Brokers. Some are good, some not so great. The good ones will save you money, time and stress – far more valuable than whatever fee they charge. But how do you know if someone is really going to deliver for you?
Here’s a rundown of how to make sure you are working with an awesome commercial finance broker, one that will work to get you the best terms possible.
The Basics: Communication
Can you easily contact your broker? Do you have a mobile number? Can you speak on WhatsApp or whatever messaging service is most convenient for you? If your actual broker is unavailable is there someone else you can speak to?
Most brokers will not be contactable 24 hours a day – despite what they say – but you should expect a prompt response within normal office hours and many brokers will accommodate outside these hours if there is a genuine business need to get something done.
The Basics: Consumer Protection
Have you been told by a broker that they are not regulated because commercial finance is unregulated? While it is true that commercial broking is an unregulated activity, there are aspects that do fall under FCA scope including some transactions for sole traders and non-limited partnerships.
A broker that does not have the right authorisation should decline any transaction that may fall within the regulated scope or refer you to an authorised person.
For brokers that do hold the appropriate authorisation, you can check their regulatory status online and also be assured that they receive regular, updated training and are committed to the FCA principles of Treating Customers Fairly.
There are other types of regulation too – every broker should have an appropriate credit broking licence and, in the event of a dispute, there are some instances when the Financial Ombudsman has power to step in if the business involved meets their definition of a small business.
Does your broker understand your business?
They don’t need to be able to jump in and pick up the phone but your broker should be able to accurately portray what your business does to lenders.
Part of a lending proposal is to highlight areas for growth and expansion but also to understand the weaknesses and vulnerabilities of a business so these can be mitigated.
It’s also key for your broker to know exactly how you intend to use the funds you raise. This then allows them to demonstrate to the lender how lending will strengthen the business and reduce their risk.
To fully understand your business you may need to invest time at the initial consultation but this, and providing the right documentation upfront, will prove to be an extremely valuable exercise as the application moves forward. It will save your broker time and ensure they only approach lenders that have appetite for your circumstance.
The other benefit is that a broker may be able to spot other ways they can reduce your costs if they have good visibility and understanding of how your business functions.
Commercial brokers operate in many different ways – self employment is common in this industry but you do also find brokers that work within other financial businesses such as mortgage advice firms or accountancy practices.
Regardless of the structure your broker operates under, it’s important to ascertain their experience level. Ask what else they are working on now. What have they worked on recently?
The commercial lending market moves quickly and lenders often work on a case by case basis. Using a broker who is familiar with the type of finance you need and the lenders in that space will save you time and money.
Can your broker put you in touch with happy clients? Can you see positive testimonials on LinkedIn or other online sources? Can they provide case studies of successful transactions?
A commercial broker can save you time and money which resultants in very happy clients. Happy clients are normally more than willing to share their experience or provide a short testimonial by way of showing their appreciation for a job well done.
Brokers earn their money through fees, commission from the lender or a combination of both. It is not unusual for brokers to charge an administration fee for processing the application and a percentage success fee on completion.
The fees charged by brokers can vary immensely depending on the level of services offered. The important factor is that the fees are documented upfront so you know what to expect and how much the advice is going to cost.
Getting a commercial loan funded takes a team of professionals.
Solicitors, accountants, insurance brokers, surveyors, assessors….the list goes on. A broker with experience – and who maintains good relationships – is likely to be able to recommend other professionals who will help get your funding over the line.
So, there you have it. A checklist of KPIs to make sure you are engaging the services of the best commercial finance brokers available.
Of course, our team at Charles Edwardson are some of the best there are. Why not get in touch today and see what we can do for your business?