How to start a full-service commercial financial business

When it comes to starting a business, becoming a commercial financial broker is an option not many people put at the top of their list. Not only can commercial lending be a lucrative industry, but brokers add value by helping businesses source the right kind of loan with the right lenders. To start a full-service commercial financial business, you may think that it requires decades of experience in the banking and lending industries. However, the business skills required to assess a prospective borrower’s risk can be learned, and a larger portion of the business is social – about facilitating relationships – than you might at first think.

With the learner-centered component of the alternative lending industry in mind, let’s look at the various elements you need to know to start a commercial lending business and identify an approach to learning the knowledge, skills and abilities required to launch your own business as a commercial loan broker.

HOW TO ASSESS A COMMERCIAL LENDING TRAINING PROGRAM

The best loan brokers are the ones who can build relationships with both borrowers and lenders. However, that requires more skills than you may realize. Fortunately, a high-quality commercial capital training program can teach you everything you need to know, including-

DIFFERENT LOAN TYPES

First and foremost, you need to be knowledgeable as a broker. While relationship-building is integral to your success, it doesn’t make much of a difference if you don’t understand the right loan type for your clients. The best commercial lending training should go into detail about all business loans, such as:

• Hard Money Loan – when clients can’t get a loan through traditional lenders (i.e., banks and credit unions), hard money describes the process of borrowing from someone else directly. Also known as “bridge financing,” hard money loans are designed to provide short-term financing while a client is waiting for another building to sell or for long term real estate financing to move through the approval process.


• Equipment Loans – rather than borrowing cash to cover various expenses, this loan is designed specifically for expensive equipment and hardware. The item itself functions as collateral.
  
  Real Estate Loan – as the name implies, this loan is made for those who want to purchase commercial property. It’s also known as “long term CRE financing.”


• Factoring – for those companies that have significant unpaid accounts receivable, factoring is a potential source of cash. A third party pays a majority of the amount owed to your business, then bills the customers directly. This process frees business owners to get fast money they are already owed without a credit check.

These aren’t all the types of commercial loans. A comprehensive training program should cover small business loans, construction loans and more.

FINANCIAL ASSESSMENT

Knowing the types of loans, the approval criteria and the available lenders in the market is one thing – knowing what will work best for each client’s situation is another. Each business that works with a loan broker has unique needs that must be addressed, so you have to understand how to evaluate statements of cash flow, balance sheets and debt to equity ratios. In some cases, SBA loans may be the best choice. For other clients, hard money loans help a client move quickly in a competitive market.

MARKETING AND NETWORKING

Once you have the lingo, industry standards, and financial assessment tools figured out, the next step is to get clients. Unfortunately, your office won’t suddenly get a flood of people as soon as you open for business. You need to understand what it takes to market your brokerage and leverage your network to connect with both borrowers and lenders.

STAFFING AND GROWING YOUR BROKERAGE

If you want to be a successful commercial loan broker, you need to know both the industry and have sufficient business acumen. It’s not enough to build relationships with clients and lenders – you have to know how to start and run a company as well.