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Secure Long-Term Financing with a Commercial Finance Broker

Updated: May 25, 2023

Working with a commercial finance broker is a smart way for businesses and property developers to achieve their long-term financing goals. Don't settle for less when you have an expert in the field of commercial finance with a deep understanding of the various types of financing available and the lenders who provide them. They are the people you need to talk to as they help you navigate the complex financing process, negotiate favourable terms and rates, and provide tailored solutions to meet your unique financing needs.


By definition, commercial finance is the process of obtaining funding for businesses and commercial projects. On the other hand, long-term financing involves borrowing money for an extended period of time from years to decades. With that being said, securing long-term financing is crucial as it provides you with financial stability and security moving forward thereby helping you make long-term investments and growth plans.


Work with commercial finance broker

Commercial Financing in Australia

According to the Commercial & Asset Finance Brokers Association (CAFBA), they have over 1,000 firms and brokers nationwide with affiliate members represented by the country's major finance providers. In their commissioned study with business advisory firm East & Partners in 2020, it found out that 72% of new financing is sourced through commercial brokers, up from 64% three years prior.


Many businesses in Australia, big or small, seek commercial financing options either as higher value business loans (in excess of $1 million), property or real estate loans, or general business loans. Sometimes, short-term business loans are preferred for hiring staff, buying equipment, or funding expenditures in growth and expansion plans.


The way it’s going, there’s an upward trend as the Mortgage and Finance Association of Australia (MFAA) reported an all-time high in the value of settled commercial loans written by brokers at $13.4 billion. It was up by approximately $4 billion (42.92%) compared year-on-year. Furthermore, brokers have continued to diversify their offering with 28.8% of mortgage brokers also writing commercial loans. By state, Victoria, Western Australia, and Western Australia are leading the way. The MFAA report also showed that the total book value of commercial lending for mortgage brokers also reached a record high of $54.19 billion.


This indicates brokers are diversifying their business and assisting their customers with a wider range of their financing needs. - Mike Felton, MFAA chief executive

Understanding Commercial Finance

As a broad term, commercial finance encompasses several types of financing options available to businesses and commercial property investors. Its umbrella definition includes the following:

✔️ Commercial mortgages: loans used to purchase commercial property

✔️ Business loans: funds borrowed to finance business operations

✔️ Asset-based lending: loans secured by assets, such as inventory or accounts receivable

✔️ Equipment financing: funds borrowed to purchase equipment or machinery for the business

✔️ Invoice financing: loans secured by outstanding invoices or accounts receivable


There are several factors that can impact a business's ability to secure commercial financing. The business's credit score is a critical factor in securing financing as lenders base their assessment to determine the creditworthiness and risk of default. Lenders would like to see a steady and consistent revenue stream to ensure that the business can repay the loan. In some cases, lenders may require collateral, such as property or equipment, to secure the business loan.


Long-term financing is essential for commercial property development as it provides stability and financial security for the future. Property developers can earn a stable income and returns over a longer period of time, which allows them to invest in additional properties and expand their business. It also enables property developers to plan for the future, make long-term investments, and secure long-term tenants.


Why Work with a Broker?

Working with commercial finance brokers would be beneficial since you need professional help in securing long-term financing for your commercial property so you can navigate the complex financing process. They will assist you in your loan applications, gather the necessary documents, and negotiate the best possible terms and rates that will suit your unique financing needs.


1. Access to Lenders and Other Financing Options

Since they have connections to a vast network of lenders and financing options, including traditional banks, private lenders, and alternative financing sources, commercial finance brokers can help businesses compare financing options and choose the one that best fits their unique financing needs.


2. Navigate the Complex Financing Process

The financing process can be complex and overwhelming, especially for business owners who are not familiar with the process. Working with a commercial finance broker will help you save time and reduce stress.


3. Negotiate Favourable Terms and Rates

They can use their expertise and connections to negotiate the best possible terms and rates resulting in significant savings and improved financing options.


4. Tailored Solutions

They can provide creative solutions that meet the specific needs of every business. More importantly, they also provide guidance on structuring financing deals.


5. Transparent Communication

They will provide transparent communication throughout the financing process, keeping you informed, and up to date at all times.


Finding the Right Broker

There are several factors you need to consider when finding the right broker, including experience, reputation, and track record. It is essential to choose a broker with experience in the specific type of financing needed.


✔️ Look for a broker with extensive experience in the commercial finance industry. An experienced broker will have a deep understanding of the market and can provide valuable guidance and insights.

✔️ Check the broker's reputation in the industry by looking for reviews, testimonials, and recommendations from previous clients.

✔️ Look for a broker with a wide network of lenders and financing options. This will ensure that you have access to the best possible financing options.

✔️ Communication is key when working with a commercial finance broker. Look for a broker who is responsive, transparent, and willing to communicate with you throughout the financing process.

✔️ Understand the broker's fee structure before engaging their services.


Questions to Ask

Before making your decision to choose the broker you want to work with, you may want to ask the right questions.

  1. What is your experience in the commercial finance industry?

  2. Can you provide references or testimonials from previous clients?

  3. How wide is your network of lenders and financing options?

  4. What is your fee structure?

  5. How will you communicate with me throughout the financing process?


Relevant Licences

The minimum criteria to work as a commercial finance broker in Australia is a Certificate IV in Finance and Mortgage Broking. Not having that basic qualification is already a red flag.


In addition to that, the broker has to be an active member of either the MFAA, the Finance Broker Association of Australia (FBAA), or the Mortgage Industry Association of Australia (MIAA). These requirements are also required for both residential and commercial mortgage brokers. Brokers should have their Australian Credit Licence (ACL) as they work under the National Consumer Credit Protection Act (NCCP). That means they have an obligation to provide or recommend suitable products for you based on your unique financial circumstances.


Don’t forget to check for additional qualifications or specialist training in commercial broking as well as experience in brokering commercial and business loans.


Reputation

Even with sterling qualifications, it is important to know more about their reputation by checking what their clients have to say about them. Get referrals from people you know or read testimonials from the broker's website or social media, so you get to know if they are easy to work with and deliver the results you wanted.


More Checks

Aside from the above mentioned, it would be smart to verify if the broker is registered with the Australian Securities and Investments Commission (ASIC) or with any ASIC-approved external dispute resolution scheme like the Australian Financial Complaints Authority (AFCA).


Key Takeaways

Working with a commercial finance broker can help businesses and property developers navigate the complex financing process, access a wide range of lenders and financing options, and negotiate favourable terms and rates. It is essential to choose the right commercial finance broker with experience, reputation, and a proven track record of success to achieve long-term financing goals.


At the end of the day, they are required to work in your best interest. If you're looking for the best business financing, consider speaking with a specialist broker to learn more about your options.


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