What is a commercial finance broker?

Consumer finance is used by individuals, who can borrow money to use for their own purposes. This could include getting a loan to buy a home, organise a wedding, buy a car, or pay a surprise bill.

Commercial finance is borrowing money to use for work or business purposes. This could be to purchase assets or equipment for work use, such as an office or factory space, car, truck or tractor. It could also include borrowing money to start a new business or to keep an existing business operating.

Some types of commercial finance may include:

• Commercial mortgages
• Unsecured personal loans for commercial use
• Commercial lines of credit
• Chattel mortgages
• Hire purchases
• Novated leases

Commercial finance is typically handled differently to consumer finance, as it involves a different type of risk for the lender. A business’ income may be less consistent and harder to accurately document than an individual’s, so it may be more complex to successfully apply for a commercial loan.

Commercial finance may also be treated differently for tax purposes. For example, the interest charged on a loan for business use may be eligible to be claimed as a tax deduction. Contact the Australian Taxation Office (ATO) and/or a tax accountant for more details on exactly what is and isn’t eligible for a tax write-off.

Additionally, commercial loans may be regulated differently than consumer loans, which may affect the borrower’s level of protection in case of disputes or other issues. For example, according to the Australian Securities and Investments Commission (ASIC):

“Lenders that provide loans to consumers must have an Australian credit licence (credit licence) from ASIC and must be a member of the Australian Financial Complaints Authority (AFCA). Lenders that only provide commercial loans are not required to have a credit licence and are not legally required to be a member of AFCA.”

Much like a consumer mortgage broker, a commercial finance broker can lend you their expertise in the world of commercial finance. This can be a big help if you’re starting a new business and aren’t familiar with the sector, which could be the difference between successfully managing your business’ books and making costly mistakes. A commercial broker could also help established businesses to save time and effort finding and applying for a loan that suits their needs.

Commercial brokers can look at the requirements of your business, and help you work out which finance solution may best suit your needs. Thanks to their relationships with commercial lenders, they may be able to negotiate on your behalf to help you get a better deal, with better commercial rates.

Additionally, the broker can help you manage your application. This can help save you time and effort and hopefully improve the application’s chance of approval.

Much like consumer mortgage brokers, commercial brokers are often paid commissions by lenders when they successfully broker deals between lenders and borrowers. This means that borrowers often don’t need to pay a fee to access the commercial broker’s services, though it’s worth checking if any other costs could apply.