As a business owner in Australia, choosing the right commercial lending broker is really important for the success of your business. Whether you’re looking to purchase commercial property, fund business expansion, or invest in new equipment, having access to tailored funding solutions can make a big different to your cash flow, working capital and bottom line.
This is why and increasing number of business owners are working with commercial finance brokers. Let’s explore what the role of a commercial finance broker is, and how to choose the right one.
What is a Commercial Finance Broker?
A commercial finance broker is an accredited professional who specialises in helping businesses secure financing from various lending institutions. Unlike major banks, which may have limited lending solutions, commercial brokers have access to a wide range of lenders, including non-bank lenders, private investors, and specialised finance companies.
Additionally, some commercial finance brokers also assist with property development finance, offering expertise in securing development and investment finance for projects in capital cities such as Sydney, Melbourne and Brisbane, or fast-growth regions such as South-East Queensland and regional NSW.
The Benefits of Working with a Commercial Finance Broker
Working with a commercial finance broker offers several advantages for Australian businesses:
Access to a Wider Range of Lenders
Commercial brokers such as Smart Business Plans have established relationships with numerous lenders, giving you access to a broader range of financing options tailored to your specific needs.
Expertise and Industry Knowledge
Commercial brokers are experts in the commercial lending industry. They understand the intricacies of different financing solutions, lending criteria, and the ever-changing market conditions, ensuring you get the best possible deal.
Time and Effort Savings
Navigating the commercial finance solution landscape can be time-consuming and complex. A good commercial broker will handle the entire process, from identifying suitable lenders to preparing and submitting loan applications, creating a business plan and cash flow projections if needed, saving you valuable time and effort.
Personalised Advice
Commercial brokers take the time to understand your business, financial situation, and goals. They provide personalised advice and guidance, ensuring you choose the optimum solution that aligns with your long-term objectives.
Negotiation Power
With their industry knowledge and relationships with lenders, commercial brokers can often negotiate better terms, interest rates, and fees on your behalf, potentially saving you significant costs on your loans.
In Australia, about 95% of all finance brokers focus on the residential mortgage market. Only about 5% specialise in helping business owners with commercial loans and asset finance. That’s because commercial mortgage brokers require specialised skills and experience to help their clients navigate the complexity of business finance.
How to Choose the Right Commercial Finance Broker
Choose the right partner from the various commercial brokers in the market is a very important decision. Here are some key factors to consider:
Experience and Specialisation
Look for a commercial broker with extensive experience in your industry or asset class.
Brokers who specialise in specific areas, such as property development, commercial property finance, equipment finance, or development finance, can provide more tailored solutions.
Reputation and Track Record
Research a potential commercial loan brokers reputation in the industry. Look for reviews, testimonials, and their track record of delivering results for clients.
A reputable broker with a proven history of success is more likely to secure the best financing solutions for your business.
Lender Panel and Relationships
Inquire about the broker’s lender panel and the strength of their relationships with various lending institutions. A diverse lender panel increases your chances of finding the right financing solution.
If you choose to use Smart Business Plans as your commercial lending broker, we have a marketplace of more than 60 Australian lenders, including the big banks like Westpac and ANZ, to regional bank and niche lenders.
Communication and Transparency
Effective communication and transparency are crucial when working with a commercial broker. Look for a broker who is responsive, keeps you informed throughout the process, and provides clear explanations of the various financing options. They should be working hard for you to ensure you get the best outcome.
Fees and Charges
Understand the broker’s fee structure and any additional charges upfront. While brokers typically earn a commission from the lender, some may also charge additional fees for their services. Ensure you are aware of all costs involved. This should be clearly stated on their website.
Frequently Asked Questions
What Do Commercial Finance Brokers Do?
Commercial finance brokers play an important role in helping businesses secure the right financing solutions for their specific needs. Their expertise lies in navigating the complexities of commercial lending, and providing tailored advice to their clients. Good commercial finance brokers provide tailored funding solutions for commercial property development and investment finance, leveraging their vast network of lenders and experience in structuring and negotiating large property finance transactions.
First and foremost, commercial finance brokers take the time to understand your business’s financial situation, goals, and requirements. They conduct a comprehensive assessment of your cash flow, assets, liabilities, and overall financial health. They may also help you develop a business plan to ensure your finance and business strategy are aligned.
This in-depth analysis allows them to identify the most suitable financing options from their extensive lender panel, which may include banks, non-bank lenders, private investors, and specialised finance companies.
Once they have a clear understanding of your needs, commercial finance brokers handle the entire loan application process on your behalf. This includes preparing all necessary documentation, submitting loan applications to multiple lenders, and negotiating the best possible terms and rates.
Their industry knowledge and strong relationships with lenders give them significant negotiating power, potentially saving you substantial costs. In fact, according to a 2023 survey by the Commercial Finance Brokers Association of Australia, businesses that worked with a commercial broker secured an average interest rate that was 0.75% lower than those who went directly to lenders.
What is the Difference Between a Mortgage and Commercial Broker?
While mortgage brokers focus primarily on residential home loans, commercial brokers specialise in securing financing for commercial purposes, such as commercial property, business loans, equipment finance, and development finance. The reason many mortgage brokers often don’t offer commercial loan brokering services is that they lack the experience and expertise for business lending, which is typically more complex.
What is the Current Interest Rate for Commercial Loans in Australia?
Commercial loan interest rates in Australia can vary depending on factors such as the lender, loan type, loan amount, and your business’s financial profile. As of June 2024, typical commercial loan interest rates could range from 4% to 8% per annum. Working with a commercial lending broker will help you get the best going rates.
How Much Can I Borrow for Commercial Property?
The amount you can borrow for a commercial property depends on several factors, with the property value being one of the most significant determinants. Generally, lenders may provide up to 70-80% of the property value as a commercial loan. However, this percentage can vary based on your business’s financial strength, cash flow, and the lender’s specific criteria.
Your business’s financial profile plays an important role in determining the loan amount. Lenders will carefully assess your company’s revenue, profitability, existing debt levels, and overall financial health. A strong financial position with consistent cash flow and low debt levels can increase your borrowing capacity, as it demonstrates your ability to service the loan comfortably.
The type of commercial property you intend to purchase can also impact the loan amount. For instance, lenders may be more conservative when lending for specialised properties or those in niche markets, as these properties may be more difficult to sell or lease in the future. On the other hand, properties with stable tenants and long-term leases may be viewed more favorably, potentially allowing for higher loan amounts.
It’s important to note that lenders may also consider additional factors, such as the location of the property, the industry in which your business operates, and the intended use of the property (e.g., owner-occupied or investment). According to a report by the Commercial Real Estate Finance Council of Australia, the average loan-to-value ratio for commercial property loans in 2023 was 68%, indicating that most lenders were willing to finance up to 68% of the property value.
What Are the Best Commercial Mortgage Rates?
The best commercial mortgage rates can vary based on market conditions, your business’s financial profile, and the lender. Working with a reputable commercial broker can help you secure competitive rates by accessing a wide range of lenders and negotiating on your behalf.
By partnering with the right commercial finance broker, Australian business owners can navigate the complex world of commercial lending with confidence, access tailored financing solutions, and achieve their business goals more effectively.
Getting Started
If you’d like to book your free consultation with our commercial loan brokers and finance experts, call 1300 262 098 now, or click here to book online.
We’ve helped more than 3,300 Australian business owners over the past 14 years. Let’s talk and see if we can help you.
