Looking for new ways to serve your accounting and advice clients? Adding a lending service to your offering could be the answer.
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There’s no denying that lending and finance broking means big business in Australia. In the month of June alone, Australians borrowed an estimated $20.6 billion in housing finance, while borrowing $38.1 billion in commercial finance and spending $517 million on lease finance.1
But what does this mean for accountants? First and foremost, it highlights an opportunity for you to support your current clients, and attract new ones, by adding a lending service to your offering. As well as positioning you as a trusted adviser who takes care of all your clients’ needs, it can also help your clients become more confident in their own financial decision-making.
Why branch into lending?
Depending on your firm and the clients you serve, there are all sorts of reasons to offer lending and finance solutions. For example, during a client meeting you might identify that the client is looking to:
- Borrow to invest for their SMSF
- Buy or upgrade a home or car
- Use their home equity for a gearing strategy
- Buy commercial property
- Borrow to expand their business
- Explore their asset finance options, including chattel mortgages and novated leasing.
Since you already have a deep understanding of the client’s financial circumstances and needs, you’re in an ideal position to support them with their financing options. This includes showing how they can best structure their loan, and explaining how it will affect their overall financial and tax position.
What’s more, coming to you means your clients don’t have to spend time and energy looking for another lending provider. This also gives you an edge over your competitors.
How should you structure your lending service?
Once you’ve made the decision to invest in your firm’s lending capabilities, it’s worth taking a step back to consider how your lending arm will fit within your overall business structure. It’s important to see your venture into lending as a long-term commitment, which means balancing the upfront and ongoing costs with the projected revenue it will bring.
The first major decision you’ll need to make is whether to lend directly, or to refer to a lending partner. This decision will probably come down to the size and capacity of your firm and the potential demand for lending solutions across your client base.
Option 1. Refer
If you’re moving into the lending space for the first time, you might not be confident about the cost–benefit ratio of adding a lender to your in-house team. An alternative option is to integrate lending into your firm by partnering with an external credit provider who you trust. As well as helping to keep costs down, it also means you can tap into the qualifications, experience and knowledge of your lending partner.
With this option, you have an expert at the ready who you can call on as and when you need them. At the same time, your clients get to enjoy a seamless service, with all of their financial needs taken care of. And because you have all their financial information at hand already, you can provide them directly to the broker to speed up that process.
But if you do decide to go down the outsourcing road, make sure you stay in the picture for your clients. That means being on hand to answer any questions they may have about their cash flow, and getting your lending partner to keep you in the loop about each client’s progress with their loan.
Option 2. In-house lending
If you want to offer lending as an in-house service, you might choose to become a licensed broker yourself or hire one to join your team. Either of these options may be better suited to larger firms with enough of a client base to warrant having an in-house broker. As your lending arm grows, you may even bring in additional experts in specialised areas like commercial property, SMSF loans or asset finance.
An advantage of in-house lending is that it helps you build your firm, while allowing you to keep your accounting, advice and lending services under the same brand. And as your lender starts bringing in new business, you’ll also be able to identify additional cross-referral opportunities within your firm. Not only can your accounting and advice clients become lending clients as well, but your new lending clients can discover other ways your firm can cater to their needs.
So whatever size or shape your firm is, it’s worth considering how referring to a lender or adding an in-house lending service could strengthen your business for the future.
1 Australian Bureau of Statistics, August 2016. Lending Finance, Australia, Jun 2016.