When you need finance for a business vehicle, equipment, machinery or another commercial asset, your first thought may be to speak with the bank you already use.
That can make sense, particularly if you have an established relationship and your finance needs are straightforward. However, going directly to your bank means you are generally limited to that lender's products, policies and current appetite for your type of application.
A commercial finance broker can look across a broader range of lending options and help structure the finance around your business, rather than starting with one lender's product range.
For business owners, that difference can matter when your application involves a newer business, specialised equipment, changing cash flow, an unusual asset or a finance structure that does not fit neatly into a standard lending product.
A commercial finance broker acts as an intermediary between you and potential lenders. Rather than offering finance from one institution, a broker can assess your circumstances, understand what you are trying to achieve and identify lenders that may be suitable for the application.
The process generally starts before an application is submitted.
A good broker will look at factors such as:
The aim is to understand the deal first, then determine which finance options may be appropriate.
The biggest practical difference is lender choice.
When you approach your bank directly, you are dealing with one lender. The bank can only offer products available within its own lending range and must assess your application according to its own credit policies.
A broker can potentially access multiple lenders, including banks, non-bank lenders and specialist asset finance providers.
That can create more options when your circumstances do not fit neatly into a standard lending policy.
Going direct to your bankUsing a commercial finance brokerAccess to one lender's productsAccess to a broader range of lendersFinance assessed under that bank's policiesApplication matched to suitable lender policiesYou manage the application directlyBroker can manage the application processLimited to that bank's current appetiteCan consider different lender appetitesStandard structures may be offeredFinance structure can be discussed around your circumstancesExisting relationship may be beneficialBroader comparison of available finance options
Neither approach is automatically right for every borrower. The important question is whether your chosen lender is suitable for the deal you are trying to structure.
One of the main reasons business owners use a commercial finance broker is access to a broader range of lenders.
Different lenders have different appetites.
One may be comfortable with a particular industry while another has tighter requirements. One may have a strong appetite for newer businesses, while another may prefer established trading history. Some lenders specialise in particular types of equipment or commercial vehicles.
This can be particularly relevant for businesses that do not fit a standard lending profile.
For example, a self-employed borrower purchasing a specialised piece of equipment may have very different options from an established company purchasing a standard vehicle.
Your bank may have a suitable solution. A broker can help determine whether there are other options worth considering as well.
Getting approved is only one part of arranging commercial finance.
The structure of the loan can affect your repayments, cash flow and how the finance fits into your broader business plans.
Depending on the asset and your circumstances, this could involve considering:
For example, a business buying a $150,000 excavator may not simply want the lowest possible repayment.
The owner may want to preserve working capital for upcoming projects, structure the term around the expected useful life of the equipment or consider a balloon payment to manage cash flow.
A commercial finance broker can discuss these considerations before deciding where the application should be placed.
Lending policies are not necessarily the same across every lender, and they can change over time.
A lender that was comfortable with a particular asset, industry or borrower profile previously may have different requirements today.
This is why choosing a lender based solely on previous experience can sometimes be limiting.
A broker working across multiple lenders can consider current lending appetite when assessing where an application may fit.
This can be especially useful for:
The key is not simply having access to more lenders. It is understanding which lender may be appropriate for the particular application.
Business owners sometimes assume that applying with several lenders at once gives them more chances of getting approved.
That is not necessarily the best approach.
A finance application can involve credit enquiries and each lender has its own assessment process. Multiple applications over a short period can create unnecessary complications, particularly if applications are being submitted without first understanding which lender is likely to suit the borrower.
A broker can assess the application before submission and help determine an appropriate lender to approach.
The goal is to make the application targeted rather than simply sending it everywhere.
Commercial finance can involve more than completing an online application.
Depending on the transaction, a lender may request financial statements, tax returns, business activity statements, identification, asset details, contracts, valuations or other supporting information.
A broker can help explain what is required, coordinate documents and communicate with the lender throughout the assessment process.
This can save business owners time, particularly when they are already managing staff, customers, projects and day-to-day operations.
Potentially, but there is no guarantee.
Interest rates depend on a range of factors including the lender, loan type, asset, borrower profile, loan term, security and overall risk.
A broker may be able to compare options from multiple lenders and identify competitive pricing that may not be available through your existing bank.
However, the lowest interest rate is not necessarily the most suitable finance solution.
A slightly different rate may come with a more appropriate structure, repayment profile or lending policy for your circumstances.
This is why it is worth looking at the overall finance package rather than comparing rates alone.
In many commercial and asset finance transactions, the lender pays the broker a commission when the finance settles.
The exact arrangement can vary depending on the type of finance, lender and transaction.
If there is a broker fee payable by the borrower, this should be explained before you proceed.
It is reasonable to ask a broker:
At Motorlend, we believe the cost and structure of the finance should be explained clearly before you commit.
Using a commercial finance broker is not always necessary.
Going directly to your bank may make sense when your finance requirement is straightforward, your relationship with the bank is strong and the bank is offering a structure and pricing that you are comfortable with.
For example, you may already have an established commercial facility and simply be increasing an existing limit or extending finance under an arrangement that works well for your business.
A direct application can also be appropriate for a simple transaction where you already understand the lender's requirements and have compared the available options.
The important thing is to understand what you are getting before you commit.
A broker can be particularly useful when there is uncertainty around lender suitability.
That could include situations where:
In these situations, lender selection and finance structure can have a significant impact on the outcome.
Commercial finance brokers and mortgage brokers can both help borrowers access finance, but they generally operate in different areas.
A mortgage broker typically focuses on residential home lending, while a commercial finance broker deals with business-purpose finance such as:
The assessment process can also be quite different because commercial lending often involves understanding the business itself, rather than simply assessing a consumer's personal income and expenses.
For a business owner, this means the broker needs to understand how the asset or facility fits into the operation of the business.
Before proceeding with any broker, it is worth asking a few straightforward questions.
Which lenders could suit my situation?
You should understand whether the broker has access to a range of lenders and how they determine which one to approach.
How will you structure the finance?
Ask whether the broker is simply finding a loan or whether they are considering the term, deposit, balloon and repayment structure as part of the process.
How are you paid?
Ask about commissions, fees and any other costs before proceeding.
What information do you need from me?
A good broker should be able to explain what documents are required and why.
What happens if my application is declined?
It is worth understanding what the process looks like if the first lender cannot approve the application.
A commercial finance broker assesses your circumstances, considers your finance requirements and helps identify suitable lenders and finance structures. They can also manage the application and communication with the lender through to settlement.
The cost depends on the type of finance and the broker's remuneration arrangement. In many asset and commercial finance transactions, the lender pays the broker a commission. Any borrower-paid fees should be disclosed before you proceed.
It depends on your circumstances. A bank may be suitable for a straightforward application where you are happy with its pricing and structure. A broker can provide broader lender access and help when your circumstances or finance requirements are more complex.
Commercial finance brokers may operate under an Australian Credit Licence or as a credit representative of a licence holder, depending on the type of finance and business structure. You can ask a broker about their licensing arrangements before proceeding.
A mortgage broker generally arranges residential home loans, while a commercial finance broker focuses on business-purpose finance such as vehicles, equipment, machinery, business loans and commercial property.
A broker may be able to access competitive rates from a broader range of lenders, but there is no guarantee that the rate will be lower than your bank's offer. The right comparison should consider the rate, fees, loan structure, lender policy and overall suitability of the finance.
Your bank may be the right lender for your next business finance application. A commercial finance broker may also be able to provide options that you would not see by going directly to one lender.
The difference comes down to choice, structure and understanding where your application fits.
For a straightforward transaction, going direct can be perfectly reasonable. When your finance needs are more complex, your business circumstances are less conventional or you simply want to understand what other options are available, speaking with a commercial finance broker can be worthwhile.
At Motorlend, we look at the bigger picture before recommending a finance option. We consider your business, the asset you are buying, your cash flow, your goals and the lending options available to determine what may suit your circumstances.
If you have a vehicle, equipment or business finance requirement, you can speak with the Motorlend team about your situation before deciding which direction to take. Get in touch.
