Business Finance FAQ
These are the most frequently asked questions about our Business Finance service
1) Does IBC deal only with banks?
No. Whilst we specialise in dealing with banks, there are over 270 challenger banks, independent and specialist lenders that we can use in cases when it is more appropriate to clients’ needs, or when the banks cannot, or will not lend. This dual approach enhances our success rate, which since April 2000 has averaged over 90%. It means borrowers have more options available to them and are more likely to get the finance they need on terms that suit them best.
2) Why doesn’t IBC believe in accepting arrangement fees from lenders?
It is normal practice for lenders to pay to an intermediary (such as a finance broker) a referral fee for introducing a borrower. However, we believe this creates a conflict of interests and puts borrowers at a disadvantage, because:
- There is a risk that a broker will ‘follow the fee’; that is, they will gravitate towards lenders (or finance products) that earn them the biggest fees rather than towards those that offer better value or terms to the borrower.
- Borrowers have little control over the amount of the fee paid to the broker.
- A referral fee paid by a lender to a broker still comes out of the borrower’s pocket because the lender will simply add it on to the lending fee it charges for agreeing the facility. In other words, if a lender has to pay a bigger referral fee to a broker, the lender will recoup it by charging a bigger lending fee to the borrower.
3) So how is IBC paid?
We believe that any borrower who enlists the help of an intermediary to help them raise finance has a right to expect that the intermediary will be independent and that they will act solely in the borrower’s best interests.
Therefore, rather than accepting referral fees from lenders, our approach is to agree a fee with our client instead. Then, to reflect the fact that the client is paying us, we ask the lender to deduct from its lending fee the amount it would otherwise have paid to us, had we been operating in the same way as a broker – i.e. the client pays a smaller fee to the lender.
This is a much more transparent and reassuring way of working that does not disadvantage clients and instead puts their interests at the forefront. An added benefit is that we can then usually make even more savings for the client because:
- Banks will often reduce their lending fees even further to reflect the work we do in preparing our credit paper. These reductions can be high and in some cases, banks have not charged the client a fee at all.
- Lenders know that they are in competition with each other, so they have an incentive to be as competitive as possible. This leads to improved borrowing terms, including longer-term savings in interest rates and other cost savings.
In summary, apart from being more transparent, our approach often results in even bigger cost savings, as well other benefits such as reduced security, less onerous conditions, etc.
4) Surely, IBC are an expensive luxury when it comes to raising finance.
Absolutely not! As well as the fee savings, borrowers also benefit in other ways:
- Their chances of success are higher.
- We can help negotiate the security and other important lending terms, not just the price.
- In addition to lending fees, we can also look at other costs, so our clients will benefit from longer-term savings in interest charges, account transaction charges and in other fees and costs.
- Our clients also save a huge amount of time and can therefore concentrate on other things while we are dealing with lenders on their behalf.
5) Does IBC only deal with difficult cases?
No. Borrowers will use us because it is important to them that they get the right outcome and they see our specialist skills as a way of achieving it. To some, the right outcome may be getting a ‘yes’; others may require specific borrowing terms. They also use us because they like our independence and value our ‘inside knowledge’ of banking and lending. They also know that we will save them a lot of time, worry and aggravation. In reality, we can add tangible value in nearly every case.
6) I have never had trouble borrowing money before, so how could IBC help me?
Raising finance is not just about getting a lender to say ‘yes’. The terms are equally important, especially when you consider that facilities can be in place for many years. Therefore, it pays to ensure that borrowings are as flexible and cost-effective as possible, right at the outset.
Whilst most businesses will routinely obtain several quotes for say insurance, or for raw materials, many still do not adopt the same approach to finance – one of their most important resources! This may be because they don’t have the time or expertise to do it, but whatever the reason, it usually means that they miss out on better opportunities elsewhere, unknowingly concede too much security, sign up to unnecessary terms & conditions, or pay too much in interest and fees. For more on this read our e-book: How and why lending decisions go wrong and what to do about it.
We have the expertise and resources to deal with several lenders at the same time, and help clients make an informed choice. We use a robust and comprehensive competitive tendering process to make transparent, like for like comparisons between lenders.
7) Do banks feel threatened by your approach?
No. Because of our commercial banking backgrounds, they appreciate our involvement and tend to have more confidence in the cases we put forward. We also save them time and money by doing some of their work for them. Although they have to compete to win new customers, we treat them fairly and give them feedback when they are unsuccessful. They also know that we are not merely wasting their time by using them as a way of securing concessions from an existing lender.
8) Do borrowers have any say on which lenders IBC approach for finance?
Yes of course. We agree this at the outset. Clients can specify whichever bank or other lender they would like us to approach (or avoid) – they can even specify the names of individual Managers if they wish.
9) When IBC is involved, will I lose control over the process?
No. When arranging finance, we are careful to agree how the job is to be done, what the timescales are, which banks we will approach, and what the outcome will be: we keep you informed every step of the way. Reassured by this, most clients are happy to leave it with us.