Introducer Today

Adverse

David Burrows, Managing Director, Secured Loan Services

Bolster income via additional revenue streams

There is no escaping the fact that over the coming months business volumes in the sub-prime market are going to fall significantly. In the last two months many businesses have already seen figures dwindle and the outlook for the immediate future is unfortunately bleak.

However for those who want to ride out the storm and put themselves in a better position to deal with future downturns, creating as broad a base to their business is going to be essential.

The issues surrounding Northern Rock are well documented, but in light of the problems the lender has suffered how many firms have reappraised their own operations? How many firms have asked whether they are overly reliant on a single means of trading?

Some brokers have perhaps mentioned it to colleagues in passing, while others may have failed to address the issue at all, but unless they examine where their revenue comes from and how resilient it is to changing market conditions, then it becomes almost impossible for them to proof their business against future upheaval.

If there is one thing that is for certain, it is that any commercial entity needs to be able to navigate its way through difficult trading environments if it wants to be in business for the long-term.

This is the issue facing brokers in the sub-prime market at the moment and for those who have relied solely on sub-prime business, they will need to find a way of winning new clients or diversifying their business if they want to continue on an even keel.

Winning new clients in the sub-prime sector is going to be very difficult. Simply put, a large number of borrowers have in effect been excluded from the market as lenders have tightened their criteria. Competition for those that remain will be stiff indeed.
However brokers should perhaps be looking for clients outside their traditional strong hold of sub-prime. It is easy to talk of diversification and certainly more difficult to effect in practice, but until brokers explore the opportunities, they will never know what they may yield.

Are there local partnerships they can create to help get into prime or specialist markets? Are they talking with accountants, lawyers and estate agents to see what might be possible? Can they work with local developers to help those buying new properties get the finance they need?

Over and above the first charge mortgage market, brokers should also be exploring what is available in the second charge market. Lenders and packagers in this area offer an excellent service to brokers and the product itself is in growing demand. Commissions are also healthy, around £1,250 per case on average, and should help sub-prime brokers bolster their businesses.  

Those who have eschewed the market in the past should take the opportunity to investigate it now in a bid broaden their product offering to clients. Not only will this help cope with the difficult times ahead, but it will also help put the business on a firmer footing for the future.