wells has been offering commercial finance for well over a decade and he wouldn’t have it any other way

Q. How long have you been offering commercial lending?

I see myself as a pioneer in the commercial field – I started broking in 2001 and commercial was something that we offered from day one, and that was because of my 24-year background in business banking.

Q. What percentage of your total loan book is commercial lending?

Around 35 per cent, and that doesn’t include leasing. In the six months to 31 December 2015, around 50 per cent of our [overall] volume has been commercial construction and business loans, so we’re seeing a bigger move into the commercial area as confidence slowly continues to recover in the market.

Q. Why do you offer commercial lending? Why not just stick to residential?

I’ve always had the view that my business needs to be a one-stop shop. The scope of being able to add value to customer and referral partners in all areas of finance gives us the opportunity to build those relationships and create ‘stickier’ clients.

Q. How competitive is commercial lending compared with residential lending?

Commercial is a very competitive area, but you need to know what you’re doing – you need to understand risk and price accordingly, which includes a range of other aspects such as balance sheet analysis and management experience.

Q. What benefits have you gained from offering NAB’s commercial products? How has NAB’s commercial offering helped your business and clients?

NAB is the largest business bank in the country, and it was critical to have it come into commercial broking and offer its full range of products and services. NAB has a lot of credibility in the commercial space – it provides a robust offering, and ensures that we’re getting full access to its range of products and services. It is critical to our credibility as a brokerage to have NAB on our panel.

Q. How has NAB helped educate/train and support you in terms of offering its commercial products?

NAB provides face-to-face education and training as part of their product roll-outs. For instance, we recently attended one which detailed the bank’s expansion in trade finance, which opens up the ability for us to offer our import/export clients trade finance facilities such as letter of credit.

The other thing that NAB’s done really well is give us access to credit decision makers at an early stage, so that when we’re dealing at the large end of commercial lending, we’re able to access credit managers and show them our clients and the types of assets underpinning transactions. That early engagement makes the transactions easier and enhances our overall offering.

 

The Adviser sits down with Andrew Kelly to discover what opportunities commercial lending can offer brokers

Q. How long have you been offering commercial lending?

Since 2003, and I’ve been offering NAB’s commercial lending products since they were introduced a few years ago.

Q. What percentage of your total loan book is commercial lending?

About 40 per cent, but in terms of activity it would be a 50/50 split, if not a little bit higher, because there’s more commercial activity in Sydney and NSW currently than I’ve experienced in the meantime.

Q. Why do you offer commercial lending? Why not just stick to residential?

Apart from the fact that the majority of my clients are self-employed, I have a background in commercial and corporate lending through the banks, so it made sense to continue that through the broker channel. With NAB entering the market a few years ago, it’s really kicked it along further.

Q. How competitive is commercial lending compared with residential lending?

There are a lot of brokers out there who are dipping their toes in the commercial waters – the take-up has been quite dramatic compared to what it was when commercial lending was first being offered through the third-party channel.

A lot of the brokers who do commercial have a background in it, but you tend to find that some resi brokers who diversify are disheartened by the time it takes to do a commercial transaction as opposed to a home loan, and feel quite challenged.

For the new entrants in the commercial space, I’d recommend starting with smaller transactions like vehicle and equipment finance. There are lots of different ways for brokers to offer commercial products, and the opportunity for them is extraordinary if they want to put the time in. There is plenty of support offered by NAB through its BDM team and business bankers, and there are many brokers out there like myself who are willing to educate others about this type of lending. Commercial lending is not that scary if you’re prepared to have a go.

Q. What benefits have you gained from offering NAB’s commercial products? How has NAB’s commercial offering helped your business and clients?

The relationship managers that we deal with at NAB have a lot of discretion to make decisions quickly, and decision-making in our game is critical. I’ve also found that they are very switched on and are constantly looking for opportunities. As far as the products go, NAB is diving into areas for brokers that other lenders aren’t in yet.

Q. How has NAB helped educate/ train and support you in terms of offering its commercial products?

I get along extremely well with our BDM – he’s always very quick and willing to talk us through new products, which is much easier than having to read through a myriad of information. Overall, nothing is a problem with the NAB team. If you’ve got a problem, they’ve got all the time in the world to help you through it, and this gives us a lot of confidence.

Going commercial with NAB
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