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How to break into the $413bn commercial lending market

by John Kolyvas5 minute read
John Kolyvas

Incidental commercial lending opportunities can present themselves frequently during the course of the average residential broker’s day. The key is to identify them.

There are more than 2.1 million SMEs in Australia employing five million workers, according to the Australian Bureau of Statistics.

The total value of the sector’s borrowing hit $413 billion in 2015, compared to only $135 billion in 2000, according to research by Fujitsu. It highlights the incredible growth and buying power of the SME market and the enormous need everyday suburban entrepreneurs have for capital to buy property, equipment and other assets to expand their operations.

Around $79 billion of SME loans are secured against commercial property – $200 billion is secured against residential property and $134 billion is unsecured.

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For the average residential mortgage broker, there’s a valuable opportunity to grow their revenue by extending their proposition to SMEs, which are increasingly looking for capital and alternative service providers.

According to the ING Direct 2015 Business Segmentation Report, prepared by Fujitsu, three quarters of SME owners are prepared to switch lenders due to poor service and product delivery standards.

The report concluded that there’s a significant opportunity for both lenders and brokers who are able to construct and deliver a compelling offer to the SME sector.

Leverage existing opportunities

Brokers who have recently started providing commercial lending services, or who are thinking about it, can tap into their existing client base for potential leads rather than try to reposition themselves as a commercial broker to strangers.

Brokers already have a solid relationship and rapport with their residential customers, which is an invaluable head start.

Whether they’re aware of it or not, many residential mortgage brokers have helped hundreds of entrepreneurs and key SME personnel secure a home loan. That’s not to mention the potential SME customers hidden in their personal social network.

A new SME customer may be disguised as a professional couple looking for a loan to buy an apartment or a pre-retiree looking to buy an investment property within their self-managed superannuation fund (SMSF).

The key is to be mindful and alert, and listen carefully for clues. Brokers who have traditionally focused solely on residential lending will need to change their mindset and train themselves to think more widely.

Effective marketing doesn’t need to be complicated and structured. It can be as simple and quick as asking poignant questions to residential customers, and carefully listening to their responses in order to identify incidental commercial opportunities.

When processing a residential mortgage application, brokers collect a lot of valuable, insightful information about a borrower’s income and expenditure including expenses such as car and equipment finance.

If they stumble on company documents, such as a transaction listing summary report, this information can be used to start a conversation and inform customers that they’re able to facilitate other forms of lending.

Even if the customer has no immediate need for commercial finance, it may lead to future work.

Savvy marketers understand the power of leveraging existing opportunities. They know it’s a considerably easier strategy than trying to reposition and establish a business in a completely different market segment.

At a basic level, a marketing plan should include updating a company’s website and any client-facing material to highlight their new commercial lending offering. Brokers should send an email to existing customers informing them about the broker’s enhanced service proposition and ask for referrals.

When trying to forge referral relationships with centres of influence, it’s vital for brokers to clearly articulate their value proposition.

john kolyvas  x

John Kolyvas

John Kolyvas

AUTHOR

John Kolyvas is the national partnership manager of third-party commercial at ING Direct.

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