3 minute read
Foreword
Specialist foreword
Lending 2.0
by Mark Posniak, Managing Director,
Octane Capital
Do you remember the good old days of commercial lending when customers had an actual relationship with their bank manager?
In those simpler times it was the relationship that dominated who borrowed what— especially when it came to property. Over a call, coffee or lunch or, dare I say, drinks, a prospective borrower would set out the details of their project proposal and within minutes they’d have an answer on whether the deal would work for the lender. Then, not only was the relationship and the trust that went with that key, but so was flexibility. It was a quid pro quo of sorts in that the lender trusted the client and, in return, extended deal terms and parameters that reflected that trust. It was called ‘individual discretion’.
But since the financial crisis, traditional lenders and even so-called specialist funders have pulled up the drawbridge on individual discretion, preferring instead a computer-led approach that comes with a series of hoops to jump through. Crucially, if just one ‘hoop’ is missed, the whole case falls over.
Yes, commercial customer property lending is now a one-size-fits-all, tick-box exercise that focuses on risk aversion and ‘backside covering’ as its modus operandi—once again, particularly applying to the property space.
Let’s look at those checkboxes for a moment:
•LTV–75% • British citizenship or residency only • No first-time landlords • No offshore companies • No mixed use/semi-commercial • No residential security over commercial units • No HMOs over a certain number of rooms • No portfolios on shared title • No dwellings not fit for occupancy • No low yielding properties (we don’t stress test!) As a broker, if your client is one of thousands of entrepreneurs that fall foul of even one of these arbitrary criteria, then the computer will certainly ‘say no’ to your efforts to place that business. Much like if you tick the wrong box on an online mobile phone contract application, you swiftly receive a notification that says, ‘Declined’.
Therefore, one wonders how much money is being left on the table—and not least for the broker community. I’d wager that number has a few zeros after it.
BACK TO THE FUTURE AT OCTANE CAPITAL
At Octane Capital we don’t use a computer programme or a spreadsheet to ‘score’ a lending application. There are no big, red flashing lights that go off in our office if one of the above parameters is breached. Indeed, we consider projects that cross more than one of the above obstacle boxes.
The word ‘no’ isn’t one that you’ll hear much at Octane Towers
We take one approach to bridging deals, developer exit finance and buy-to-let portfolio funding and that is to look at every deal in the round. There’s no algorithm nor flaming set of hoops to jump through; instead, we look at the bigger picture.
Multiple flats above a row of takeaways? Foreign nationals? HMOs over 12 rooms? Separate portfolio units on one title? No problem. These do not trigger a collective sigh or a shake of the head.
We invite you to challenge us. We’re not saying that we say ‘yes’ to everything; of course, we have to pass on occasion if the overall feel of the deal doesn’t work for us. But you’ll be surprised at how likely we are to approach a deal with an open mind, whereas traditional funders and some self-proclaimed specialists won’t. That’s how we’ve lent over £1bn across 2,500 loan facilities since we launched in 2017. It’s truly next generation lending—specialist lending 2.0.
PS. Don’t tell anyone, but our North Star is not the securitisation of our lending book, hence our comparative agility.
