Quick answer
Mortgage and finance brokers usually borrow to buy another broker's trail book, cover the cash dip while a new business builds trail, hire loan writers and support staff, and fund marketing or an office. Banks lend to established brokerages with property security. Where trail income is the main asset, specialist lenders can advance against recurring commissions, and unsecured loans or lines of credit cover smaller needs. Lenders focus on trail run-off, clawback exposure and aggregator statements.
Key points
- Trail commission is a recurring, verifiable income stream, which makes an established broker's book one of the few intangible assets lenders will lend against
- Upfront commissions can be clawed back if a client refinances or repays early, typically within the first two years, so lenders discount very recent upfront income
- Trail books are usually priced as a multiple of annualised trail, and the multiple depends heavily on run-off: how quickly loans refinance away or are paid off
- Brokers must meet the best interests duty set out in ASIC's RG 273, and lenders funding a book purchase will check the buyer's licensing and authorisation
Brokers spend their days explaining serviceability, security and lender appetite to clients. Turning that lens on your own brokerage can be surprisingly awkward. Your income arrives as commissions paid through an aggregator, part of it can be clawed back, and your most valuable asset is a list of loans you don’t own. Lenders who understand broking can work with all of that. Lenders who don’t tend to say no.
This page covers mortgage brokers, commercial and asset finance brokers, and brokerages with several loan writers.
How do lenders read commission income?
Broker income has three layers, and lenders treat each differently.
| Income type | How it arrives | How lenders view it |
|---|---|---|
| Upfront commission | Paid after settlement, usually monthly via the aggregator | Real but variable; recent amounts discounted for clawback risk |
| Trail commission | Paid monthly while the loan stays on the lender’s books | Valued for its predictability; assessed against run-off history |
| Fees and other income | Client fees, referral income, insurance or asset finance commissions | Considered case by case |
Clawback is the wrinkle. If a client refinances away or pays out a loan within the lender’s clawback period, part or all of the upfront commission comes back out of your account, usually on a sliding scale over roughly two years. A brokerage that has just had a record settlement year therefore has a slice of income that isn’t fully earned yet. Experienced credit assessors adjust for it, and so should you when planning repayments.
Buying a trail book or a brokerage
Acquiring a retiring broker’s book is the most common large borrowing in this industry. Books are generally priced as a multiple of annualised trail, sometimes with an earn-out tied to how much of the book is still in place after a year or two.
Before you borrow, look hard at:
- Run-off rate. How much trail has disappeared each year through refinances, repayments and sales. High run-off shrinks the asset you’re paying for.
- Loan age and type. Seasoned owner-occupier loans tend to stay put. Recent refinances and interest-only loans rolling to principal and interest are more likely to move.
- Lender spread. A book concentrated with one lender is exposed to that lender’s commission policy.
- Client relationships. Will the vendor introduce you, and stay involved during the handover?
- Transfer mechanics. The aggregator and lenders must agree to redirect trail to you. Get that confirmed in writing.
Funding options include a business acquisition loan, a facility secured over the trail stream itself, home equity, or part-payment to the vendor over time. Our page on buying a business covers due diligence that applies equally to a brokerage.
Weighing up a book purchase and want someone to look at the numbers with you? Send us the outline; your credit file won’t be pulled just for asking.
The first-year cash dip for new brokers
Starting a brokerage is a lesson in delayed income. A typical home loan takes weeks from first meeting to settlement, then commission flows through the aggregator’s next payment cycle. Trail starts as a trickle and builds over years. Meanwhile, you’re paying CRM and aggregator fees, professional indemnity insurance, marketing and your own living costs.
Lenders generally want six to twelve months of commission deposits before offering unsecured credit. Until then, the realistic options are savings, a line of credit secured by home equity, or a family guarantee. Once commissions are flowing regularly, an unsecured business line of credit becomes a practical buffer for slow settlement months.
What else do brokerages borrow for?
- A new loan writer or credit assistant. A support person lets a principal broker see more clients; a new writer takes time to build a pipeline.
- Lead generation and brand. Websites, digital campaigns and referral partner events.
- Office premises. Moving from home to a shopfront or shared office.
- Technology. CRM, fact-find, compliance and document collection tools.
- Tax. Brokers moving from employee to business owner often underestimate the first year’s BAS and income tax.
- Buying out a partner. See buying out a business partner.
The business borrowing power calculator gives a rough sense of how far your current earnings stretch before you talk to anyone.
Risks lenders will ask you about
Refinance cycles. When lenders compete hard with cashback offers, run-off rises and books shrink. Lenders funding trail purchases model this.
Regulation and compliance. Since January 2021, mortgage brokers have had to act in clients’ best interests under the best interests duty, with ASIC’s RG 273 setting out what it looks for. A compliance problem with your licensee can interrupt income, so lenders like brokers with clean records and established authorisation.
Aggregator dependency. Your commissions flow through one aggregator. Changing aggregators can be done, but the trail transfer terms matter enormously to anyone lending against them.
Commission policy changes. Lenders periodically adjust commission structures. A book spread across many lenders is less exposed.
Housing market slowdowns. Fewer purchases mean fewer new loans, although refinance activity can partly offset that.
Documents to have ready
- Aggregator commission statements for the past 12 to 24 months
- A trail book report showing loan balances, lenders, settlement dates and run-off
- Clawback history and any current clawback liabilities
- Business financials, tax returns and business bank statements
- Credit licence or credit representative details
- For acquisitions: the sale agreement, the vendor’s trail statements and transfer confirmations
Example: a broker buying a retiring colleague’s book
A hypothetical case for illustration. An Adelaide broker with seven years in the industry agrees to buy the book of a colleague who is retiring. The book is mostly seasoned owner-occupier loans with a modest annual trail, and the price is set as a multiple of that trail, with 20% held back and paid after twelve months depending on retention.
The buyer’s bank will lend most of the upfront amount against their home. The remaining piece comes from the vendor’s held-back amount, which effectively acts as vendor finance. The vendor agrees to make personal introductions to the top 50 clients during the first three months. Within a year, the trail retained is close to the original estimate, and the deferred payment is made from the book’s own income.
Let someone else do the legwork for once
You know better than most that the right structure matters more than the headline offer. You also know what a scattergun application does to a client’s credit file.
Completing our form is a sixty-second job, and submitting it doesn’t put an enquiry on your credit file. We keep your enquiry to ourselves; it isn’t syndicated to a list of lenders who then ring you. Someone here reads it properly, then phones to discuss your brokerage, your book and your plans. Be as accurate as you’d want your own clients to be, and we can head straight for the option that fits.
Frequently asked questions
Can I borrow against my trail book?
Yes. A small number of specialist funders and some banks lend against trail commission, typically advancing a portion of the book's value and taking security over the commission stream. They'll want aggregator statements, a trail run-off history and details of the lenders and loan types in the book.
How do lenders value a trail book?
Usually as a multiple of annualised trail income, adjusted for quality. Books with seasoned loans, low arrears, a spread of lenders and slower run-off command higher multiples. Books full of recent refinances or interest-only loans nearing expiry are discounted because the trail may disappear sooner.
How does clawback affect my borrowing?
Lenders know that upfront commission on recent settlements could be recovered if clients refinance or repay early within the clawback window. They often discount upfront income from the past year or two when assessing serviceability, and give more weight to trail and longer-term earnings.
Can a new broker get a business loan?
It's harder in the first year because income arrives slowly: commissions are paid after settlement, and trail starts small. Many new brokers use personal savings, a line of credit secured by home equity, or a modest unsecured loan once six to twelve months of commission deposits are visible.
Does it matter whether I'm a credit representative or hold my own licence?
It can. Lenders funding a book purchase will check that the buyer is authorised to service the clients being acquired. Moving between aggregators or licences can also affect how trail is paid, so get the transfer terms in writing before you borrow against the book.