August 2019
Adam Tyler, Executive Chairman, FIBA
The contribution of Brokers and their Trade Body to the growth of a Lender
As the demand for commercial finance in the UK continues to grow, the need for the number of new or emerging lenders to be visible to the intermediary market, has become ever more vital to their success.
The growth in the number of new finance lenders over the past decade has followed a similar journey to those within the residential market. In the wake of the 2008 credit crunch, major lenders chose to withdraw or curtail their activities, particularly in areas of the market that were perceived as offering higher risks. By the end of 2009 the number of lenders focused on the commercial sector had fallen from over 100 two years previously, to around 40.
In the intervening period, we witnessed a reluctance by larger lenders to step beyond a self-imposed template of the kind of customer and level of risk they are prepared to entertain. However, volumes for UK commercial funding have revived, and the demand for SME finance of all types has increased dramatically in recent years. The vacuum created by the withdrawal of traditional sources of finance has been increasingly filled by the growing number of new lenders. In fact, there are now over 400 lenders competing for finance business across the UK, offering a truly inspiring range of lending options and products.
But, how can they begin to compete effectively when the market is becoming so subscribed?
One of the most effective ways for lenders to grow their business and boost revenue streams is to affiliate themselves with a trade body like FIBA. They act as a focus point for lenders, providing access to adviser firms which the lender knows are potential business providers from the outset.
Similarly, membership of FIBA ensures that brokers can get access to lenders who might not allow access to individual firms.
FIBA offers lenders and other providers the potential for increasing distribution by utilising the value of its membership to give both lenders and suppliers access to a concentrated source that might otherwise be beyond their reach without extensive individual marketing, negating the need to ‘cold call’ for prospective introducers. This, in turn, means that the savings in general marketing can be channelled instead to build greater volumes and to target resources more efficiently - a win/win scenario.
Lenders might prefer to deal directly with customers in a perfect world, but the value of the intermediated sector provides a stronger opportunity to generate business. Broker sourced business converts better because of experience and market know-how. When a lender is able to access a dedicated trade body membership, not only can the lender reach a knowledgeable group, but also one that is looking for the kind of lending solutions that the lender can fulfil.
FIBA has a robust vetting procedure before lenders are allowed to join the lending panel and each business is subject to the centralised provision of an ethics code, so that members can be confident that the providers that they use will be of the highest possible quality and standing.
In short, trade bodies offer lenders a tailor made resource of brokers with an interest in the commercial sector, who have themselves subscribed to a code of conduct governing the treatment of customers, among other considerations. A trade body relationship for a lender, properly managed, offers new lenders a tailor made audience on which to build a strong reputation, benefitting the lender looking to expand its reach and benefit from the quality of the business generated with the subsequent saving in processing costs.