One of the most critical challenges that brokers consistently face is ensuring that enough cases come through the door. Of course, existing clients are a great source of business but often it is easy to miss opportunities by not asking the right questions when talking to clients.
Many brokers that we deal with time and time again work with lots of self-employed customers and property investors on their mortgage needs. The reason we deal with them is because they successfully diversify their income by talking to those clients about their commercial finance requirements as well. Ask the right questions and you may well find there is valuable source of income to be gained from meeting their commercial finance needs.
If you’re not particularly experienced in the commercial finance world, don’t let that put you off. At Alternative Bridging for example, we support brokers who are new to our world and help them with the process. In doing so, not only does it mean that the client gets the funding that they require, but it also gives the broker confidence to look for similar cases in future and builds their reputation as a more holistic adviser.
Asking the question
When was the last time you asked a self-employed client if they have considered buying their own premises? We’re seeing increasing numbers are looking for finance in order to purchase their premises, so there’s a good chance this will reflected in the aims of your self-employed client base.
The challenge is that they are often unable to secure a commercial mortgage to do so because of their limited accounts. At Alternative Bridging, we help many such self-employed borrowers using bridging finance. It does not require a drawn-out application process, due to being secured against a property asset. This means that the self-employed borrower could take out a bridging loan in order to purchase their commercial property; for example, a second charge bridging loan can be secured against the borrower’s residence or a first charge bridge against an investment property.
The bridge can be employed until such time as the borrower has the requisite number of years’ worth of verified accounts in order to apply for a commercial mortgage and exit the bridge. For example, a client who has been self-employed for only six months can take out a bridging loan for 18 months, secured against their home, in order to have two years’ accounts, which for a number of lenders is enough to qualify for a commercial mortgage.
Another question you should be asking clients is if they need finance to fund a new start-up venture, or for investment purposes to improve the growth of the company. This is where a commercial term loan can be ideal. These are typically for a longer period of time than a bridging loan, with the sweet spot generally found in the three to five-year area.
At Alternative Bridging, in terms of security, our term loans can be secured by a first or second charge over residential investments, office buildings, retail premises or industrial and distribution properties.
Loans are structured to match cash-flow including special arrangements for interest to be accrued when the property income is not yet stabilised so these can be ideal for business start-ups.
There are other differences with a term loan compared to a commercial bridging loan. At Alternative, it is a flexible loan particularly suitable for asset management situations. For instance, if income is improved or other improvements made, and the value of the asset increases, additional advances can be made.
We also provide a five-year interest-only term loan for purchase, refinance, property improvement or working capital for commercial and residential properties.
Another option would be a drawdown product like the Alternative Overdraft. It offers a flexible drawdown facility that provides liquidity whenever a borrower needs it. The facility can be drawn upon and repaid time and time again and provides the perfect overdraft for real estate, property auctions, site acquisitions or to fund work-in-progress.
The Alternative Overdraft is available for two years and then subject to review which can be secured by first charge over commercial or residential and second charge over residential properties. Interest is charged on the balance outstanding and can be serviced or accrued. Loans are available from £250,000 to £3m and enable under-utilised assets to play a prominent role in the investor’s finance arrangements.
A third question for your clients could be: “Are you seeking to increase your property portfolio to include commercial properties?” Here, a commercial bridging loan, a term loan and the Alternative Overdraft could all provide an answer! In such cases, we can work with the broker to establish what the best solution would be to meet that particular client’s requirements.
What I hope has become clear is that your clients may well have plans or aspirations, which you won’t know about unless you ask the question. Talk to your clients about their businesses and you may well find that you can provide the answers they’ve been looking for, which will make you more valuable than ever.
Jonathan Rubins is director at Alternative Bridging Corporation