Company owners or managers who have struggled with financial issues for a while may heave a sigh of relief when they finally get a commercial finance broker on board to help them navigate their way to a safe harbour.
Sadly that broker may not always provide the safe passage they expect. A client looking for commercial property finance came to us this month with an example of just that – they had been working with a broker for more than five months to access some extra funding, but had been led into choppy waters and committed to unnecessary fees, legal costs and valuations. As a result, they still didn’t have a deal in place but had spent an inordinate amount of time and money on a funding route that probably wasn’t applicable to them anyway but that was almost certainly of more benefit to the broker.
The broker had been taking the client, an SME in the agriculture industry, down the short-term bridging route where they could easily have gone to a high street lender if this was their preferred solution, and the interest rate being arranged wasn’t exactly attractive.
The client came to us after becoming frustrated with the whole process and, as we suspected, the broker wasn’t a member of the National Association of Commercial Finance Brokers (NACFB) – which represents the industry gold standard for quality and reliability.
Once approached, we made the effort to meet with the client and a lender (the other broker hadn’t even seen the client), and together we identified the best option available. We are now arranging a medium-term, more sustainable solution at a better rate, through a 15-year mortgage with the option to repay early.
While the agreed rate is a third of that which they were looking at paying through the other broker, sadly the client has already paid out tens of thousands of pounds in unnecessary expenses that could have been avoided.
With the solutions we’ve put in place that are more affordable and sustainable, this SME will hopefully now go from strength to strength.
How to choose the right broker
Our blog post from February 2016 highlights the qualities businesses should look for when choosing a commercial finance broker, and the basics haven’t changed. The advice is to look for an NACFB member, check they have FCA authorisation using the online register, and ask them about their relevant experience, knowledge, and the range of lenders they work with.
Doing your own due diligence should help you pick your advisors wisely, and remember to check the advice you’re being given as much as you can. If something seems too good to be true, it probably is, and if you feel like you’re being led down a garden path, you very well might be.
By checking a broker’s credentials before you start doing business you will hopefully avoid becoming yet another cautionary tale for others.
Paul Goodman (c)