What type of broker should SMEs be looking for? 

In recent years many Australian brokers have diversified their service offering, expanding from residential finance into the world of commercial finance. However, there is a significant difference between the two – and more specifically, commercial property finance and commercial business finance.  

Take a deep dive with us into the Australian broker market, and what small-to-medium enterprises (SMEs) should be looking for when seeking a true expert in commercial business finance. 

A glance at the Australian broker market 

The broker market continues to grow year-on-year and is now writing 70 per cent of all Australian mortgages. With an increase of 22.7 per cent since 2021, 11,387 registered mortgage brokers are now operating in Australia. 

This is a sign the industry is thriving after the pandemic and is a positive outcome of the recent Royal Commission into Banking. This Royal Commission highlighted brokers are empowering borrowers by promoting competition and providing greater choice. 

Although the market is growing, a large proportion of mortgage brokers are still residential brokers – meaning they are focused on home loans, as opposed to specialising in commercial finance. Many brokers can offer both services, however these specialties are significantly different in terms of knowledge and outcomes for the client.  

Understanding the difference between commercial property and commercial business finance 

Many banks refer to their commercial segments differently, often causing confusion. 

For example, some banks have a ‘business banking’ division that provides finance from $1 million to $15 million, and this division will cover both business finance (cash flow, business acquisitions, equipment, etc) and commercial property finance (offices, industrial, retail, property development).  

However, other banks will name this segment ‘commercial banking’. So, when you are looking for a broker that specialises in these areas – and not residential finance – who should you look for? 

Finding the right SME broker for you 

When you hear of residential brokers ‘diversifying’, it usually means they are transitioning to commercial property services. This is because there are similarities in the assessment of the transactions. 

However, it’s important for you to engage a broker who can discuss all aspects of your business, and not just a property loan. This is why it’s essential to seek out a specialist commercial business broker. 

Specialist commercial business brokers can provide in-depth guidance on finance structures and understand how to maximise tax outcomes by aligning debt structures with your accountant’s tax planning. This might be for asset protection purposes, or in more complex situations, unsecured or partially secured lending supported by a strong cash flow business. This requires an abundance of commercial business expertise. 

It’s great to see many broker businesses diversifying into commercial and business finance, and the overall industry growing year-on-year. However, if you’re an SME seeking finance, you want to make sure you have an expert who truly understands the complexities of your situation and needs.  

Make sure you ask your broker about their experience and clarify if they specialise in commercial business finance as opposed to commercial property finance. There’s a big difference between the two, and the outcomes can differ significantly for you and your business. 

At Duo, we’ve been proudly diversified since day one – and intricately understand the difference between residential finance, commercial property finance, and commercial business finance.  

Chat to us today: https://www.duofinance.com.au/contact-us/