Commercial Finance Broker

What is a commercial finance broker?

Commercial finance brokers act as intermediaries between businesses that want to borrow and commercial lenders that want to lend. They are there to provide commercial finance solutions.

A commercial finance brokerage can assist with:

• Secured business loans
• Unsecured business loans
• Short-term business loans
• Start-up loans
• Merchant cash advances
• Commercial property finance
• Invoice finance
• Asset finance
• Advice on the commercial finance sector

You have a choice when selecting an independent Broker. The rest of this guide will highlight factors that I consider important for your consideration.

Why use a commercial finance broker?

Market knowledge

If you don't have a background in accountancy, finance, or lending you may not have a thorough understanding of the commercial debt market.

Commercial finance brokers can provide funding options for a wide range of loan services (some you won't even be aware of).

Engaging with an expert to understand a market is sensible. Alternatively, you can do your own research.

Subject matter expertise

You can master the lexicon of a subject without understanding the subject matter (parrots can talk!).

One reason I founded BorrowingWell was that I was sick to death of seeing Brokers claim expert knowledge in debt finance, but have no accountancy, credit underwriting, credit decisioning, or business lending experience. In some cases, without even any real business experience.

I find this disconnect dangerous. Dangerous for business owners that are relying on "expert" opinions for the success of their business. Selecting the appropriate finance option isn't just about pitching you and your business to a few lenders. It starts way before that.

A big advantage of having a professional accountancy qualification is when it comes time to engage with Lenders. This advantage is further amplified when there are discussions with the credit underwriting department.

When I talk, they listen. Nothing is lost in translation, because not only do I understand the lexicon, I also understand the subject matters of accounting, finance, business debt, credit underwriting, and credit decisioning (I've written credit underwriting models for a non-bank business lender and served on the credit committee, deciding which businesses would get funding opportunities and which would not).

My opinion of myself may seem high, you may find that arrogant, but find another commercial finance broker with my skills, experience, and qualification. Then understand the difference between arrogance and confidence is the ability and experience to deliver.

Saves you time

Liaising with a range of lenders to secure the correct financial solution for your business can be time-consuming. Even more so if you don't know what you're doing.

You should take an opportunity cost approach to calculate the value of your time. Even if you have the know-how in-house, you need to ask yourself if your employee's time is best spent adding value to the business elsewhere. At a minimum, raising debt will be a decent size distraction for your team.

How do you choose the appropriate type of funding for your business needs? Should you go for a:

• Commercial mortgage
• Development finance
• Secured business loan
• Unsecured business loan
• Revolving credit facility
• Short-term lending

When I researched the market around 130 different loan services were being marketed. The vast majority of which, I'm certain was for marketing, rather than informational purposes.

A good independent Broker should:

• simplify
• bring transparency and
• add subject matter expertise

Access to Lenders

Note: Business lenders want business borrowers.

Access to lenders is not a limiting factor if you do decide to go it alone. There are plenty of lenders out there that will liaise with you without a Broker.

Google a list of business lenders, view a few of the business development manager profiles on LinkedIn, and watch how quickly you get pounced on! lol.

I'm not saying all business lenders will want to liaise directly with borrowers, but the lenders that want your business will and they are, arguably, the better lenders for you (with or without a Broker helping). When someone puts up barriers for me to spend my money I really do think "how much do they want my custom?"

The commercial lending market is big. You should ask yourself if you're likely to get the best deal if your broker only does business with their 'panel of lenders'. Yes, I have a network of Lenders but every deal I do I start from scratch. My assumption isn't that I already know the lender that is best for your business. I grind. Daily. To get the best deals for your business.

Choosing a commercial finance broker

Trade bodies, professional bodies, and regulators

These three types of organisations are different.

You should be very careful with the credibility (consciously or subconsciously) you give to anyone, based on their membership of any organisation or their regulated status.

Many, perhaps most, commercial finance brokers are members of the National Association of Commerical Finance Brokers (NACFB). I just pulled this from the top of their home page.

From the NACFB Website

Note: I am not a member of the NACFB

"Established in 1992, our mission is to support you, the broker, in your endeavors to source funding solutions for UK SMEs."

• Building strong relationships with the lenders in your sector
• Facilitating positive engagements between lenders & brokers
• Comprehensively supporting your compliance needs
• Aiding your commercial growth
• Helping you generate new business leads
• Championing your professional development & life-long learning
• Keeping you up-to-date with industry news, issues & developments
• Providing a wide range of business support services
• Giving you a voice in the industry & lobbying those who can effect change
• Welcoming you to the friendly, supportive community that is the NACFB

https://nacfb.org/

To me, that reads as the copy of a trade body. A trade body that has the interests of its members (being Brokers) at heart. Sadly, as you can see, there isn't anything about delivering value to borrowers. It's all aimed at the interests of members.

I concede, some of these topics align with their client's interests (their client being the borrower) but the spin is all about making the Brokers operation a better operation. Making the Broker more money.

I know the NACFB aren't short-sighted though and I have to say my interactions with them have been positive. I was fortunate enough to be invited to a presentation and I have to say, the people there know what they're talking about… I just feel the NACFB is more a trade body than a professional body or a regulator.

From the Association of Chartered Certified Accountants (ACCA) website

Note: I am a fellow of the association of chartered certified accountants

"We're the world's most forward-thinking professional accountancy body.

We believe that accountancy is vital for economies to grow and prosper, which is why we work all over the world to build the profession and make society fairer and more transparent.

We have more than 233,000 fully qualified members and 536,000 future members worldwide. They're among the world’s best-qualified and most highly sought-after accountants - and they work in every sector you can imagine.

Organisations know and trust our designation. We're out there every day, connecting with businesses large and small, governments, educational establishments, and opinion formers. We're on top of emerging trends, legislation, and legal requirements, helping to shape them.

Because of all this, we’re able to create the innovative, strategic-thinking accountants our fast-changing world needs."

https://www.accaglobal.com/uk/en/about-us.html

This is the copy of a professional body that understands reputation and service delivery are everything. Compare the two and make your own decision about the difference between a trade body and a professional body.

From the Financial Conduct Authority (FCA)

Note: Borroingwell is not regulated by the FCA, nor will it ever be, read on and you'll see why

"incorrect permissions can mislead consumers about the level of protection offered or give credibility to unregulated activities."

Published 18th January 2021.

https://www.fca.org.uk/news/press-releases/fca-clamps-down-consumer-investment-harm

A common misconception is that business debt brokering is an FCA-regulated activity. If you think I'm wrong or another broker is telling you otherwise, simply ask them to show the section on the FCA register that regulates this activity. I can say with complete confidence if they are regulated for credit broking it will be for consumer credit broking and not business credit broking.

I've checked a lot of businesses on the FCA register over my career and none have ever had permission for brokering business credit. Only consumer credit. The distinction between commercial/business and consumer is straightforward. Consumers are people. Their legal identity is their name. Businesses have limited liability and their own legal identity (a company number).

You should view anyone who attempts to leverage FCA regulated status as a marketing tool with high suspicion. In fact, let me know who's doing it so I can report them to the FCA myself.

Training, Experience, and Qualifications

Qualifications and training are important but in my opinion, nothing beats experience, or more precisely, the right kind of experience.

The right kind of experience for a commercial finance broker is the following:

• Accountancy
• Business finance
• Credit underwriting
• Credit decisioning

Just think about this for yourself and consider the parrot analogy I made earlier.

Other factors to consider include:

• Who is the person dealing with your case? Is it someone junior reporting to someone senior?
• Is the Brokerage using a network that then subcontracts the work? Do you know exactly who will be representing you?

One of the best business leaders and accountants I worked with had no accountancy qualifications but he was well experienced in accountancy, finance, and business and I respect him a great deal (shout out to Paul Skelton if you're reading this).

Having a professional qualification does not make you better at a task than someone who isn't qualified but generally, I would say, a qualified accountant is better than an unqualified one, training and experience being equal.

What do we specialise in?

BorrowingWell specialises in being experts in business debt. We do not specialize in selling niche services/products. It is true, some industries and sectors are easier for us to raise finance in, but you don't pay me because my work is easy. You pay me because I am your best option.

If you're considering raising any form of business debt, please do get in touch.