Why Use a Commercial Finance Broker – part 2?

In last week’s blog, I asked “Why Use a Commercial Finance Broker?”

In answering the question, I addressed the issues business owners often face when trying to raise finance themselves through their own bank, and I spoke about the myriad options that business owners now have when it comes to raising finance.

Raising business finance has become increasingly complex and I outlined the benefits and that using a good commercial finance broker can offer you.

However, in choosing a commercial finance broker to work on your behalf, there are certain questions that you need to ask beforehand, and I addressed some of those questions in last week’s blog.

So, questions like:

• Are they specialist commercial finance brokers – is this their area of expertise?
• Are they regulated by the FCA – the Financial Conduct Authority?
• Are they members of the NACFB – the National Association of Commercial Finance Brokers?

I wanted to finish this 2-part series by providing you with several other questions you need to think about before you appoint a commercial finance broker to work on your behalf.

Do they have Professional Indemnity (PI) insurance?

If you use a broker who has PI insurance, you have the protection of knowing you have recourse if something goes badly wrong.

Fortunately, things seldom do, but if you use a commercial finance broker with PI cover it just gives you that extra protection.

Also, in order to get PI cover, the insurance company will have examined the brokers credentials before agreeing to put a PI policy in place, which gives additional “peace of mind”.

Are they whole of market?

A good commercial finance broker should be “whole of market”. In other words, they’re not tied to one particular lender or to a selected panel of lenders.

Instead, they can go out to the entire lending market, research what options exist and then feedback to you so that you can make an informed decision knowing that your broker has gone out to the whole marketplace and not just to his “favoured” lender.

Can they provide you with case histories of recently completed deals?

A good broker will have done many deals just like yours. If you want to see what they can do, ask them to provide details of deals they have done in the past 6 – 12 months.

If you want more information, ask to speak to a couple of their clients – past and/or present.

That way you know that they really can do what they say they can do!

Are they transparent about their costs?

The FCA requires finance brokers to provide a client with their terms of business right at the very outset of the transaction.

The terms of business must include details of the fees the broker is charging to arrange the finance.

Be wary of using any broker who is “cagey” about telling you what they charge.

Also ask them about the other fees that you are likely to incur, such as: bank arrangement fees, legal costs and valuation fees.

It means that you know exactly what the costs of arranging your finance will be right at the very outset.

To summarise

Raising finance for your business is probably one of the biggest decisions you’ll make. It’s therefore important that you use an expert.

You wouldn’t use a dentist or a solicitor, or an architect if they didn’t know what they were doing. Raising finance for your business is no different.

There are many great brokers to choose from. But there are also some dodgy ones!

So, when choosing a commercial finance broker, do your research and use the questions from both this week’s and last week’s blog to help you.