What is a Commercial Finance Broker?

 

And what do they offer to a company that’s looking to put finance in place?

Fiducia Commercial Solutions works on a very straightforward ethos – we work with clients to understand their requirements, source the most suitable funding solutions for them and to achieve the best possible outcome for their business.

Beyond that being sound bites on our commercial blog or on our website or on social media, we take some far more concrete steps to underline the sincerity of this for us as a company.

Fiducia Commercial is directly authorised by the FCA, a badge that we wear proudly to demonstrate how seriously we take the integrity of our business, and how we put how we treat our clients at the top of our list.

We have been active members of the National Association of Commercial Finance Brokers (NACFB) for some time – you cannot get more active than our CEO having chaired the association!

We are market leading in the transparency of terms and conditions and charges. And to emphasise this we hold a ‘security call’ with a client just to go back over their requirements and priorities to make sure that we have captured them correctly, as well as ensuring that they are happy with, and have read and understood, all of our terms and conditions and paper work.

So what does this actually mean in practice?

All businesses are different, and even two firms in the same sector or looking to fund the same type of property related transaction don’t have the same finance requirements.

With trading company clients we take the time to fully understand how a business works, its working capital needs and the challenges it faces; this allows us to identify the solution, or combination of solutions, taking into account the type of finance required and the costs to the company that would be involved.

Lenders can use confusing terminology and jargon in their product description, and the cost structure can be difficult to navigate if you’re not fluent! And there are a lot of lenders and commercial finance products out there. For example, our database has:

•       Commercial and Investment Mortgage, Bridging Loan and Development finance lenders
•       Unsecured and Secured Business Loan providers
•       Asset Finance and Vehicle Solutions companies
•       Invoice Finance lenders
•       Trade and Supply Chain solution providers

Using a commercial finance broker helps you to cut through the crowd and to identify suitable products and lenders.

And beyond ‘what’ we can do for you, we guarantee our clients ‘how’ we will do it for them:

TRUST

You can trust us to find the right solution for your businesses and funding requirements.

SECURITY

We offer ‘Whole of Market’ commercial financial services, giving you the security of choice.

CONFIDENCE

We do all the hard work sourcing the market and providing you with the confidence that we can deliver the best terms available.

There is no comparison website out there where totally independent, unbiased and suitable results can be obtained by a business owner or director. We see many are promising indicative terms and decision in 2 minutes – but a consequence of the pandemic is that lenders’ criteria has and continues to change very often, along with their risk appetite.

Commercial funding is not agreed without human intervention – and indicative terms will be of rates available to ‘someone’ at best, and they will worry about where they source your funding from once they have engaged with you.

We do the leg work for you and use experience and product knowledge together with our lender network to source and present the most suitable options for you.

This leaves you to be able to get on with the important job of actually running your business!

We are looking to maintain long term client relationships. Companies grow, change and sometimes face their challenges over time. Having someone that already understands the business and its journey to this point means that you already have a partner in taking the next step, or fighting the next fire – whatever is on the horizon for your company.

Finance is not everyone’s favourite subject, and can take people at all levels out of their comfort zone – but business owners are engaged with us when the conversation is about finance for their company:

•       To resolve a problem that is eating away at them.
•       To buy the property they have been paying rent to a landlord for the last 5 years for.
•       To find a lender because their bank of 10+ years has just declined them..
•       To get funding for more operating space because orders have gone through the roof.
•       To lease extra cars because they know if they could get more salespeople in front of customers then the product would actually sell itself.

People that we talk to are some of the most passionate and engaged that we have ever worked with, because it matters so much to them – they live and breathe their companies.

We can’t help but be inspired by that to provide the best solution that is available to them.

 

We can’t make your company profitable, increase your turnover, raise your credit score or double the deposit that you have in the bank – but if the market sees you as viable for finance then we will achieve the best outcome for you.

How do you want to get funded?

Mark Grant, June 2021.

info@fiduciacommercialsolutions.co.uk  / 01636 614 014

‘Commercial Mortgages’ – So much more than the name suggests.

 

The name ‘commercial mortgages’ is a wrapper for number of different commercial property related products. As a business we use it to describe a large amount of the work that we do for clients – and the industry commonly uses the same header.

The trouble with a single header for multiple products – all of which are quite different in the requirements that they meet – is that in the end the header becomes a bit like an acronym – and you can’t remember what it actually means!

So when Fiducia Commercial says ‘commercial mortgages’ what do we actually mean? And who can use them? Oh, and what are they?

Commercial Mortgages

Commercial mortgages are used to fund the purchase, or refinance of, commercial, semi-commercial or residential properties – and as we explain below the funding reason can be both to occupy the building, and as an investment.

In general terms there are 3 main uses for commercial mortgages:

Owner-Occupier: The purchase or refinance of the property where your company is currently trading, or the purchase of a new property to move to and trade from.

Commercial Investment: The purchase or refinance of commercial or semi-commercial property which will be rented to another company to trade from – essentially a commercial Buy-To-Let investment.

Residential Buy To Let: A limited company (‘SPV’ or Special Purpose Vehicle) can purchase residential property to let as an investment, and professional landlords / Buy-To-Let limited companies use these mortgages for the same purposes.

Commercial mortgages are, just like residential consumer mortgages, available with fixed or variable interest rates over a range of years, and the amount that you can borrow is set as a ‘Loan To Value’ (LTV) percentage of the property value.

The amount that you will be expected to have a deposit can vary according to different factors, including:

• If you are an owner-occupier: the sector that you are in / your company’s recent financial performance / they type of property you are financing.
• If you are an investor: the type of property you are financing / the sector that your tenants are in / the amount of revenue generated from the lease/s.

Existing property holdings with equity value in them may be considered towards the deposit by some lenders as security.

Bridging Finance

This effectively does what the name suggests – bridges the gap from one point to another in a financial sense, and are a short-term property finance product, between 3-24 months in term, but the ‘common’ term is 12 months.

At the end of the loan the ‘exit’ from the loan for your company is the repayment of the loan from the disposal of the property, or ‘re-financing the bridge’ with a long term finance product.

Bridging loans can provide a quick route to property purchase, and are commonly used to purchase property at auction and for circumstances when the normal conveyancing cycle would take too long to complete the purchase in the required time frame.

Bridging is a means to refurbish commercial or residential property, or funds to develop property – from light / cosmetic refurbishment of existing structures to ground up development of land.

‘Just’ for property transactions? Well, no.

Bridging is of course based on property as the security for the loan, but the business reason could be to release equity from a property already held by a business or director. Therefore it could be said that bridging finance is a cash flow tool for raising working capital too.

Given the specialist and short-term nature of bridging loans, interest rates can be higher than traditional commercial mortgages.

Development Finance

On the surface a complex area of finance – but you can start to lift the lid on its application for you and your business by looking at the amount of structural work that is required on your project.

Finance terms that are available to you vary according to:

• the initial value of the property / land (Purchase Price)
• the costs and fees associated with the development work (Cost Of Works)
• the projected value of the completed development (Gross Development Value)
• your previous experience of development

Commonly used terms for variants of development:

Ø  Light Refurbishment: Cosmetic refurbishment with no structural changes. Includes: Kitchens, Bathrooms, Windows, Doors, Decoration and modernisation.

Ø  Heavy Refurbishment: Contains cosmetic work, but usually renovation work including structural changes (internal walls) or changes to the footprint of the property.

Ø  Ground Up Development: Commonly starts from vacant land, can include demolition and rebuild projects. Lenders are likely to look for projects where planning permission is already granted, even if you might vary that once you have acquired the site.

So it is worth your knowing that ‘commercial mortgages’ isn’t a header for a single product – and there is no ‘one size fits all’ solution.

But that is where a commercial finance broker can add so much value to you – we can listen to your full requirements and match you with the most suitable lender and product from our large whole of market panel of lenders.

 

We do the leg work so that you don’t have to – how do you want to put the roof over your business?

Mark Grant, June 2021.

info@fiduciacommercialsolutions.co.uk  / 01636 614 014

Criteria – The devil (and your funding) is in the detail.

 

Lender Criteria – As the proprietors of the original commercial finance sourcing system, Optimus, it is something that Fiducia knows a lot about.

What are Lender Criteria? They are the details of what lenders will and won’t accept about a borrower and their requirements when they present an application for funding.

I appreciate that when we are asked for ‘just a quick idea’ of what is available for a client it is frustrating to either be told that we need to know more about them and their requirements – or to be told a very wide ballpark or range with a long list of caveats attached.

The temptation as a broker would be to quote what you know is available to someone out there, and what would be very attractive terms to get the ‘hook’ and engagement from the potential client – and then worry about finding someone who can justify that indication later.

But that is not how we operate – and it does the potential client no favours. It is a number generated from thin air, with no relation to their circumstances or requirements – and they could commit to a cost or transaction based on the ‘guesstimate’ that they were provided, which could leave them out of pocket if the indicative terms cannot be delivered on.

So when we talk to a client to get enough details to secure an indication of terms, there is still a caveat that the indication is subject to greater analysis of their financials and the requirements – but we will have gathered enough information to be able to match their requirements with eligibility criteria for different lenders’ products.

Below are criteria that we will cover with a client in an initial call to allow us to make an initial eligibility check and indicate terms. These are by no means exhaustive and are commonly just gathered in a conversation, so the client may not even realise they are providing as much information to us as they are:

•       Geography – which home nation is the client/property based in?
•       Sector – if involving a trading business, what sector are they in?
•       Trading company – how long has it been trading, what exactly do they do and what is the recent financial performance?
•       Business Finance:

Ø  What type of product they require

Ø  What size facility

Ø  What is the business reason for the funding?

•       Property finance:

Ø  What type of building/structure is it? (Commercial/Semi-Commercial/Residential/Land)

Ø  What type of finance do they require? (Owner/Occupier or Investment)

Ø  What is the property value and what is their deposit/contribution?

Ø  What variable of funding do they require? (Term/Fixed or Variable/Interest only or Capital repayment)

Ø  What other property is held in the background by the limited company and/or directors?

•       Credit – Any adverse credit for either the company or the directors?
•          Anything else that we should know up front?

You would be amazed at what answers can come up on the last question – but seriously, if we are aware and can make lenders aware of any ‘wrinkles’ up front then it can make the proposal more likely to succeed than if the lender discovers these issues late in the process.

So what do all of the above have to do with lender criteria?

•       Not all lenders lend to companies or on properties based in all 4 home nations.
•       Lenders will have sectors that they won’t lend to – common ones that are excluded might be adult entertainment, munitions or gambling for example.
•       Some lenders have a minimum length of time trading required, or a minimum level of experience with property or development.
•       Lenders all have a minimum and maximum loan amounts.
•       Property lenders don’t all lend on every type of building – some will only fund investment, some only owner-occupier and some both.
•       Lenders vary in their appetite for any type of adverse credit – some won’t accept any, others might accept it if it has been cleared for a defined period – someone might accept an open credit event with a story!

The final thing that I wanted to mention was the pandemic environment, and its affect on lender criteria. Their risk appetite has changed and therefore their lending criteria have changed.

We have been updating our systems lender by lender to try to capture their current criteria – a long process but critical because there are not many that will have remained the same since pre-Covid.

And dauntingly we know that we will likely have to repeat the exercise again over the next year because as the economy recovers and evolves again, so will lenders’ appetite for risk and that is what drives their lending criteria.

Beware of the claims that someone (or their website) can match you with lenders in a couple of minutes based on their systems that hold the criteria of hundreds of lenders – I can guarantee that the criteria won’t be up to date across the board.

We see large lenders shifting slightly their criteria on a monthly basis, and in the odd case more often – so there is a manual check to be done and this is where your commercial finance broker is earning their money working for you.

So, sorry for wanting to know a bit more up front about you and your requirements – but my answer will then be based on your eligibility to lender criteria as we have discussed it – and not the best rate available to someone, with me worrying about how I get that for you later!

 

How do you want to get funded?

Mark Grant, June 2021.

info@fiduciacommercialsolutions.co.uk  / 01636 614 014

Fiducia's Commercial View - The Podcast - June 2021

 

Fiducia's Commercial View - The Podcast - June 2021

https://open.spotify.com/show/1PzCdJnpsWPtd3TIjVu2Yh

Some great topics to cover this month, and we take a look at: 

• A Bridging Loan is just the way to buy a property when you still own another, right? 
• Product and Process innovation with Bridge-To-Let, and some input from Lendinvest. 
• Will this be an Asset-Backed recovery for the UK economy?  
• We ask the Commercial View of Andre Parcin from the NatWest Group about Asset Finance.

info@fiduciacommercialsolutions.co.uk