'Paradigm shift' required to move to commercial finance

Commercial and SME lending requires a special skill set, says FBAA head

'Paradigm shift' required to move to commercial finance

Commercial finance can give brokers an excellent opportunity to develop their business – but it requires a special skill set, according to the Finance Brokers Association of Australia (FBAA).

In a recent column for MPA, FBAA managing director Peter White (pictured above) said a “paradigm shift” was required for brokers entering the commercial lending space.

“Brokers who focus on consumer lending, including home loans and motor vehicles, must have the mindset of ensuring all they do is within the parameters of consumer regulation,” White wrote. “This is even more important with the current responsible lending regulation and best interests duty.”

White said one of the greatest challenges in commercial and SME lending was for consumer-focused brokers to distance themselves from the National Consumer Credit Protection (NCCP) Act when working in the commercial space.

“The NCCP Act only applies to consumer asset loans, consumer mortgages, credit cards and the like,” White wrote. “It has no place in commercial property loans, leases or other types of commercial and SME lending.”

While commercial lenders are still required to lend responsibly, commercial lending is too complex to work within the parameters of the NCCP Act, White said.

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“It can’t be considered within the realm of the NCCP Act for consumers as it is far more bespoke,” he wrote. “It doesn’t fit cleanly into a simple box as does home lending. Commercial lending is very dynamic in its construct and must have the ease of flexibility to ensure it meets the needs of SMEs.”

Despite the complexity of commercial lending, White said the FBAA has not wavered in its commitment to advance the rate of commercial lending done through its members and finance brokers generally.

“It is said that success only happens outside of our comfort zone, and I encourage all brokers to be willing to take this step, think differently, embrace the challenge and receive the rewards,” he wrote.