Why Use a Commercial FInance Broker

Why Use a Commercial Finance Broker

Or more importantly, what is a commercial finance broker…

A commercial finance broker specialises in helping business owners and entrepreneurs raise finance for their business in exactly the same way that you may speak to a residential mortgage broker about your home and a commercial insurance broker about your business’s insurance. Many brokers claim they are specialists in commercial finance when their expertise for example is as a residential mortgage broker and they do commercial finance as a sideline to their main business activity.

Wattsford Commercial Finance does not do residential mortgages or commercial insurance, we work with specialists who only provide these services.

As a commercial finance broker, we will spend time finding out about your business’s needs and then negotiate on your behalf with lenders to arrange the finance. The majority of regulated brokers will charge a fee for their service.

Why use a Broker?

After all, you can pop down to your local bank and arrange the finance yourself!

This is definitely an option and many businesses have dedicated Bank Business Managers who will work on your behalf with the Bank to secure your finance. Not all Banks offer this service and you can end up in a Call Centre, or your business doesn’t have the turnover to warrant a Business Manager. Once upon a time, the only option available was through your Bank, today there are hundreds of Alternative Lenders including the Banks to speak to.

The list of Alternative Lenders is exhaustive, with Challenger Banks, Merchant Banks, Peer-to-Peer Lenders, Private Funding Groups, Investment Trusts, high net worth Personal Investors and Specialist Lenders covering niche areas such as bridging finance, property development finance, business loans, invoice discounting, treasury finance, asset finance to name but a few. And within each niche sector, there are several lenders, each with their bespoke offering.

Commercial finance is complicated

Unlike a standard residential mortgage which has neatly defined rates and criteria, commercial finance is much more bespoke and requires a good degree of skill and experience to find the right deal.

That’s why a good commercial finance broker can help. We will sit down with you and analyse your funding requirements and then provide you with various options that are best suited your needs.

Regulated by the Financial Conduct Authority (FCA)

In commercial finance, the majority of deals we broker for clients are in the name of a limited company. As a result, many commercial finance brokers decide to remain unregulated by the FCA. There are many grey areas to structuring a deal, one moment the deal is unregulated and the next it’s regulated which means an unregulated broker can no longer deal with it.

As a broker, Wattsford Commercial Finance conducts FCA-regulated activities for our Principal Firm who are directly authorised by the FCA. Our registration on the FCA Register.

Members of the National Association of Commercial Finance Brokers (NACFB)

The NACFB is a nationally recognized organisation that has approximately 1600 members throughout the UK. As members of the NACFB, we adhere to an industry recognised Code of Practice that lets you know that you’re working with an expert and that you should get good advice. The recommendation is that you should only work with NACFB members when looking to raise finance for your business.

Professional Indemnity (PI) Insurance

If you use a broker who has PI insurance, you have the protection of knowing you have recourse if something goes badly wrong.

Fortunately, things seldom do, but if you use a commercial finance broker with PI cover it just gives you that extra protection.

Also, in order to get PI cover, the insurance company will have examined the broker’s credentials before agreeing to put a PI policy in place, which gives additional “peace of mind”.

Whole of market

A competent commercial finance broker should be able to offer a choice of lenders from across the “whole of market”. In other words, they’re not tied to one particular lender or to a selected panel of lenders.

Instead, they can approach the whole of the market, research various options and report back to you so that you can make an informed decision in the knowledge that your broker has not just approached a couple of favourite lenders.

Experienced and suitably qualified

Does your broker have relevant experience and knowledge?

A good broker will have knowledge and experience relevant to the role. Many brokers will also be able to support this further with a mix of both academic and professional qualifications.

That way you know that they really can do what they say they can do!

Transparent fees

In the same way that you would expect to pay for any professional service, a broker should charge a fee. Ideally, look for a broker that charges a fee and has a wide choice of lenders to approach on behalf of a client as this removes any potential conflict between fee earning and commissions from lenders.

The FCA requires that all brokers provide their clients with their terms of business at the start of every transaction which will include any fees and how they will be charged.