How to get started in business lending
“Businesses are no different to home buyers in their expectations of their broker - they’ve got to have trust and confidence that you’ll do the right thing.”
When it comes to commercial lending, you’ve got capacity to venture into different areas. From commercial property, to lending against a business all the way through to property development; the commercial space is broad.
We sat down with commercial lending veteran, Grant Rheuben, who shared his insight.
“If you’re coming from residential lending, I’d always recommend you develop a niche for commercial property first because it’s closest to home loans. ING, for example, treat commercial property loans like a home loan; the rates, the service calculator - it’s the same as residential,” he said.
Other areas of business lending are more complex. As Grant explains, there’s a lot of learning that’s needed but there are some simple things you can do to get a head start.
Know how to read financial statements
“This is the fundamental skill you need to get started. If you can’t read financial statements, you need to learn how to. If you aren’t as confident as you’d like to be, you can team up with a specialist and have them guide you through - in a referral arrangement of course. This means you don’t have to turn commercial business away and can learn on the job.”
Understand it’s business as usual
“With commercial lending there is no emotion in anyone’s decision - it’s purely business. That’s the clear distinction between commercial and residential loans. When a family is buying a house you can appeal to their emotions. In commercial no matter how hard you work, if the numbers don’t stack up for the business, they won’t go ahead. Having the business acumen to identify the deals that might fall over is important and is something that comes with experience and exposure to different businesses.”
Ask yourself three questions
To help you assess your business clients, Grant suggests you answer three simple questions.
- Have they been running the business for two or more years or worked in that industry for a prolonged period of time?
“What you’re trying to determine here is whether they have the necessary experience to make money and pay back the loan,” Grant said.
- Is this person willing to put up a property or cash to secure the loan?
“Banks like business borrowers to share the risk with the loan. They’ll be expected to put up their property or have a substantial sum of money to contribute.”
- Do they numbers makes sense?
“This is simply a matter of determining if can they afford the loan in the long term.”
At the end of the day, business clients share common ground with home buyers: “They’re no different in their expectations of their broker - they’ve got to have trust, and have the confidence in you to do the right thing,” Grant said.