The Longer Story
It is difficult to rate the advantages of using a commercial broker by importance, due the varying reasons as to why companies chose to/are considering sourcing corporate finance via a broker.
One of the most obvious advantages however, is that broker will carry out all the leg work when seeking the right deal or suitable lender based on the funding requirements and company profile.
A good broker will have quick and efficient systems in place to ensure smooth running of finance requests, regarding factors such as; paperwork, assessing appropriate lenders, clear communication channels between all parties involved and ensuring all client requirements are met.
Many finance brokers have begun to adopt fintech (read more about fintech at https://www.rlacapital.co.uk/blog/fintech-at-rla-capital) systems such as those adopted by RLA Capital in the form of online application systems (see more at https://rlacapital.co.uk/apply-for-business-finance) and CRM systems.
These online systems allow clients to apply for finance at their convenience, without being restricted to office hours, which in turn makes a finance broker more accessible to potential and existing clients. Client’s do however have to be aware of the security implications of poorly developed systems and it is prudent that when using such systems that they check a few security features before entering sensitive information.
Features to check include;
- HTTPS only SSL connections, ensuring that any data sent to and from the client is over encrypted channels - What is SSL???
- Secure password protected systems
- HTTPS only cookies
- Hashing and Encryption to Protect Sensitive Data - What is Encryption???
A broker will already have existing links with lenders on their funding panel, which means that have in depth knowledge of the type of requests each lender is most likely to accept. This in turn allows the broker to select the most suitable lender(s) for a loan or finance request in a shorter period of time, than if a business or client carried out the task themselves, without expert guidance and advise.
Generally speaking the more lenders a broker has access to such as peer to peer, high street or traditional lenders and specialist lenders, the better the funding solution they are able to arrange for the client.
To expand on this, if a broker has a small range of lenders on their panel, they are restricted to the terms, benefits and rates of these lenders. These lenders may not be the most suitable or cost effective for the client. In addition to this if a broker does a lower amount of business via the different credit channels they have the less likely the facility will be the best for the client.
Having a wide diverse lending panel allows a broker to search and compare the most suitable deals for their clients. Comparisons will take into consideration factors such as loan/facility terms, funding amount, purpose of facility, company profile and status. A broker’s expertise comes into play here. For someone with limited knowledge of the finance market, identifying the most suitable lender, assessing what is a good deal in terms of interest rates, monthly payments and loan/facility amounts available.
When a finance broker provides a number of facility options for a client, they enable the customer to make an informed decision. A finance broker must be authorised and regulated by the FCA and have enough experience and expertise to give the most realistic and beneficial information to a client. For example, when making a new loan application a broker will assess a client’s current lending, they then may provide information on consolidating these existing credit agreements with the end effect of streamlining payments into one monthly payment and reducing the monthly cost to the client.
So how do brokers assess client(s) requirements?
Finance brokers will analyse several factors when determining the best course of action, the most appropriate lender and a client’s current credit worthiness. They will request a variety of things to allow for a thorough and accurate overview of an organisation’s status including;
- How long a company has been trading
- Company Accountants – current financial assets, revenue and liabilities
- Company bank statements – daily expenditure and current cash at hand
- Existing credit agreements (if any)
- Information on company directors/owners/partners
Using this information, a broker can determine possible lending amounts, the best time to apply and most importantly which lenders to approach.
Finally…. Some points to consider when selecting a broker
- What is their level of skill, experience and expertise?
- Do they specialise in your particular type of finance? E.g. Asset finance?
- How wide and/or diverse is their lender panel?
- Are they tied to particular lenders?
- Are they authorised and regulated by the FCA?