Barnes runs his brokerage, Barnes Finance Solutions, as a one-stop shop, dealing with everyone from sole operators to sub-ASX businesses
Working out of his brokerage on the outskirts of Brisbane, Glen Barnes offers expertise spanning the full spectrum of commercial lending, from commercial real estate to asset and equipment finance and development funding. Indeed, for Barnes, diversification comes naturally and appears the obvious way to go. “These people that do commercial development live in houses and drive cars, so I offer that service to my clients; sort of a one-stop shop,” he says.
For most deals, Barnes does not charge a fee. For deals above $3m he negotiates a fee “that’s fair for the customer but also fair for the bank, and meets their return on investment benchmarks; and the outcome has got to be satisfactory for all parties”. Barnes’ cost base is low as he only took on his first member of staff this month, a PA who he hopes can eventually become a support staff member.
Changing bank appetites
While Barnes is not as dependent on development funding as other brokers in the Top 10, he has definitely noticed a change in bank appetites. “Credit has definitely become tougher,” he explains. However, “on the flipside, if a deal is bankable and ticks nine of the 10 boxes, it can be almost simplistic in a way”, he says. Barnes is finding that some loans are becoming easier to submit. “I’m seeing a lot of banks trying to strip out reporting and financial covenants for deals that meet a certain benchmark or LVR, so I’m seeing both sides I suppose.”
Looking elsewhere for finance
Barnes is “absolutely” considering other lenders. That’s not simply a response to recent changes, however; he has always taken this approach. “I just don’t think the big four have all the solutions. A lot of my clients have multiple relationships, and I encourage that.” For many clients it makes sense to have multiple lenders, including regional banks, non-banks and private funders, Barnes explains.
“When customers have diverse and complex structures it does allow you to split off loans and
assets to different mortgagees.”
Outlook for 2017/18
Conditions for commercial borrowers could get even tougher in 2017/18, Barnes believes. “I think we’re already seeing that with regard to the winding back of development funding and investment and commercial funding,” he says, pointing towards banks’ increased emphasis on borrowers’ LVRs and ICRs (interest coverage ratio for a company). “We are seeing a tightening of that market,” Barnes says.
“I’m seeing a lot of banks trying to strip out reporting and financial covenants for deals that meet a certain benchmark or LVR”