Sometimes, in order to cater to a client’s long-term financial goals, brokers will need to look at their short-term needs. Interim Finance managing director Andrew Littleford explains why brokers should enhance their value proposition by diversifying into short-term lending.
Why should brokers diversify into short-term lending?
Short-term lending provides a fluid, real-time solution that is perfectly aligned to the ever-increasing expectations within the commercial sector. Short-term lenders are geared to provide flexible, quick financing. This is particularly valuable when opportunities and/or cash flow issues are time-sensitive, and provides a useful alternative when the more prosaic style of funding is not available.
Whether it’s capitalising on an opportunity or sidestepping a potential problem, Interim Finance can provide financing that meets the specific requirements for the commercial space.
Interim Finance is known for its competitive caveat/second mortgages. Recent analysis also indicates a distinct shift towards first mortgages (348 per cent increase in first mortgage turnover compared to November 2014).
As a leading short-term lender, Interim Finance’s financing solutions perfectly align to growth of the commercial sector/corresponding demands. In particular, the company’s service offering resonates with the buoyant SME sector. Borrowers typically require short-term financing for classic business requirements, including cash flow issues and increasingly to enable business opportunities and expansion.
What is the commission model like when it comes to short-term lending?
There are distinct upsides to diversifying into short-term lending:
• Commissions tend to be more generous than residential, aggregator-based payments (circa 1 to 2 per cent).
• Commissions are paid more quickly, as the loan settlement period is much shorter (around five to 10 business days).
• There are no clawbacks.
A loan written with Interim Finance also has the added benefit of a complete back-end support service, where brokers can elect to have the loan written and managed on their behalf at no cost. This has been popular for those who are time poor/under-resourced and seek the assurance that the loan is compliant.
Commissions aren’t affected and the client relationship is maintained.
How much of your broker origination business is spot and refer?
About 3 to 5 per cent of our business is spot and refer. This is largely due to brokers preferring to be engaged in the process and maintaining customer retention.
The limited uptake of this model is compounded by our complete back-end support service, where brokers can elect to have the loan written and managed on their behalf at no cost. This is an efficient option that guarantees compliance and doesn’t impact commissions or client relationships.
What do you think the short-term market will look like for brokers in the future?
There’s no question that SMEs continue to be a growth market and represent a big opportunity.
A core characteristic is the consistent juggle of working capital requirements, combined with the ability to recognise, and desire to exploit, business potential.
Conversely, there’s an increasing demand for flexible, quick financing that the short-term lending market is naturally geared to.
What advice would you have for brokers looking to tap into the short-term lending market?
Don’t just regard your database as a farming ground for home loans when it’s very likely that a good portion of your client base are SMEs, and by definition, have ongoing cash flow/capital requirements.
Stock purchases, expansion, tax payments, equipment, etc. are all common and good reasons why these facilities may be appropriate.
These requirements may be big or small, but may not necessarily warrant a full refinance of their residential property to accommodate this temporary need. So why upset a cheap housing rate when other cost-effective options are available? These shorter-term loans are generally approved within the day and can take as little as a week to settle – something major banks cannot do and have no interest in doing.
There’s a direct and immediate opportunity for brokers to diversify into this lucrative sector, and consequently expand their client base and strengthen their service offering.
Interim Finance provides best-in-market rates, flexible products, and thorough and quick turnaround. Whether it’s capitalising on an opportunity or sidestepping a potential problem, Interim Finance can provide financing that meets the specific requirements for this growing market. Talk to us and realise this market potential with confidence.
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