There is no doubt we have seen some major changes across the property finance sector, none more so than in the world of commercial finance. Historically dominated by high street lenders, recent changes have seen the introduction of challenger banks and specialist lenders. Is it fair to suggest that high street lenders are in retreat when it comes to commercial finance?
Defining commercial property
Before we dig deeper into the changing face of commercial finance, it is worth defining a commercial property. There are two main types:-
Semi-commercial properties
As the name suggests, there is an element of commercial and an element of residential space within these properties. The most common example would be a retail shop on the ground floor with a residential flat above.
Commercial properties
Use of the term commercial property can vary significantly from a commercial landlord looking to expand their portfolio to a business looking to purchase/refinance their own trading premises. The demise of the high street has certainly had an impact on commercial finance which we will discuss in more detail.
Commercial finance post-2008 US mortgage crisis
It may seem strange that we are still looking back towards the 2008 US mortgage crisis when discussing the changing face of the UK commercial finance sector. However, the fact that many high street lenders were left with significant bad debts and unproductive loan books prompted at least a partial withdrawal from the sector. The ongoing demise of the high street has not helped the situation either.
While it would be wrong to suggest that high street banks have withdrawn completely from the commercial finance sector, they now tend to focus on more vanilla opportunities with significant security. This partial withdrawal created a vacuum which the new breed of challenger banks and specialist lenders were more than happy to fill. There is also a very different approach to risk when it comes to high street banks and challenger banks/specialist lenders.
Flexible and nimble
Many people see high street lenders as the dinosaurs of the UK commercial property sector. Set in their ways, often unwilling to move with the times and historically working on relatively healthy margins. In many ways this is unfair because high street banks have adapted to the new environment but they have chosen to withdraw from the “more competitive/riskier” end of the sector.
It is also safe to say that the new breed of challenger banks/specialist lenders is more flexible, nimble on their feet and able to accommodate often complex scenarios. It is this ability to offer bespoke arrangements which has enabled finance brokers such as Finance 4 Business to create commercial finance arrangements moulded around an individual client’s requirements.
The value of finance brokers
The independent status of Finance 4 Business has allowed the company to move and adapt to changing market trends. An ability to talk to all lenders in the marketplace has created an environment which allows the best possible deals to be negotiated on a case-by-case basis. There may be times when high street lenders offer the best terms, especially with vanilla transactions, although more recently there has been more focus on challenger banks/specialist lenders.
When you couple these negotiating skills with a deep-seated knowledge of the industry, it is no surprise to see Finance 4 Business winning awards and reporting significant growth. Nurturing long-term relationships across the sector allows specific lenders to be matched with specific client requirements. Knowing who to go to, information required and the leeway for negotiating ensures that Finance 4 Business customers are able to secure the best possible terms available to them.