Traditionally, borrowers who wanted to take out a mortgage loan on a commercial property would have negotiated the terms of the loan with their lender of choice – probably the bank that provided for their business’ everyday banking needs.
Standardised products and criteria did not exist and borrowers often had to ‘take it or leave it’. But a new breed of specialist commercial mortgage lender has entered the market and borrowers needing commercial loans are able to consult advisers who should be able to source a competitive deal from a growing range of lenders and products.
Advisers not thinking commercial could be missing out on earning additional proc fees and developing valuable client relationships.
Because they are not familiar with commercial mortgages many advisers don’t know how to take the first step but nothing could be easier. If a mortgage broker who has no contact with commercial mortgage lenders gets an enquiry about a commercial mortgage they have a choice – either they turn the business away or they find a way to offer the prospective client a solution.
The first and easiest option is to find a way of referring the sales lead to a specialist commercial broker and in return receive an introduction fee. If this is a first venture into the world of commercial mortgages and there are no existing relationships with specialist commercial business-to-business brokers, commercial lenders should be able to help them.
If a broker wants to become a successful commercial mortgage introducer at this basic level all they have to do is recognise the commercial opportunities and pass them on to a specialist partner.
Generating commercial business from existing mortgage clients entails a higher level of involvement and developing a watchful eye with regard to how a commercial mortgage could provide a solution for customers.
Self-employed residential mortgage customers may need capital for their business, whether to consolidate some short-term credit or to help grow their budget. Or they could be considering buying their own premises.
A few relevant questions added to a fact-find could highlight commercial opportunities and strengthen existing relationships. A buy-to-let investor might want to diversify into commercial property investment, at which point they will need to source a commercial mortgage.
Building on this, brokers wishing to grow the commercial side of their business need to start marketing and lead generation activities to get business. As with all successful marketing activity, campaigns must be planned and monitored. Marketing techniques that work well should be built on and unsuccessful strategies discontinued.
Simple marketing techniques can yield good results. For example, a letter pointing out a commercial mortgage offering could be mailed to a customer database, followed up by emails or phone calls. Normal marketing material can start to mention commercial mortgages and sales staff should be trained to spread the message.
All these stages of involvement in generating commercial mortgage business could still culminate in a case being introduced to a specialist so-called mortgage master – a broker or packager that will process it through to completion with the appropriate lender.
But some introducer firms may want to join the broker or packager panels of commercial lenders so that they can handle their own commercial cases from start to finish. This will involve training staff to become knowledgeable in this sector, plus an investment of time and money in creating the resource and capacity for commercial business.
In the past, most commercial mortgage business was introduced by professional advisers such as accountants, IFAs or business consultants and these are still successful channels.
These advisers are in an ideal position to assist business operators but are sometimes unable to process an enquiry through to a successful mortgage application.
On the other hand, residential brokers have excelled in this area and their processing skills and systems can be used to convert commercial leads into completed cases in a short time. Forming mutually beneficial networking arr-angements with professional advisers is another way to increase commercial mortgage activity.
Brokers wishing to be serious players in the commercial sector must have the will to learn and understand the special market conditions and valuation or conveyancing idiosyncrasies of commercial transactions.
Certain issues are more prevalent in commercial property transactions than in residential ones, and these have implications for the valuation and legal processes. They include leasing arrangements, rights of way, planning and licensing issues and property not listed at the Land Registry.
Once processors have gained the necessary experience of the commercial sector they will be equipped to convert these leads into completed mortgages. Our experience shows that three or four weeks is a realistic time for a commercial remortgage – and traditional residential mortgage brokers have shown the most aptitude in steering commercial cases through efficiently.
The commercial mortgage sector has huge potential and with the benefits to a broker of expanding their client bank and increasing their revenue it is a potential advisers cannot afford to ignore. There’s a way for all brokers to participate – and it is fast becoming a competitive requirement to do so.