While the COVID-19 pandemic is a crisis that none of us could have envisioned, it also presents an immense opportunity for commercial brokers to cement their relationships with SME clients says founder of Banyan Co Stuart Donaldson.
MPA spoke with the professional educator about how brokers can help SMEs navigate the COVID-19 crisis and why a client’s financials are like gold.
This is not a normal situation
Being there for SME clients is first and foremost the top priority for commercial brokers at the moment says Donaldson.
He says to remember the current economic situation is not normal, nor is it the new normal.
“It’s a crisis that none of us have ever seen before,” he adds.
“In a strange sort of way, it’s also an immense opportunity for brokers who are there for their clients to basically cement that relationship for life.
“They are the lynchpin or the link between accessing capital from banks and not accessing it.”
For him, the best thing brokers can do is meet with their clients and develop a strong understanding of their cashflow requirements. If clients are forecasting their cashflow on a 13-week rolling basis, the broker should be able to look ahead to see when they will need funding or finance.
“There is a role for brokers to play there in that they can put limits in place, they can provide emergency funding in need and they can address the capital needs of the business,” he says.
“Sadly, if planning action and forward thinking doesn’t take place then some businesses will ultimately fail because they just will never emerge from the crisis.”
Why financials are like gold
For brokers who are considering moving into the financial space, Donaldson says out of all the things to get your head around, the client’s story is the most important.
“You need to understand your SME client’s story – past, present and future,” he says.
“The SME is your client. They are your opportunity and the best way to lock that in and become part of the solution and part of the inner circle is to be able to meet with them, to be able to look through their financials, and ask them the right questions about the business.
“In my opinion, the ticket to an SME relationship in commercial lending always starts with the financials.
“The financial statements are a history of the business from day one as well as a snapshot over the last 12 months.”
He says an examination of these statements can allow a broker to arm themselves with a whole heap of questions to ask the client – the answers of which can reveal where the business is heading.
How to pierce the SME psyche
Donaldson established Banyan Co about five years ago after working alongside SMEs and businesses that engage with SMEs for several years.
“I have a long history in banking and finance dealing with SMEs,” he says.
“In my experience I witnessed a lot of what I call spectacular businesses and business owners with big brains, great ideas and fabulous sales people.
“But when it came to understanding the financials, this is what was lacking. They just all too often left that to the accountant and regrettably I saw a lot of these fabulous businesses go under.”
As part of the Commercial Best Practice series hosted by Tradeplus24 BDM Yasmine Shah on LinkedIn, Donaldson will discuss the ways brokers can “pierce the psyche” of their SME clients.
“SMEs are typically entrepreneurs who have a passion for sales but sometimes are blinded towards the other important things in their business. I love to educate brokers on how to pierce that psyche, how to position yourself as part of the inner circle of the business and how to straddle the relationship between lenders and SMEs,” he says.
“My goal will be to focus very much on helping to educate commercial brokers on building that strong relationship with customers and with SME customers in particular.”
He says commercial finance is a great space to work in at the moment but that brokers should be careful about which industries they become involved with.
“It would be very easy to go down a lot of blind alleys at the moment trying to fund businesses that perhaps are in a restricted industry in terms of lender policy.
“Get to know your client well. I would use this COVID-19 time to your advantage; to lock in some relationships and invest a lot of time and effort with them.”