Time to capitalise on commercial lending

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The highly competitive home loan market can be a tough nut to crack, but with fewer brokers working in the commercial lending space, brokers are being encouraged to seize the moment and diversify

OPPORTUNITY BECKONS in commercial finance as more brokers diversify into this space, attracted by a less crowded and competitive marketplace than residential home loans. “Whilst only 30% of the total brokers in the Australian lending market write commercial loans, the actual market share of all commercial loans written is 38%. This huge scope for growth is attracting more residential mortgage brokers to dip into commercial lending, often looking to source business in this sector from existing customers, knowing it’s a great value add and client retention strategy.” Pepper Money is one of Australia’s largest non-bank lenders and is keen to support brokers wanting to diversify into the commercial space. Barry Saoud, Pepper Money’s general manager mortgages and commercial lending, says that while it’s been a challenging year, a lender that can support customers by considering their current income and situation will be important to helping those people and their businesses continue to move forward. “As this plays out, more brokers – and in turn their customers – will begin to understand the real value that non-bank lenders like Pepper Money can provide for their commercial lending needs.” Saoud says there are already strong signs that the commercial property market is positioned for growth. “Not only do reports show that the number of mortgage brokers writing commercial finance loans has continued to increase by almost 15% – according to the MFAA – but commercial loans settled by mortgage brokers recorded their highest-ever value at $15.98 billion, up 55% year-on-year.”

Pepper Money is a people-focused non-bank providing a refreshingly real-life approach to lending across home loans, commercial loans, equipment finance and car loans. We work with all sorts of people and businesses, from blue-collar to blue-chip. Whatever the circumstances, we take a uniquely flexible human approach, assessing each person’s situation individually.

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VALUE of commercial lending settled by mortgage brokers

“It’s our goal to build stronger market understanding of Pepper Money’s commercial offer – but importantly, we are laser-focused on developing broker confidence in working in commercial lending”

Barry Saoud, Pepper Money

While it’s great to see the momentum continue to build for brokers eager to diversify into commercial property lending, says Saoud, their total share of the market is still under 30%. “So it’s our goal to build a stronger market understanding of Pepper Money’s commercial offer – but importantly, we are laser-focused on developing broker confidence in working in commercial lending. “We realise the way to achieve this is to make commercial lending as accessible as possible, which is why we are investing in support, education and tools to make the product easy for brokers and their clients.” Saoud says the benefits are clear: brokers can diversify their

revenue stream and build stronger relationships not just with clients looking for home loans but also with those seeking business solutions. “Whether customers want to buy an investment property or commercial property to operate their business out of, or to access equity and cash flow to support them in growing their business, we have a diverse range of flexible commercial solutions to ensure every customer has options.”

“If a mortgage broker could gather the information for a home loan from a self-employed customer, they would find commercial lending not that different.” Saoud says he meets lots of commercial brokers who only deal with commercial, and they think that dealing with a residential loan would be a time-consuming and complicated process. “It goes to show that the only obstacle is flawed perceptions, but when we unlock a new level of confidence with commercial lending, we open up new opportunities for brokers. “Now there are very common similarities with our residential and commercial loans at Pepper Money. Such similarities are: LVR, Loan terms, loan features, documentation types such as full doc or alt doc assessment, and securities all have their equivalents. The exact same purposes are offered in commercial property. The only difference is the actual security type.” “It’s really that simple. Are there nuances in a commercial loan? Yes. But Pepper Money has made it easier than ever. It’s as simple as talking to your BDM and you can get started that day. It’s guaranteed to be a rewarding outcome for you and your clients.” Education can be the key to success, Saoud says. Pepper Money has developed workshops for those interested in commercial lending that brokers can access through their BDMs. Pepper Money also runs commercial lending webinars as part of its Insights Webinar series that address the common concerns brokers have about commercial lending.

Start by asking the right questions: Part of Pepper Money’s training is designed to help brokers have conversations with their clients and create a winning client experience. We show brokers how to expand their conversations with customers to understand more about their business and needs. What type of commercial property does your client want? Is it a shop, office, industrial warehouse, or something purpose-built such as a childcare centre or a service station? Is this an existing business? If so, what’s happening around the business? What are they looking at in terms of expansion? Build a strong network: Build relationships with potential clients and referral sources such as real estate agents, accountants, attorneys and other professionals in the industry. Attend industry events, join business organisations, and engage with other business owners and brokers who can open new doors and opportunities for you. Be knowledgeable about the lending process: Understand the lending process and policies. Your BDM will help you do this. Ask us about our training sessions, register for upcoming webinars, and read industry publications like the one you’re reading today in MPA to stay informed and up to date on industry trends, new products and policies.

The non-bank lender is also expanding its ability to fund commercial properties across Australia, including in non-metropolitan and regional areas, opening up more opportunities for brokers and customers Australia-wide. “With more than 20 years of specialist and SME knowledge, dedicated BDMs around Australia and a real-life approach to making deals happen, these recent changes we introduced are a real game changer for business owners and brokers,” Saoud says.

Small business advice, commercial lending

Support for brokers

New commercial lending offerings

Published 28 Aug 2023

“Education can be the key to success. We have developed workshops for those interested in commercial lending that brokers can access through their BDM”

Barry Saoud, Pepper Money

$0bn

$2bn

$4bn

$6bn

$8bn

$10bn

$12bn

8.85

Apr 17-Sep 17

Oct 17-Mar 18

Apr 18-Sep 18

Oct 18-Mar 19

Apr 19-Sep 19

Source: MFAA Industry Intelligence Service 15th Edition, 1 April 2022–30 September 2022

$14bn

$16bn

$18bn

Oct 19-Mar 20

Apr 20-Sep 20

Oct 20-Mar 21

Apr 21-Sep 21

Oct 21-Mar 22

Apr 22-Sep 22

8.94

9.05

8.79

8.99

9.70

9.37

10.27

13.40

15.98

17.24

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2,932

3,668

3,617

3,481

3,670

4,486

4,539

4,727

5,268

5,396

6,118

Apr 17-Sep 17

Oct 17-Mar 18

Apr 18-Sep 18

Oct 18-Mar 19

Apr 19-Sep 19

Oct 19-Mar 20

Apr 20-Sep 20

Oct 20-Mar 21

Apr 21-Sep 21

Oct 21-Mar 22

Apr 22-Sep 22

Source: MFAA Industry Intelligence Service 15th Edition, 1 April 2022–30 September 2022

number of mortgage brokers also writing commercial loans

As more mortgage brokers turn to commercial lending, word is spreading that it’s not as difficult to do as some brokers think, Saoud says. “In fact, it’s as simple as doing a home loan – or even simpler. With the training we offer, it’s about helping the broker realise what they are capable of doing.” Pepper Money offers brokers training and commercial workshops on everything from understanding commercial, as well as the differences between commercial and residential, to building brokers’ capabilities for having conversations with clients. “We do sessions on real-life case studies, and even a simple ‘coffee with credit’ – having a coffee with our credit managers and talking about how they look at a transaction,” says Saoud. He says whether brokers are writing a home loan or another type of loan, including complex commercial loans, all brokers are doing is “moving money”, and all that changes is the security.

Saoud says there are three key strategies:

Highlighting Pepper Money’s commitment to its valued broker partners, Saoud says the non-bank recently removed clawbacks on all commercial property lending and made this even easier with a single form of income verification required on its commercial Prime Alt Doc offering. “We also simplified our fee structures on commercial products and reduced legal charges to make it even easier to partner with Pepper Money. This was a decision to show our commitment and support brokers to meet the growing demand for commercial property.”

Strategies for brokers looking to build a commercial offering

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