The Intermediary – September 2026 - Flipbook - Page 62
SPECIALIST FINANCE
Opinion
Are brokers
looking beyond
the product?
I
f two lenders are offering
the same rate, the same
leverage and quoting similar
turnaround times, how do
you decide which one to use?
That’s the point where the role
of the broker becomes so important.
Once products become difficult to
separate, the job is to differentiate
between the lenders providing them.
The best brokers in our market
have an understanding of each
lender’s ability to deliver on its
promises. But how?
It’s easy to focus on what’s visible.
Rates, leverage and service standards
are all there in front of you, and
they’re naturally the first things
clients ask about. What they don’t
really tell you is how that lender
is likely to handle a case if it stops
being straightforward.
One of the biggest influences on
that is funding. Every specialist lender
needs capital to lend, but they don’t
all access that capital in the same way,
and they don’t all operate under the
same funding model. That sits at the
heart of how the best brokers assess
a lender. How a lender is funded can
be pivotal in what happens postapplication.
Lender funding
There are several funding mechanisms
across the specialist lending market,
and they all work slightly differently.
Some lenders use warehouse facilities,
where they have a segregated facility
to draw from before repaying it over
time. In these scenarios, the loan sits
on the lender’s balance sheet.
Others use forward-flow
arrangements, where loans are sold
to the funder on completion. The loan
then sits with the funder, while the
lender is paid a fee for originating and
servicing it.
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The Intermediary | September 2026
Then, there are those that lend
using private capital or directly from
their own balance sheet. And banks,
of course, may also have access to
customer deposits.
I don’t think there’s a right or wrong
approach, because every funding
structure has been built for a different
purpose. What it does mean, though,
is that two lenders with products that
look remarkably similar can have very
different levels of flexibility.
That’s why comparing products on
their own doesn’t tell you enough.
Capital origination
The second question is where the
capital actually originates.
A lender could be funded by a bank,
a building society, a private investor
or a credit fund, and each of those
providers will have its own objectives
and appetite for risk.
Understanding the strength of
the relationship between the lender
and its funding partner helps build a
clearer picture of how dependable that
funding is likely to be for your client.
You don’t need to understand
every detail of institutional funding
to appreciate why that’s relevant.
Different providers naturally have
different expectations, and those
expectations influence the sort
of lending they’re comfortable
supporting.
Who decides?
The final question, and probably the
one I’d pay the closest aention to, is
where the lending decision ultimately
sits. Is the lender trusted to make that
decision internally, or does approval
have to come from somewhere else
before a loan can be agreed?
We’ve all worked on transactions
where the case becomes more complex
than originally expected. Those are
JOSH KNIGHT
is managing director, sales
and marketing at Glenhawk
usually the cases where experience,
judgement and common sense become
just as important as policy.
If every lending decision must go
through another layer of approval, it’s
naturally going to be a very different
process from one where the lender is
trusted to make those decisions itself.
Understanding where those
decisions are made – and when they
are made – is arguably the most
important part of this process. The
product may still look the same,
but the process of geing the funds
approved and ready for completion
may be very different.
Beyond the product
Product plays an important role
in our market. Of course it does.
But products only tell part of the
story. Understanding how a lender
accesses its capital provides a much
clearer picture of how it is likely to
perform when a transaction requires
commercial judgement.
How is the lender funded? Where
does its capital come from? Who
ultimately has the authority to make
the lending decision? Those questions
won’t appear on a sourcing system,
but the answers can tell you a great
deal about how that lender is likely to
approach a transaction.
Rates will change, and products will
continue to evolve. The way a lending
business is funded, where its capital
comes from and who has the authority
to make lending decisions tend to
change much more slowly.
Brokers who understand those
three areas put themselves in a
much stronger position to choose the
right lending partner, not just the
right product. ●
