NACFB brokers are a varied bunch who often look to specialise in more than one sector. Some finance sectors go regularly hand-in-hand, such as bridging and commercial mortgages or buy-to-let. Some don’t, like vehicle finance and pension-led funding. And it’s our aim to give the widest range of brokers the widest range of possible funding opportunities, so that the right advice can be given at the right time, whether or not the broker giving the advice can pursue the lead.
The risk – and this is a good problem to have – is that lenders are innovating so fast that we can barely keep up with what’s available.
Our association sees three new lenders for every one we end up offering patron status. One of the reasons we might turn down a new lender is that we don’t see they are offering anything materially new to the market, anything that sets them apart from what’s already available.
The fact that we’re still able to bring on one new patron every week so far in 2016 shows that lenders are coming up with new products all the time. So I fear it may well be the case that small businesses are missing out on a full understanding of all the products that are out there. Part of the reason the NACFB has increased the numbers of publications we issue is to keep up with the new products being made available.
The rest is down to the creativity of the broker. Critically, the new regulatory environment might be acting as a slight disincentive, pulling the handbrake on creative thinking. This is because every decision ought to be clearly documented and the thinking process behind it set out so that the Financial Conduct Authority can hypothetically see that the decision to use funder X or funder Y wasn’t simply down to who invited the broker to a day at the races, for example.
The more imaginative uses of “splice and dice” financing options will inevitably be harder to document in terms that the lay reader will fully understand. In theory a smart piece of documentation will win brownie points for the broker. But in practice, the FCA isn’t interested in handing out brownie points, so it nudges the broker towards keeping things simple.
That’s not always in the best interests of the client, though it’s easy to make a case that suggests it is.