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A vow of commerciality
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A vow of commerciality

4 minute read

With mortgage professionals increasingly being urged to diversify their businesses for long-term sustainability, commercial lending is now on the radar of many brokers

Uniquely placed as a bridge between finance brokers and lenders, aggregators are at the forefront of trying to connect brokers with this stream of lending growth. Vow Financial held its first commercial lending conference in the NSW Hunter Valley in August, where finance brokers from across the country joined key lenders to discuss how brokers can integrate commercial loans into their existing service offering.

Top commercial brokers from within the group’s network were also recognised with awards at the event.

Opportunity knocks

“Commercial finance is an area that we’ve focused on growing and developing for a long time,” the group’s CEO, Tim Brown, tells The Adviser.

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“To actually hold a conference that was specifically focused around commercial needs and requirements demonstrates that Vow has grown significantly in size and scale.

“APRA is trying to slow the residential lending market, in particular [with] regards to investment loans. That’s the bread and butter for most of our mortgage brokers today.

“We’ve always been big believers in the need for diversification, and have been encouraging our network to do so for some time. One natural transition for most residential brokers is to move into this space of financing and leasing/commercial.

“The transition to commercial can come naturally for residential brokers as they meet with people regularly with these needs. When talking to their residential clients, 30 to 40 per cent of them are generally self-employed and potentially have some sort of commercial loan,” Mr Brown says.

Breaking down barriers

The event also highlighted many of the key concerns brokers have about commercial lending, such as what constitutes the definition of a commercial loan.

“Many lenders will say if the loan is in a company’s name, then they would class that lending as a commercial security or commercial transaction. But then other lenders will say ‘Well, it depends on the security’. All lenders have different criteria and the lines become a bit bluured,” explains Glenn Mitchell, head of Vow Commercial and Leasing.

“I think it would assist everyone to have clearer definitions in place.

“So that’s why we have days like the Vow Financial Commercial Conference. It provides an opportunity to share knowledge and work out issues we all face, such as which lenders operate in the space and when they class the particular product or security as commercial or residential.

“I understand not every person will particularly want to diversify out of what they’re doing and what they’re doing quite well. However, in this day in age, clients want to get more and more of their solutions in one place,” Mr Mitchell says.

Vow Financial’s conference came just a week after AFG held its fourth annual Commercial and Equipment Finance Conference in Melbourne, which this year included the launch of its Commercial and Equipment Finance Member Awards.

“The conference aimed to equip brokers with invaluable insights, great tools and the right networks to increase their business performance,” says AFG general manager of sales and operations Mark Hewitt.

 Supporting diversification

“To achieve long-term business success, diversification is critical,” declares MFAA chief executive Siobhan Hayden.

“Diversification delivers a stickier client and better customer satisfaction, and also reduces the vulnerability of a finance broker’s business in times of change.”

The FBAA’s CEO, Peter White, agrees on the importance of diversification, provided it is done so properly.

“Diversification is a very good thing to engage in your business, so long as it doesn’t take you on a journey a long, long way away from your core business. I have seen many companies diversify so far away from what it is they do, they lose focus and struggle,” he points out.

“Related diversification helps you to mitigate market changes/movements which may impact your revenue stream/s.”

Both association chiefs highlight opportunities within the commercial lending space.

“Sure ‘commercial’ lending is more complex than say residentially-secured business loans. That said, commercial lending is a great sector and very rewarding for those that venture down that path,” Mr White says.

Ms Hayden explains that offering a broader range of lending options can only be good news for clients.

“Traditionally finance brokers focus on either residential or commercial lending, rarely do they provide a holistic lending solution,” she says.

“Furthermore, I see many finance brokers that are responding to their customers’ immediate needs, but missing further opportunities.

“By simply asking additional questions, additional needs related to commercial lending or asset finance may be identified.” 

A vow of commerciality
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