The use of specialist finance brokers by small to medium sized business operators is becoming an increasing trend.
Some see this as a changing of the guard where banks are tending to leave the client service and all the associated paperwork to business finance specialists.
Or is there more to this trend than meets the eye?
Some business operators who need finance less frequently are asking, what is the role of a finance broker? Surely if banks are servicing the needs of small business, why do they need a specialist broker to handle equipment finance, fleet leasing or other business finance needs? That is precisely the point, the needs of small businesses aren’t being adequately serviced by the major banks.
Recent research has indicated that one of the biggest stumbling blocks to the growth of small business after the global financial crisis is access to finance. Banks have tightened up lending practices and typically it’s the small businesses that are missing out.
They’re also neglecting to provide adequate service to small business operators in helping them access the right finance solution to suit their needs.
So who can small business operators turn to for help?
Specialist business finance brokers can source funds from a wide range of financial institutions all around the country and often with more understanding of small to medium sized businesses. The broker, who typically has or will have a long term relationship with the client, has or will develop an in depth understanding of the client’s business.
That enables them to prepare each finance application in a manner which best represents the client’s case to a prospective lender. So the broker serves as the advocate for a small business.
Not a ‘devil’s advocate’ which is a term we may be more familiar with. The broker takes the more positive ground, showing the business operator in a balanced ‘best light’ to lenders.
In this way, brokers like Finlease are able to give banks and other financiers greater insight and resultant confidence in that business.
Finlease typically present the client in a manner which provides not only a concise financial and operational summary of the client’s business, but give a reason why they are seeking the additional finance.
As Mark O'Donoghue the founder of Finlease confirmed: “most clients have already approved the purchase of the additional equipment in their own heads. They know why they are buying it, what income gains or expense reductions it will achieve and how much it will cost."
"Our job is simply to extract that information from the client, put those thoughts into 'financier speak', wrap a concise and compelling finance submission around it and present to the best lender available on the market for that client."
Simple if you say it fast
Spreading loans across different financiers is also important, as a business shouldn’t be too geared with a particular lender, which can restrict access to funding in the future. Additionally, a broader spread of lenders means that if the answer is no from one, it may well be yes from another.
A finance broker can save business operators time, freeing them up to do what they do best – running their businesses. Once a broker has an understanding of a client’s business they can represent the client to a wide range of lenders.
Any decent broker will have 10 – 20 year relationships with their clients, which means no more revolving doors of account managers from the banks who may only meet the client 2 – 3 times before disappearing, only to be followed by another in quick succession.
Funds can often be sourced at better rates and at more flexible terms because of the finance broker’s advocacy skills, spread of lenders and buying power. It’s also nice to have a long term associate/mentor in your small business journey. A capable broker will have a clear perspective on your business, challenges and opportunities as they spend their lives assisting SME clients.
Finally, as the broker’s income is paid for via the lender and absorbed within the overall funding costs, similar to an insurance broker, all of the assistance from your long term finance broker comes at minimal and often no additional cost to the client.