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That was the focus of this week’s Finance Specialist, as hosts Liam Garman and Trent Carter examined the habits and mindset that underpin long-term success in small- to medium-sized enterprise (SME) and commercial finance broking.
Below is a closer look at what separates sustainable, high-performing SME brokers from those chasing short-term volume.
Moving beyond transactional broking
While residential and asset finance may follow a more well-trodden playbook, SME and commercial lending often requires a much more nuanced approach.
Carter, director of Provident Lending and partner at Accendo Financial, shared his own experience working within the commercial and SME lending sector.
Carter said that much of what differentiates brokers in the space isn’t a particular practice, but a mindset centred on asking deeper questions and avoiding assumptions.
Being successful is “not pretending to know everything and having an inquisitive mindset,” Carter said.
“That’s the fantastic thing about this space, is every single business is nuanced and different and you can’t possibly assume to understand every single business and how they operate,” he said.
“You can get two different types of businesses in the same industry, two engineering firms, both turning over $5 million. So they’re exactly the same at this stage, but one’s a trust, one operates as a company, one has five clients, one has 50 clients, one contracts its staff, one employs its staff, one’s got suppliers from overseas, one does local supplier support.
“All of a sudden, they’ve just become vastly different. If you’re inquisitive and you can spend time talking about it, you’re going to scratch the surface, you’re going to uncover the problems they’re trying to solve with their funding and you’re going to be able to partner with them really well. And I think that’s what successful brokers do.”
Why cash flow matters more than credit policy
Carter also emphasised cash flow literacy as a core skill for SME brokers. While understanding credit policy is always important, Carter described it as a rulebook rather than the primary source of insight.
While credit policy can be a complex world, at its core, the rules are fixed, Carter said.
“I encourage brokers to really understand their client’s business through the lens of cash flow,” Carter said.
“I think one of the most critical skills a broker can have is being able to understand how money comes into your business, where you use it, how long it takes you to get hold of cash, where it gets locked up and where it gets freed up.
“Then understanding where the gaps are in that cash and then how efficient they are at using their cash tells a massive story about SMEs.”
Carter emphasised the importance of understanding the key cash flow ratios in a business.
“It will put a different lens over the conversation which then allows you to ask different questions of your clients, which gives you a different set of answers, which opens up a whole new world of lending,” Carter said.
Choose your niche
Another habit that both Garman and Carter emphasised was specialisation. Rather than attempting to be all things to all clients, the duo encouraged brokers to define a clear niche, whether industry-based, geographic, or demographic.
Carter said: “What you’ve got to start off doing is saying, what are the problems that these business owners have in the niche that you’ve selected that keep them up at night?
“If you can’t articulate the problems that those business owners have, you’re not ready to serve that niche.”
However, Carter cautioned that if brokers choose a niche purely because it appears lucrative, they could well run into problems.
“If the question is why do you want to be all things to agribusiness and your answer is because I think it’s really lucrative, I can make a lot of money out of it, it’s not good enough,” Carter said.
“You’ve got to genuinely care about that niche and want to understand how those businesses operate. You’ve got to be deeply passionate about why you’re serving them. Because if you’re gonna build deep relationships, you are gonna be a servant to them in that industry. You’re gonna build that brand up that you are someone that can know and trust and understand and have these conversations with.”
Delivery first
Garman and Carter also cautioned against aggressive marketing before operational readiness. Generating leads without the systems, processes, and expertise to deliver consistently can damage reputation and limit long-term growth.
Garman said: “Inherently there is a risk that if you’re marketing first and you fail in the delivery, that to your clients and your customers, for a short term win, for a short term pipeline of leads, you could blow up your career.”
Garman pointed to one particular case he experienced, involving a broker who overstretched themselves too early.
He explained: “There was a niche that they highlighted very well. Amazing marketing campaign, got thousands and thousands of warmish leads online.
“Single digit conversion rate, less than a single digit actually. They were having 30–40 meetings a week and didn’t even convert one person because they didn’t have the processes to follow through.”
“You’ve got to walk before you can run,” Carter added.
“It’s an old saying, but it rings true in almost every skill you’re trying to build.
“Sometimes we get so starry-eyed by the settlement outcomes and the potential outcome of all these leads that we blow ourselves up in the interim.
“Speed matters, but honesty matters more.”
Carter said that the key is being honest about your capacity and using that capacity to produce quality work rather than chasing volume.
“If you’re a broker and you pride yourself on the capacity to be able to service your clients and provide good customer relationships, less is more. Look for higher profit relationships, not more transactions,” he said.
[Related: Broker launches program targeting early-career growth]