Photograph of Adam Tyler, CEO at the National Association of Commercial Finance BrokersHistorically, UK
finance brokers have evolved from a market where new business
proposals had to be placed after being initially rejected by prime
lenders. The market subsequently grew and brokers became the first
port of call for many customers.

Broking firms are owned,
staffed and led by experienced ex-finance company professionals,
who were victims of the industry’s drive to reduce the sales teams
of many of the funders.

Research has shown this
reduction in a sales force is more or less in direct proportion to
the recruitment by those same funders of locally based brokers. As
a result, the broker model grew and flourished during that period,
despite the fact that a number of funders have withdrawn from the
broker market in recent years making 2010 a very difficult year for
NACFB members.

In the UK, the bank branch
networks are nowhere near as important a sales channel as in Europe
and subsequently this lack of interest combined with availability
of funding through non-sales force lessors has allowed the UK
broker industry to survive.

This in turn has provided the
increased opportunity for these active lessors to seek good
business from their broker networks. If you have access to a source
of funding, not only is it a good time to be a broker, but also the
time to build a really good lending book.

There are around 800 leasing
brokers in the UK with about 500 introducing the majority of the
business in the country. This represents a good split between the
small and middle- ticket market with some real specialists dealing
with the top end.

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On top of this again there
are a number who specialise in cars and small vehicles. These
brokers have their own market and their own funders.

But our studies show that
around 58% of leasing brokers will also mix their main business
with cars.

Many observers point to the
fact that locally based finance brokers are largely unique to the
UK and some European countries limit broker activity by the very
structure of the leasing industry.

The use of a high number of
small, local lessors spread across a country provides an
easy-to-source route to finance for small- and medium-sized
enterprises, without the need to use a broker as a local
contact.

However the middle ticket
market in some European countries does rely on intermediation by
brokers. During some parts of the recession in the UK the fall in
direct sales was greater than that of the UK broker
market.

FLA’s industry statistics for
the third quarter of 2010 state that, although business finance as
a whole was down 8% compared with the third quarter of 2009, broker
introduced finance grew by 8% in the same quarter compared to the
previous year.

Some of the traditional
markets across the continent where regional lessors looked after
the local SMEs are under threat due to new regulation. But how
different is this model really from the UK broker market where some
of the larger brokerages run their own book and broke larger or
more complex deals with the main funders in the market?

Do we now have a basis to look at the integration of the
UK broker market model?