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How To Master The Art Of Net Branching

February 2nd, 2021 // branchright
Net Branching

Many of us do not know or fully understand what “Net Branching” is and how it works. So if you’re considering mortgage net branch opportunities here’s the heads up.  Some mortgage companies are already involved without fully grasping how it works. This can cause frictions in operations.

So what is “Net Branching”?

Net Branching is an arrangement between two mortgage companies, one is usually bigger, licensed and well-established while the other is a newer, smaller one and often seeks a license. The smaller company becomes an affiliate of the already established one, coming to share the license of the bigger company.

The smaller company would be required to at least have its staff, an office space and a good operational base.

Benefits in this relationship are both mutual. The bigger company gets an opportunity to expand his frontiers. This is done by adding another branch. This new addition of branches does not come with an extra cost. Equipment, structures and staff of the smaller company are available to be used hence saving the costs of getting these.

For the smaller organization, it has access to clients who have knowledge of the bigger company. Growth is brought to this smaller business through the reputation of its new acquirer. Clients closer within the neighborhood would patronize this smaller organization seeing it has an accredited name.

The branch manager is as the name implies one that operates the branch. Many times such would be a staff of the smaller company. The branch manager overlooks and manages the branch for the corporation. This special arrangement has its compensations for the branch manager.

The branch manager also affects the choice of which company ultimately becomes a branch. A branch manager that has very good managerial abilities is a plus. Getting a healthy business is in the best interest of the licensee.

Requirements to start a net branch

For this partnership to work out seamlessly, certain things have to be understood by both parties. Being a business arrangement, a clear understanding of what is required should be spelled out at the commencement of the partnership. This would help both sides know their duties and what to expect from the other side.

Duties and requirements in this association include mainly:

Licensee manages branch expenses

Many financial expenses bear the name of the larger organization. Every salary is paid from the corporation. It is in-charge of the payroll, the checkbooks and the accounts. Many times, the branch manager does not have access to these.

The corporation also covers the bills and all the expenses from business operations. All the cost of running the business is sent from the vendor to the corporation directly and paid from there. If staff have to pay for registration, the corporation should also cover that.

Documents of rents or lease should also bear the name of the bigger corporation. It could show that it is renting it from the smaller company.

If the rent or lease is done before the agreement between these two companies is done, then a sublease would with agreed. That implies that the smaller company has the lease from the landlord but is leasing it again to the bigger company. This is done with agreement from the original owner.

Working with a structure that shows how money flows from one source to another allows the organization to keep track of how funds come in and how it is spent. It is necessary especially if the branches are many or are far from the mother corporation.

Licensee manages branch incomes

Money that is paid for the business done under the name of the corporation should be paid directly into the account of the corporation. If handled otherwise, it would become difficult to track the income and the profits of each branch.

Seeing it is a corporation involving different branches, states would examine the finance of the whole company and not that of a branch alone. To get net branching right, we have to constantly be reminded that the branch is part of the licensee.

Licensee pays compensations to the branch

Net profits of the branch could be paid to the branch manager. The compensation would depend on the laws of the states. While some states would want the branch payment to be made as to contractors, some others would require that they be employees of the corporation.

The main condition for this is usually that the other conditions are met by the smaller corporation being licensed.

Licensee carries out regular supervision

It is expected that the corporation always maintains constant supervision over all the net branches. Since the name of the corporation is at stake, supervision of the branch cannot be over-emphasized. A laid out structure should be drawn and followed through efficiently.

You would want to monitor how the business is being carried out in the branch, is it in accordance with the quality the corporation is known to deliver or not? Are the figures given on paper so? Is there a struggle that is preventing this branch from doing as it ought to?

There are other alternatives for a smaller company to rise but if they would be getting the license from a larger company, then supervision is not negotiable.  If there is no monitoring, the licensee has no real control over the branch and poses potential danger for the entity.

Licensee manages the employees

The corporation does the employment not the branch manager. The corporation hires and fires staff. Although the branch manager may suggest a candidate for a position, the ultimate decision to employ resides with the corporation.

This also covers the staff that were at the branch before the license was given. They become employees of the corporation having their salaries paid from there. New employees could also be employees from the licensee and assigned to branches.

A quick round up

Once a mortgage net branch partnership has been entered, the bigger corporation or the licensee has control over several aspects of the branch.

It is important to have the net branches established and well-structured. Everything should be arranged to point to the bigger corporation. Thus branches cannot have separate warehouses, separate accounts or separate.

It is also important that you do not pay companies owned by your employees nor allow unlicensed home based branches. Business should be carried out neatly with all professionalism and not a shabby arrangement.

Since the license of the corporation is being used, all documents and receipts of purchases should bear the name of the licensee. Managing all things finance is also important for net branching that works smoothly. Constant supervision through physical visits to branches are necessary to ensure compliance to corporation values.

A point of agreement should be reached by all sides to have a smooth partnership. If done properly, there are many benefits to both parties.