A simple interest-only enquiry turned out to be a £2.7m commercial finance case.
You never know where a client meeting will lead you, even those that don’t seem to hold the most potential. So, it’s crucial you treat every client like the most important of the day – they might just turn out to be.
Just before Christmas I got a referral from a broker to help a client who had come to the end of his interest-only mortgage term, but didn’t have the funds to repay the debt. He needed an extension of the term or a remortgage.
So far, so good.
This is a fairly standard enquiry and it wasn’t complicated. I was a little unsure why the broker had asked me to help his client to be honest. The sum involved was low, in London terms, it didn’t seem like something he couldn’t have handled himself, and it was a bit of a trek out of town.
But the broker is a great partner of ours and I wanted to help.
Keeping it real
Off I went to an estate of battered old commercial warehouses and scrapyards somewhere south of Croydon to meet the guy in his 60s, who had a business restoring classic cars. It was 15 miles and a world away from the City of London and the multi-million-pound deals that usually cross our path, but every bit of business is valued.
The client has a house worth £850,000, and owed £250,000 on an interest-only basis, with the term coming to an end. Since he didn’t have the cash to repay the debt I explained his options.
As we got chatting it turned out he also owned some of the warehouses around us. In fact, he had an unencumbered portfolio of commercial assets worth £1.5m, plus an investment property portfolio worth another £3m. His assets and income were more than enough to satisfy his interest-only loan.
He also told me he wanted to buy the warehouse we were standing in.
Although his broker knew about these assets, and the clients plans for the warehouse, like many brokers in the industry he didn’t understand commercial lending or the business opportunity it provided, and so had no idea what to do about it. Yet we have managed to arrange borrowing of £2.7m for the client, raising a commercial loan against his other assets to enable him to buy the warehouse.
Don’t be stuck
The situation was a surprising one and it made two things very clear to me.
Brokers should always look for support to help a client if they can’t do it themselves or simply don’t have time to do it themselves. A lot get stuck when faced with something they don’t understand or have experience in, be it commercial finance, complex income streams, or development queries. You can’t be experts on every aspect of the market.
But don’t turn the business away, because a packager can help your client find a funding solution, and pay you a referral fee for the business. You keep your client happy and loyal to you, boost your income, plus someone else does the work and uses their skills and contacts to your benefit.
Even more importantly, don’t dismiss any case because it doesn’t seem to have potential. Nothing should be too small fry for any broker, because you really never know where a case will lead you.