Last week, Avamore attended the Commercial Finance Expo hosted by the NACFB. It was a great opportunity to make new industry connections and meet with some familiar faces. As part of the day, we put out our ‘question of the hour’ and gathered thoughts from brokers across the industry. Here is what we found:
What is the most important quality for a lender to have?
Brokers responded that communication and transparency were key elements to a good lender. Having access to a decision maker is highly important and honesty around timeframes adds a great deal of value for a lender – broker relationship.
Additionally, lenders that focus on a particular niche are generally more attractive for brokers. Those that have a clearly defined offering and target a specific sector of the market are perceived to be more knowledgeable and have greater expertise.
Finally, competitive rates are a key quality for a lender to have along with efficiency and flexibility when considering a deal.
What difficulties do brokers face when getting indicative terms on a development finance case?
Our research showed that brokers often face difficulties with newly qualified developers not understanding the amount, or the type of information they need to provide in order to gain indicative terms.
It can also be particularly challenging when a developer is simply considering property purchase and may not have access to all of the information. This in turn hampers a conclusion as to whether the project is feasible.
From the lender side, brokers struggle with inconsistency of available information across the board. The information required varies from lender to lender and this inevitably causes process delays.
Calls for greater transparency from a lender perspective were clear across the market.
What are the most common reasons you see for a development finance enquiry being declined by a lender?
The market stated that enquiries were generally declined by a lender due to valuer discrepancies. Whilst one may see the potential in something, another may disagree, and this can ultimately break a deal down.
There were further comments around the developer not having enough equity or experience which heightens risks and makes lenders lose confidence.
What is the biggest challenge a broker faces on the journey from heads of terms to completion?
The overwhelming response from the market was focused on speed of completion. Brokers inevitably feel the pressure to close deals as efficiently as possible, but problems arise when other service providers become part of the cycle. With so many people involved in closing a deal, brokers find it difficult to push forward on things that are out of their control.
Additionally, difficulties arise when reaching the legal side of the process. Numerous brokers have found that in some instances, lawyers can sway the decision of the borrower. Equally, terms can be agreed and there is danger of credit making changes at the last minute.
What is the biggest change predicted for the broker – lender relationship?
The biggest development for the broker lender relationship is centred around technology. As technology advances, it enables process to become less labour intensive and frees up time to improve the quality of customer service.
It is important however to consider that whilst technology enables processes, brokers and lenders need to push forward just as hard to ensure strong relationships are maintained. Whilst it was stated that ‘people buy into people’, it is clear that in order to be able to interact with borrowers of the future, lenders and brokers need to grapple with technological changes today.