Case study: John Swanson, chief executive, All Finance

We have always done commercial finance as well as asset finance and residential. Having these three streams over the years has allowed us to even out our cash flow peaks and troughs.

Why should brokers diversify into commercial finance?

Diversified businesses have a more stable cash flow. Brokers will find they pick up extra asset and residential finance transactions when they diversify into commercial. It will also help them build a fence around their clients so they are not taken by another group that is able to present itself as a trusted adviser by offering all services.

How hard is it to diversify into commercial finance?

Commercial finance is not a mystery. Brokers should look at doing a commercial finance course through their industry association or aggregator. It would also be a good idea to find a mentor or someone to discuss transactions with, such as a commercial broker, a banker or a business expert. A nice way for brokers to ease into commercial finance would be to do ‘set and forget’ commercial property transactions and then move to business transactions involving debtor finance and asset finance.

What are the main differences between doing residential and commercial loans?

Commercial transactions generally require more time to understand the client’s financials and business. A high exposure to a single debtor may mean higher risk for a commercial client, which is the sort of thing that may not come to light if you were just doing that client’s home loan. It also pays to thoroughly research the client’s industry. Another point to note is that some banks will sometimes have higher-than-usual exposure to certain industries and will be more prudent in lending to that industry until this evens out.