As the residential mortgage market reels, commercial mortgages more and more represent a great opportunity for intermediaries but they also create some challenges as well. Traditionally commercial lending has not been an intermediary friendly environment; in fact it wouldn’t be an exaggeration to say that at times it’s been unfriendly. It certainly wasn’t for the faint hearted and whilst many were seduced by the potential rewards few were able to stand the long winded and frustrating process.
Good news
The good news is that intermediary involvement is growing as more commercial lenders have woken up to the value that intermediaries bring as a vital distribution asset for commercial mortgages and that they represent as important a resource as they already do in the wider mortgage and financial services market.
As Mark Flower, managing director of Business Finance Quote, says, “Intermediaries used to have great difficulty coming to terms with the commercial market, principally because its processes were so much more time consuming and transactions could often change significantly by the time they completed. It was not surprising that many advisers did not get involved. That has all changed.”
New entrants
The key to intermediary involvement has been led by more recent lending entrants such as Commercial First and Business Lending, who have specifically built their business models round intermediaries. But for the intermediary fresh to the commercial market, there are still challenges. While the number of lenders has increased, offering more choice, making sure that the right advice has been given is as important in commercial finance as it is in residential mortgages.
Mark Flower comments: “Typically, many intermediaries are used to working with a sourcing system to help aggregate the choice of potential recommendation but that really does not exist in commercial mortgages. Equally, relying on the services of one or two lenders is not a recipe for long term success, particularly if it is later found that there were better alternatives available at the time. The danger of being sued and facing claims of failing to meet proper standards of care from a future regulator should not be underestimated.”
Involvement
As a lender, we have consistently argued that the best way for intermediaries to become involved in commercial mortgages is through teaming up with a competent and professional commercial packager or master broker affiliated to the NACFB. It is no accident that our distribution strategy is focused on working with key commercial packagers whose competence is benchmarked. Membership of the NACFB, we see as a means of assessing the suitability of packager partners and intermediaries can be certain that by dealing with an NACFB member, they are more likely to find that not only is there an impressive range of lenders under one roof but that the advice will be consistent with ensuring that TCF is maintained.
Prospecting
For many intermediaries having access to commercial facilities is a useful add on service for the time they run across an enquiry. However for the adviser who wants to develop his repertoire of services, active prospecting is a necessity.
Prospecting can be divided into two categories, relationship and transactional. Prospecting works by mining an existing database of clients to introduce a new service and is one which will be familiar to every intermediary who has used existing customers as a means to elicit repeat business and potential new customers. However, transactional prospecting relies on outside sources for new leads and these can be summarised as follows:
Networking – with professional introducers such as accountants and solicitors
Seminars – Building potential prospects by offering seminars on your services
Internet – pay per click and banner advertising
Press – advertising in the local and regional press
Some intermediaries who are already working with master brokers or commercial packagers have already found that they can get help to prospect for new customers. The better commercial packagers have realised that it is in their interests to go further than simply offering products and placement services. Helping intermediaries for some now extends to marketing support with material to help newcomers advertise and also through lead generation programmes.
Mark Flower added “Offering the best service through products and placement is fine as far as it goes, but intermediaries who are keen to develop in the commercial mortgage field need more help and where better to go than to an expert, who is already helping them with the practical issue of product recommendation. I want my business to grow and I know if I invest in helping intermediaries in this way then the increased volumes of business means that everyone is a winner.”
