Bridging Introducer November 2019 by mortgageintroducer

BRIDGING

November 2019

£5.00

INTRODUCER

www.specialistfinanceintroducer.com

Champion of the Bridging Professional

Standing strong Mark Standley on Assetz Capital’s plans for growth

BRIDGING IN-DEPTH

INDUSTRY COMMENT

PROBLEM CASES

ROUND-TABLE

Let’s have a real conversation. We understand that not every deal is straight-forward. But that doesn’t send us running for the hills. Our team are experienced & knowledgeable, so if it’s got legs, we’ll try our best to make it work. So whether your clients are in an industry that’s being let down by other lenders or don’t meet tick-box criteria, give us a call - it all starts with a real conversation.

Tirath Singh, Relationship Director

Real world lending 0800 470 0430 www.assetzcapital.co.uk/borrow

Comment

November 2019 www.specialistfinanceintroducer.com

Publishing Editor Robyn Hall Robyn@mortgageintroducer.com @RobynHall

BRIDGING

Managing Editor Ryan Fowler Ryan@mortgageintroducer.com @RyanFowlerMI

INTRODUCER

Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com

Winter is coming. Or so some drivel about dragons, knights and god knows what else has been telling people for years. But whilst said twaddle has now ended the saga that is Brexit continues to rumble on and still looks no closer to a conclusion. Despite promises of an exit on Halloween nothing has changed. The UK lingers like the proverbial stink in Europe. We now face the prosopect of the first “Despite promises December General Election since 1923 with of an exit on the possibility of a a hung Halloween parliament remains a very real prospect. nothing has The omnishambles that changed. The UK has been Brexit has been a drag on the economy for lingers like the years now and it looks like proverbial stink in it will remain so for some time yet. Europe” Developers, investors, homemovers; they are all stalling as they await the right time. That right time needs to be now. A decisive action needs to be made to ensure that whoever is returned from the ballot is able to actually deliver an end - either in or out to this drama. Uncertainty is bad for any business. Enough is enough. The latest Bridging Trends index found that bridging loan growth weakened in the third quarter. Overall transactions by the contributors stood at £181.64m, down by £3.2m on the previous quarter. It’s unsurprising that this has dipped. It’s also likely to be a much larger figure if the rest of the market were to be included. Let’s hope that we are close to the end of this nonsense so we can all return to business and growth.

News Editor Ryan Bembridge RyanB@mortgageintroducer.com Reporter Michael Lloyd Michael@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com @mortgagechat Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Tolu Akinnugba Tolu@mortgageintroducer.com Campaign Manager Joanna Cooney joanna@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Printed & distributed in England by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk

BRIDGING

INTRODUCER WeWork c/o Mortgage Introducer, 41 Corsham St, London, N1 6DR Published by CEDAC Media Limited Information carried in Bridging Introducer is checked for accuracy but the views or opinions do not necessarily represent those of CEDAC Media Limited Page.strip.pdf

07/11/2019

5 Andrew Hosford

The demise of P2P lenders is not the whole story

7 Kevin Thomson

The chance to upskill

9 Jonathan Newman

Customers need to be taken care of

11 Bret Jackson Getting the message right

13 Kit Thompson

Chain break bridges with a commercial twist

16 Feature: Investigating transparency

Michael Lloyd discusses transparency and places for for improvement

26 Benson Hersch

The latest news and views from the ASTL

28 Build a Better Bridge

Our experts answer your bridging questions

30 Round-table

Our panel discuss the latest market issues

42 Alan Dring

Get ready for 2020

11:44

CMY

Real world lending

www.specialistfinanceintroducer.com

NOVEMBER 2019

BRIDGING INTRODUCER

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Comment News

Crumble and fall? The demise of P2P lenders is not the whole story

At the time of writing this the dust has just started to settle from the collapse of Funding Secure. Unfortunately, I fear another peer-to-peer (P2P) lenders collapse is also imminent. Sorry for the incredibly negative title and opening paragraph, I will try and perk the article up a bit going forward. Jeremy Corbyn is still an irritant for his own party as well as the Conservatives. Well that sentence has done nothing to perk up the article, sorry again. How about Brexit? Let’s leave that subject alone completely, I am sure you are sick of reading people’s thoughts on it and I know I am sick to death of writing about it. So, for the remainder of the article I will talk about the positive things I am seeing from my clients and colleagues. Deals are completing, they are a little slower than perhaps they should be, but they are completing. Funders are knocking on our door, updating us on their products and more importantly their new/ increased funding lines. The market is liquid and competitive and as brokers we are delighted to pass this message on to our clients. There is a healthy optimism still reverberating around the market, I think. Yes, there are regular negative narratives, such as Funding Secure and perhaps the wider P2P market. However, the lenders that I consider to be the main players in the market are doing well, they are lending at record rates and more importantly, they are being repaid and recycling their cash at a healthy rate. I have heard form a couple of peers that there seem to be a few less www.specialistfinanceintroducer.com

developers competing for sites at the moment, possibly due to Brexit nerves. This seems to be allowing clients to secure sites for more reasonable purchase prices. I have had two deals in the past month that show close to 30% profit for the client, which is way up on this time last year. There also seems to be an increase in interest in the higher end London market. Maybe not the super prime locations, but I have a BTL deal

Andrew Hosford director – head of bridging, Voltaire

on my desk for a £10m single unit which looks very fundable and a new development for 10 x £3m-£5m houses which again, looks very fundable. The next few months (like the last three bloody years) are unpredictable. But I am still of the opinion that our part of the market will be ok, maybe not thrive like it has been since 2013, but it will certainly survive. Crumble and fall? No, no chance at all.

NOVEMBER 2019 BRIDGING INTRODUCER

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27/06/2019 09:05

Comment News

Getting the best for your client The opportunity is there for brokers to upskill or pass cases on

A new commercial bank has recently launched into the market with a proposition focusing on owner occupied commercial mortgages. Allica Bank has launched with a select few brokers, including Connect for Intermediaries, that excel in the commercial owneroccupied mortgage space. The timing of this launch of a new commercial bank should be seen by brokers as an indication of an ideal time to get into or accelerate any work that you’re doing in the commercial market, in order to finish off 2019 and build pipeline for 2020. There may be several reasons why a broker gets approached to find finance for a commercial owner occupier. For example, the business owner may want to:  Purchase new freehold premises for their existing business to move into.  Expand their business and may therefore need additional freehold premises to operate from.  Purchase a mixed-use property in order to trade from the commercial premises whilst renting out the residential parts for additional income.  Remortgage their commercial property from their existing lender because either the existing lender does not want to extend the facility or the client is seeking more favourable terms. Which lender to approach will depend upon the nature of the business upon which your advice has been requested. While some lenders will consider most types of business, others specialise in certain areas or the more niche businesses such as hotels and www.specialistfinanceintroducer.com

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guest houses, holiday lets, health clubs, pubs and restaurants, schools and care homes. While you need to know which lenders specialise in which areas, it is useful to know that a lender’s appetite may also increase or decrease depending on current economic conditions. Serviceability As with every mortgage, a lender needs to ascertain whether the client can afford it. The same applies to an owneroccupied mortgage irrespective of whether the client is a sole trader, a partnership, a limited company or a Limited Liability Partnership. The lender will assess the financial strength of the business and of course the value of the security being offered. This is why it is so important that a broker obtains the client’s business accounts, preferably of at least three years, at the outset and certainly before any lender is realistically approached. Reviewing the accounts and ascertaining the adjusted net profit by using EBITDA – Earnings Before Interest Taxation Depreciation and Amortisation, means that the case can be presented to lenders in the best possible light. Once the affordability is calculated, the LTV can be determined with a usual maximum of between 60% -75%. Whereas the high street banks will take a more cautious approach to serviceability calculations of say, five to seven times EBITDA, the specialist banks will generally lend more. Specialists will usually lend around 10-11 times EBITDA,

Kevin Thomson sales director, Connect for Intermediaries

especially as they will more readily consider interest only repayments, but that will be at a higher interest rate. This demonstrates the importance of having a broad range of lenders, which may now include Allica Bank, to be able to present options to the client so that the best solution in terms of LTV and rate can be found. Presenting the case It is incredibly important to approach the lenders with the full information at the outset. Knowing the client, knowing the property and asking the right questions is vital to being able to present the case to the right lender in the right manner, which will save time and avoid much of the to-ing and fro-ing which can occur when placing a mortgage. If you don’t feel confident when advising on commercial mortgage cases, don’t pass up the client, but partner with a specialist that has contact with all the lenders and can help you get the best deal for the client.

NOVEMBER 2019 BRIDGING INTRODUCER

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07/02/2019 09:32

Comment News

A trend that should concern us all Customers need to be taken care of

“Are you seeing any trends out there?” is a question I was asked by a lender client over a beer or two recently. My problem is that once I’ve had the beer, I can’t actually remember the question, let alone any trends. But in the early sober light of the following morning, I did settle on something quite unusual. Over the last 18 months, I have been contacted by a small, but growing number of short-term borrowers let down, dissatisfied and taken advantage of. They now find themselves in perilous situations, on financial brink, as a result of being placed with and contracted to lenders operating, sometimes at the very edge of lawful lending practices and in my view, operating over that edge. The lenders in question are mostly under the radar, but not always. The customers are mostly individual, some quite sophisticated, but not all. Only last week, I had contact from a developer involved in a significant project, who found himself with an inappropriate lending partner. Common to each case, was the absence of involvement of a professional, experienced and established packager/ intermediary. Also common to each case was huge customer detriment. This new trend tells us as much about the role of stakeholders in the short-term lending community, as it does about the lenders themselves. For the mortgage packagers and intermediaries out there, it suggests that there is a significant distribution market they simply www.specialistfinanceintroducer.com

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aren’t in touch with. And that marks a real business opportunity. Packagers have made great strides and enjoyed much success in business, but there is more work to be done in connecting with the consumer – and more reward. To the various associations out there, there is a need to continue promoting and improving good practice, to making membership meaningful, not just to members, but to the consumers. The wider public should be able to take comfort in a badge and understand the significance of lenders, who don’t conform and who practice disassociation. Is now the time to look outwards, as well as within? I would argue that the bridging industry and the media have performed well in messaging, promoting change and improving

Jonathan Newman senior partner, Brightstone Law

practices within. But these borrowers, clearly haven’t heard any messages and are clearly unaware of the many established, mainstream funders who are around, offering the right deals at the right price, on fair terms, applied reasonably and responsibly. They are also unaware of the intermediaries who exist to help and support them. A trend which demonstrates consumer detriment is undoubtedly an extremely worrying one. Note however, statistically, the incidence in the context of the much grown, short-term market is few and far between. Positively, it suggests that there remains a significant market, still untapped, still unconnected. And if I am right on this, we all have more work to do! Which is a good thing.

NOVEMBER 2019 BRIDGING INTRODUCER

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Comment News

Getting the message right Records and failures in the short-term sector

As usual, the specialist lending sector is full of positive news, with a raft of new hires, lenders looking to expand, and records being announced. Roma announced its largest ever loan, Fiduciam is set to exceed its £250m loan book target, helped by an additional 10 new hires in the summer.

Liquidity

Octane announced a record third quarter, in terms of loan number and value. They also announced they had exceeded £250m in redemptions, since 2017, and 90% of their loans exit route was sale, have all been achieved, proves liquidity in quality market areas exists. Whilst the good news emits from the industry, there is always a blemish that appears. This time it was another P2P lender, FundingSecure, going into administration. I appreciate they are small, compared to some of the larger more recognised lenders, but still emphasises this funding model has issues. It is great to see senior figures from the P2P world coming out stating this is not a reflection of the sector, trying to mitigate the damage. On the face of it, this has worked and has not been publicised within the full public domain, causing more hysteria and scaremongering. But an article featured on the SFI website, stated that P2P platforms should be moved from the FCA to the Bank of England. Dr Roger Gewolb, executive chairman and founder of FairMoney.com, makes some very valid points in his article, and I can totally see his reasoning for the change in regulation. He also pointed out that as banks and www.specialistfinanceintroducer.com

other lenders are lending more and more, it pushes the smaller P2P lenders up the risk curve, taking on projects that are either very high or potentially, not viable. This is emphasised further, when you look at the state of Lendy and Collateral’s loan book, two other lenders to fall into administration. It is the consumer/investors that are getting burnt. I have raised the issue about the marketing of these products previously, especially those that promote high returns within an ISA. The consumer sees the word ISA and believe they are covered if something goes wrong, when they are not. Whilst I agree with the comments made by Dr Gewolb, the regulator needs to look closer at the marketing of products. In the investment world, it is very clear what you can state, display and say, when promoting products and funds. This has been the case for many years and is not easy for a marketer to gain an advantage, as you are restricted to what can be done. Other firms such as LC&F and Blackmore Bonds have also promoted exceptional rates of returns, with the former already in administration and major doubts surfacing about Blackmore, who have deferred their accounts again, by shortening their account period twice. Being a marketer, I am going to say firms should utilise all available tools at their disposal. But when it becomes damaging to the industry and consumers lose their investments, then this annoys me greatly. The regulator is there to protect everyone, especially the consumer, which is clearly not always the case. Continuing along the marketing theme, I saw a post on LinkedIn by Mark Harrison at Stretton Capital,

Bret Jackson head of marketing and communications, BWD

which really hit a nerve. As a prominent social media networking site, many of you will have seen this post, but if you haven’t, you will understand why it did. Mark referred a case to another lender, for whatever reason, were unable to facilitate it. He received an email flyer from another lender, who he thought maybe able to. He stated they did not want anything for it, just to assist the borrower. The lender in question came back and stated “not for us” with no other explanation. It wasn’t until Mark pushed them for a reasoning, so he can go back to the borrower, and he was told “we do not lend above £1m.” The borrower required £1.9m.

Reputation

Mark responded to the lender, referring to their email flyer stating they lend up to £3m.The representative at the lender came back with “yeah we say that, but we don’t actually mean it.” With all the hard work to increase the reputation of the market to the level it is currently, it is things like this that can destroy it in no time at all. I am sure I am not the only one who feels like this, so I urge people to ensure what they are marketing is factual, not just a method to gain enquiries. Finishing on some good news, it was great to read a story featuring Finance 4 Business, providing a bridging facility in excess of £2m in just 4 days. This is a clear example of a master broker understanding the market and the lenders, in order to conclude a deal for the borrower. Nothing false in this, just excellent PR that should be widely published to demonstrate the greatness of the sector, rather than false, inaccurate marketing. NOVEMBER 2019 BRIDGING INTRODUCER

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Comment News

Chain break bridges in demand Chain break bridges with a commercial twist

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You probably don’t need to be reminded that property is taking a long time to sell in the current environment and, the longer a transaction takes to complete, the greater the chance of something going wrong that causes it to fall through. In this market, therefore, cash is king. Cash buyers are highly sought after as they enable vendors to break the cycle of slow-moving chains and this means they can negotiate better deals. In fact, many vendors insist that home movers have sold their property before they will even accept an offer, as they want confirmation that the finance is in place to secure the agreed purchase price before taking their property off the market. But securing the sale of a property is not the only way to provide vendors with the certainty they demand. Short-term lending is increasingly seen as a flexible tool to find property refurbishments and business investments, but it’s worth remembering that the traditional use of a bridging loan was to provide a bridge between property transactions. A bridging loan can release the equity from a buyer’s current property to be utilised within a few weeks, which puts a purchaser in a much stronger negotiating position, enabling them to have a better chance of winning bids, commanding better prices, and being in a position to act and respond to the vendor’s needs as well as their own. In a slow-moving property market, the humble chain break bridge is in high-demand and, while it is one of the more traditional uses of bridging, it can still be versatile – able to provide solutions to complex transactions. www.specialistfinanceintroducer.com

We were recently approached by a broker who had a quirky case that he was prepared to turn away because he couldn’t see there being a suitable solution. The case was a chain break bridge for clients who were selling their property in order to downsize and didn’t want to lose the property that they were buying. This is a straight forward use of a bridging loan, however, the complication came because the property that the clients were selling was a pub, which included the trading business and the residential property in which they lived. This meant that we needed to find a lender that was happy to lend on a combination of regulated and non-regulated loans and also happy to lend on a pub, which is a particularly tough type of trading business on which to secure finance. We wanted a single lender to take a combined approach rather than separate lenders to handle the regulated and commercial elements, as this would have left the customers having to pay two sets of lender and solicitors fees and created complication around the exit of the loans. The property that the couple were selling was valued at £400k and had an outstanding loan of £100k that needed to be repaid. The couple were planning to purchase a home valued at £200k and so required a £300k facility to enable them to pay off the debt on the pub and secure the new property. The list of lenders that were able to do this was very short, but we were able to secure a loan with a lender that offers both regulated and non-regulated bridging and was able to structure a blended approach across both assets as a single loan. We were happy that this

Kit Thompson director of short-term and development finance, Brightstar Financial

was a responsible approach because, while the clients required a chain break bridge, they did have a buyer secured for the pub and this sale was proceeding, which meant that there was a guaranteed exit for the loan. The result was that the clients were very happy as they were able to secure the property they wanted to buy, and the broker was happy as well as he earned a fee of around £3k for the referral of a case he was thinking of turning away. So, while there’s a growing number of ways that you could use short-term lending to help your clients, don’t forget about the chain break bridge, which can prove particularly useful in the current environment, even in more complex scenarios.

NOVEMBER 2019 BRIDGING INTRODUCER

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Comment News

It’s time to seize the initiative The short-term lending market needs a foundation qualification

As we gear up for a General Election which will pitch the slogans “Let’s Get Brexit Done” against “For the Many Not The Few” it’s perhaps time to remember another political rallying cry that first emerged in the mid-1990’s, one that was adopted enthusiastically by New Labour. Of course, this was “Education, Education, Education” and by the late 1990s it was a slogan that was being repeated ad-nauseum! In truth the first Blair government was less radical in education than other areas, but never ones to let the truth get in the way of a good slogan, this phrase attained almost trademark status! Now, nearly 20 years on, it’s a good time to resurrect this slogan and apply it to the short-term lending industry, an industry that’s grown massively in recent years. Lenders, packagers and brokers have all worked hard to raise standards and in doing so made the sector accessible to literally tens of thousands of new customers. Having said this, short-term loans have their own considerations and complexities and there can be little doubt that an industry qualification would raise awareness even further of the many and varied uses for short-term loans. Additionally, such a qualification would also drive packaging quality and reduce processing times, further benefiting clients facing timeconstrained scenarios. Finally, it would be a quality kitemark and a qualification tailored for the short-term sector would undoubtedly improve customer confidence and of course the quality of advice. The arguments for a qualification seem undeniable and yet as an industry we have been having this conversation for literally years and www.specialistfinanceintroducer.com

still nothing is in place. Why can’t we get this qualification off the ground? There are perhaps two principle reasons, the first being a laudable one in the sense that those promoting and driving the concept have simply been too ambitious. Some trade bodies, most notably the now defunct AOBP (Association of Bridging Providers), consulted with multiple stakeholders including lenders, brokers, compliance experts and the FCA. They even started to develop a syllabus with the IFS (Institute of Financial Services) but ambitions to launch a brand new specialist qualification in the Spring of 2015 ultimately came to nothing. Similarly, plans to massively bolster content and possibly even introduce a whole new module within CeMAP also fell by the wayside. The problem of overly ambitious plans was then compounded by a lack of consensus amongst the key stakeholders. Whilst the AOBP and more latterly its successor FIBA (Finance Industry Broker Association) have always been enthusiastic proponents of an industry qualification, this enthusiasm has never been matched by the ASTL (The Association of Short-term Lenders). Equally, whilst some lenders have thrown their support behind the concept and offered funding, other key players have preferred to concentrate on training in-house and on-boarding courses rather than supporting an industry-wide qualification. Thus, the years have slipped by and the log jam remains. Can it be broken? Yes, it can but paradoxically perhaps the answer is to show slightly less ambition. Some 20 years ago, long before

Brian West director, Central Bridging

the second charge loan market was regulated, it had its own successful self-regulatory body called FISA (Finance Industry Standards Association). In its heyday it offered a very successful but basic, foundation course in secured seconds. After a day’s training, brokerage staff took a short multiple-choice examination and failed, passed or passed with distinction. At the time there was barely a broker’s office in the country where staff and owners didn’t proudly display their FISA certificates. It may have been basic but the exam engendered competition between brokers and drove competency and packaging standards. Rather than reaching for unobtainable targets is this perhaps the model for the short-term lending industry? A basic shortterm foundation course and exam would be, in University Challenge terms, a great starter for 10! It would be something to build upon. Surely the trade bodies can unite behind such a concept. The NACFB (National Association of Commercial Finance Brokers) has already demonstrated its desire to drive standards in this space by developing an in-house bridging enquiry form. FIBA can bring its uniquely strong focus on compliance into the equation and so far as the ASTL is concerned it is pushing against an open door if it chooses to work with these two. Ultimately it would be far better to have a short-term lending foundation qualification in place than nothing at all. Official regulators will always prefer sectors and trade bodies that proactively seek to improve standards and self-regulate themselves.

NOVEMBER 2019 BRIDGING INTRODUCER

Feature

Trade bodies in bridging Michael Lloyd investigates the impact of trade bodies in the sector

rade bodies are created to protect and represent their members. In the bridging space there are associations for lenders and brokers alike. The Association of Short Term Lenders (ASTL), Financial Brokers Association (FIBA) and the National Association of Commercial Finance Brokers (NACFB) each have their own niche and audience they represent. They all, however, serve their members in a similar fashion. “The role of a trade body is to represent the collective interests of its members, as well as protect and promote the industry in which it operates,” says Benson Hersch, chief executive of the ASTL. Adam Tyler, executive chairman of FIBA, explains that trade bodies represent their members’ interests and that means with customers, lenders, regulators, the government and other professional bodies such as solicitors and conveyancers. “That’s what FIBA does, it represents its members in all those different areas,” he adds. Lenders share a similar viewpoint. Ian Harrison, head of sales at Aﬃrmative Bridging, says that trade bodies exist for the benefit of their members, to protect and promote their interests and provide a level of assurance to all those who trade with said members that the company is reputable. Here Bridging Introducer explores their impact and if there is space for more collaboration and more trade bodies in the sector.

The trade bodies

In March 2008, 19 bridging firms combined forces to

BRIDGING INTRODUCER

NOVEMBER 2019

create the ASTL. The trade body now has 34 lender members and 31 associate members of law firms, surveyors and insolvency experts. Members must abide by its Code of Conduct and membership rules, with new lenders undergoing rigorous checks to ensure they have responsible management of their businesses before joining. It provides members with regulatory updates, market briefings and the latest information on fraud prevention. The association collects and distributes industry statistics and collaborates with the press and regulatory authorities. The ASTL provides seminars and anti-fraud discussion meetings for member staff, as well as regular meetings where members can freely discuss what is going on in the market and a free annual conference where it negotiates preferential commercial terms on services, including fraud detection prevention for members. “We are the main organisation looking out for the interests of short-term lenders and our work to raise standards and work with legislators to avoid unnecessary, heavy-handed regulation provides a significant benefit to all businesses with an interest in this market,” Hersch says. “We also liaise with intermediary trade bodies, to promote co-operation and meetings of lenders and brokers to discuss issues of mutual interest.” FIBA launched in January 2018 as part of The Simply Biz group. It functions as a non-for-profit organisation. “We represent the brokers but have lender partners also as lenders want to interact with the broker members,” Adam Tyler says. www.specialistfinanceintroducer.com

Feature

FIBA carries out due diligence on its members and lender partners so it feels comfortable recommending them to its members. It negotiates exclusive arrangements with lenders and brings together solicitors who want to work with brokers to provide them with services such as professional indemnity insurance. “The voice of a thousand firms is much stronger than the voice of an individual entity,” Tyler adds. Similarly to the ASTL, FIBA expects members to sign up to a code of professional and ethical standards. The trade body also has a complaints procedure, acting as the mediator between two parties, such as a broker and lender, that have disagreements. The association also offers FIBA TV, which sees a range of video interviews with lenders on its website with the aim of educating new brokers and give them an understanding of different lenders. Since its launch 18 months ago, FIBA has seen the number of its lender firms rise by 150%. “FIBA’s making its own way in the world and is continuing to do so,” Tyler says. “That is the right approach.” The NACFB is the oldest of the three being founded back in 1992. It has 1,875 broker members out of 1,045 brokerages and 142 lender patrons. The association provides forums across multiple platforms to enable engagement between brokers and lenders with the aim of helping to fund UK businesses. It also provides workshops, compliance support with full template documents and offers discounted access to an array of relevant services such as insurance and credit checking. This year the NACFB overhauled its magazine Commercial Broker, which provides a platform for its patrons and broker members. The association has also enhanced its lead generation platform, ‘findsmefinance’. “The association champions commercial finance brokers and remains the voice of the industry,” Graham Toy, its chief executive, says.

Member reception

The majority of members of the trade bodies value the memberships. Roma Finance for example is pleased to be a part of all three. Scott Marshall, managing director of Roma Finance, says that the trade bodies provide ongoing support and market insights as well as regular forums for market, legal and compliance updates. “Membership of the different trade bodies provides current thinking on the various aspects of lending Roma are active in,” he says. “For introducers and customers, membership provides a ‘badge of honour’ and offer credibility and confidence to existing and new business partners.” Aﬃrmative Bridging is a member of the ASTL, UK Finance, and are patrons of the NACFB. Its head of sales Ian Harrison is very happy with what each offers. Harrison says that the ASTL supports its members to www.specialistfinanceintroducer.com

promote better standards within the bridging industry, and both FIBA and NACFB offer a vital platform for brokers and lenders to engage with each other for the benefit of the financial services sector. Masthaven is also member of the ASTL, FIBA and the NACFB and is pleased with each. “All trade bodies provide invaluable work in their respective fields,” says James Bloom, managing director for short-term lending at Masthaven. In addition Peter Bloom, lending director at BM Samuels who are a member of the ASTL, says it is a useful organisation with more positives than negatives. “It’s quite useful from time to time meeting people and exchanging ideas,” he says. “I attend meetings and benefit from hearing about changes to regulation and legislation. “It is also helpful to discuss issues in the market.” Jonathan Samuels, chief executive of Octane Capital, praises FIBA for supporting the campaign against excessive and misleading default interest rates. “We’re a member of FIBA and know Adam Tyler very well, particularly how invested he is in our industry,” Samuels says. “The way he has supported our campaign against excessive and misleading default interest rates has also been very encouraging.” However Tony Sutton, managing director of brokerage Specialist Financial Services, which is a member of FIBA, NACFB and the second charge trade body the Association of Finance Brokers (AFB), criticises trade bodies for forcing him to become a member because some lenders only deal with members of the bodies. “They offer value,” Sutton says. “My concern is just when the next one comes up and then you have to join and pay lots more each month or year just to access certain lenders.” “I compare this to boxing in the 1970s. There was one championship and then different ones popped up and everything got undervalued. “Sometimes they are working in different directions. They would be more powerful as one. With everything else to pay for like PI and staff fees, membership to trade bodies cost the most for me.” Alan Dring, director of The Mad Approach, praises Benson Hersch’s performance at the ASTL and education programmes the NACFB and FIBA offer their members. However, he says his clients regularly question the return they get on their various memberships. “They all joined originally as it seemed the right thing to do for a new start-up trying to establish themselves,” Dring says. “It is down to the business development teams at the different bodies to stimulate the membership into being more involved.” He is pleased with the growth of education workshops but fears that some of these groups can just become talking points, and the bodies need to ensure words turn into action. Dring is also critical that the managing director role  NOVEMBER 2019

BRIDGING INTRODUCER

Feature

How do you measure the value of a trade association? “What’s in it for me?” This is a question that I am sometimes asked by businesses when they enquire about membership of the ASTL. As an accountant by profession, I have some sympathy for those who have an appetite to attribute a direct return to any investment, but in the case of membership of a trade association, this really is missing the point. In whatever industry you operate whether it is services, construction, manufacturing lending or whatever, it is my belief that you have an obligation as a member of the community that forms that industry to positively contribute to its reputation. Membership of a trade association provides a platform for businesses to contribute collectively, to unify and amplify their voice to

Benson Hersch chief executive, ASTL

of the ASTL is only part-time. “If any trade body is to be meaningful and constituted to deliver benefits for its members, I do not see a part-time managing director as being compatible with that objective,” he adds. One criticism of the ASTL includes that some of the larger lenders are not members. Peter Bloom says this is the biggest challenge for associations. “It is a bit chicken and egg; the more lenders are involved the more they would feel that the organisation represents the bridging community,” Bloom adds. “Some are reluctant to join. It’s a self-fulfilling prophecy.” In a recent blog for Specialist Finance Introducer Brian West, director of Central Bridging and former board member of the ASTL, praised both FIBA and the NACFB for what they offer their members but raised concerns regarding the future of the ASTL. “Its fee earning potential will always be much smaller but to be truly representative of the short-term lending industry, an industry that has grown at a staggeringly fast pace over recent years, it simply must grow its member base, albeit without compromising standards,” he says. West adds that the ASTL needs to take a holistic view of the market and drive far closer links with the other trade associations whilst ensuring that it offers more value to its members. He believes the task is immense for Benson Hersh’s successor as chief executive, but the opportunity is there

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encourage high standards, call out bad practice and respond to the relevant authorities, so that legislation and regulation is framed to protect the consumer but also encourage competition and innovation. This may be considered too altruistic an opinion for a competitive commercial environment, but I believe this approach is anything but selfless. By protecting the interests of their industry, businesses are ultimately investing in their own future and membership of a good trade body can help to put a business on the right track, guard against threats and promote the sustainable growth of the market by developing a reputation that encourages greater involvement from investors, businesses and customers. The next question is often whether it is better to be

part of a larger trade body to provide members with an even bigger voice. But this does not always work out in favour of all the members. As a trade association gets bigger, some of the voices that make up that association can be drowned out and the result is that the association loses the focus it needs to make a difference. There are examples where formerly proactive and very effective trade bodies have been quietened as a result of being merged into a larger organisation. So, it’s important for businesses to take a long-term view when assessing the value of a trade association and important that they do not take them for granted, as it is not necessarily guaranteed that there will be an organisation there to fight their corner.

and needs to be grasped. Benson Hersch says the ASTL has been very effective in overseeing the robust growth of the bridging sector whilst maintaining the very highest standards in the sector. “We would, of course, like to take on new members, and we have a number of applications in the pipeline,” Hersch says. “But we will continue to do this in a controlled way, with a vetting process and an adherence to high standards and sustainable lending.” Ian Harrison claims trade bodies do not need strength in the quantity of their membership to be effective, but it is up to those members within the trade body to uphold the shared ideals to the highest standard to make the body as a whole effective.

Recruitment and improvements

Benson Hersch says that trade bodies, like the ASTL, do not provide an overnight return on investment but lay the foundations for sustainable growth in the industry. This is by providing a framework for open dialogue and best practice, and building a strong reputation that ultimately attracts more customers and investment. “I would say that if you are serious about the long-term prospects for your business, you should contribute to membership of a trade body,” he adds. Adam Tyler says that FIBA wants to recruit all brokers involved in specialist property finance, partly through exclusive offers from lenders and benefits like a PI and commercial insurance scheme. www.specialistfinanceintroducer.com

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Feature

“More members operating in our space is very important,” Tyler says. Peter Bloom says the associations should convince more lenders to join by talking about the issues that affect the whole industry such as regulation, fraud, insurance and market trends. “You would have thought some of the larger organisations, which sit outside the ASTL would benefit from these discussions,” he adds. Alan Dring describes the easiest way to grow membership is for current members to showcase what value added benefits the trade body has brought to their business model; for example how annual subscriptions for SMEs have turned into capital benefits. Dring adds that more strategic and development support is needed. “It’s always better to have smaller membership numbers but greater business growth amongst those members than too many members who are fighting to survive,” he says. However, Ian Harrison believes the onus is not upon the body itself to recruit new members but instead by each individual lender to decide if they wish to share in the values of the wider industry. Graham Toy says the NACFB will be overhauling its online offering, launching a new website and refurbishing its back-oﬃce procedures. The NACFB will also be investing in resources to promote the association to both SMEs and lenders. Meanwhile, Tony Sutton says that he wants trade bodies to crack down on malpractices in the industry. He observes unregulated brokers with no FCA permissions giving bridging lenders cases that fall under credit-related permissions, but are being allowed to place that business because the lenders are not giving the advice. “I want my trade bodies to stop unregulated brokers giving bridging deals in the credit broking space under credit broking permissions,” he adds.

Campaigns

Benson Hersch says the ASTL will continue to push the message that vigilance and care when underwriting is paramount. He says the industry must unite to raise lending standards and ensure lenders have freedom to innovate and operate without the costs of regulation. In addition, Graham Toy promises the NACFB will be launching a dedicated and targeted campaign in early 2020 working to promote the broker network and enhancing the trusted adviser status of its members. FIBA is preparing members for the FCA’s Senior Managers & Certification Regime (SM&CR) which comes into force on 9 December. Adam Tyler says FIBA’s campaign on transparency started with collecting the default rate fees of its lender members, but this has now led to a much wider piece on transparency on fees in the industry. “We’re still collating the information we’ve received,”

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“Benson Hersch says that trade bodies, like the ASTL, do not provide an overnight return on investment but lay the foundations for sustainable growth in the industry. This is by providing a framework for open dialogue and best practice, and building a strong reputation” Tyler says. “It’s leading onto the next level where we’re going to ask more questions. We’ve found most lenders are doing things correctly, but all are doing it differently.” Tyler describes that brokers have to sign up to an agreement when joining a lender’s panel and with multiple lenders it can get confusing, so FIBA is looking at some form of standardisation across specialist property finance to make it easier for brokers to work together. “If you had one agreement you were familiar with, it would make life easier,” Tyler adds. “50 different agreements is where the trade body comes into its own. “The current project is transparency of fees and regulation with SM&CR. “The next project will be some form of standardisation.” Jonathan Samuels praises FIBA’s transparency campaign, saying there are still rogue operators and they need to be made to change their ways for the benefit of the whole industry. Tyler adds that he has started to have conversations with the London Institute of Banking and Finance about looking at some form of training module for new entrants to the industry, whether they are lenders or brokers. “We’re looking at this and seeing where it leads,” he says. “I don’t think we’re ready for an exam, but discussions have been around providing some sort of modular training.” Alan Dring believes that any initiative that improves the reputation of an often tarnished industry has to be encouraged but more importantly understood and supported by its membership.

Collaboration

Adam Tyler says FIBA collaborates very closely with other trade bodies, such as the NACFB for all aspects of commercial finance and hosts joint events with the ASTL. Tyler adds that in FIBA’s early days they also worked with the Association of Mortgage Intermediaries (AMI). “It’s shared knowledge and experiences,” he says. “If we want to make a change somewhere it may have an effect on another part of the industry which another trade body represents.”  www.specialistfinanceintroducer.com

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Feature

FIBA – A trade body for the 21st century The Financial Intermediary & Broker Association (FIBA), launched in January 2018, is part of The SimplyBiz Group, and run as a not-for-profit organisation. 1. We support the broker, lender and professional community engaged in specialist property finance, which includes development finance, short-term/bridging finance, commercial mortgages, specialist buy-to-let and second charge finance for business purposes. 2. We provide our members and partners with unique and exclusive arrangements that they would not be able to achieve on their own. The benefits of a large network available to all at minimum cost. 3. We represent and provide the voice of the specialist property finance industry to Westminster, HM Treasury, British Business Bank, UK Finance and the FCA. 4. Finally, we are raising standards within the industry and providing customers with the security that FIBA members are committed to placing their needs at the centre of all they do.

Adam Tyler executive chairman at FIBA

Meanwhile according to Benson Hersch, the ASTL is working collaboratively with other organisations on a “very interesting” project, which will be announced soon. James Bloom says the ASTL is always actively looking for ways to enhance short-term lending and openly encourages collaborations. The NACFB has partnered with trade bodies on various issues, such as hosting representatives from AMI and the Finance and Leasing Association (FLA) when GDPR came into force to ensure a uniform interpretation of the rules. The NACFB has made available a standardised bridging finance enquiry form, for use by brokers introducing short-term bridging loans to lenders. This aims to increase the quality and consistency of client information a broker passes on to a lender. Graham Toy says it is seeking the support and backing of another trade body with this. Lenders, brokers and consultants all agree more

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NOVEMBER 2019

Lender panel In support of our members’ business growth, we have a handpicked lender panel representing the breadth of the real estate sectors, including lenders, which are not generally available to individual broker firms, without the provision of minimum volumes. Professional partner panel FIBA operates a professional partner panel consisting of legal firms and surveyors, with dedicated expertise in the commercial sector. Too many brokers and lenders have found to their cost and that of their customers, that using a legal firm or surveyor without direct knowledge of the commercial sector can, in many cases, lead to unnecessary delay, additional cost and ultimately failure to complete. PI scheme We have an exclusive, highly competitive professional indemnity insurance scheme that has already proven to succeed in meeting the needs and requirements of brokers in a significantly cost-effective manner. Lobbying As a trade body, FIBA provides

the voice of its members, which is heard at the highest levels of government and other bodies. Compliance support A comprehensive compliance support package is available on preferential terms, including an online compliance resource, which contains compliant advice documents, regulatory guidance, support for the business process and explanatory manuals detailing the background of relevant legislation. Ultimately FIBA provides the kind of services that individual firms involved, or wanting to become involved in specialist property finance cannot replicate alone - access to a world-class lender panel, a strong voice in the corridors of power, an exclusive PI scheme, compliance support and a professional legal and surveying partner panel. Individual membership is just £20 per month, which gives member’s access to the lender panel, the professional partners panel, website, regular news and high-level compliance updates, a monthly magazine and the right to add their voice to the ongoing lobbying effort.

collaboration is important. Ian Harrison says believes more collaboration is always valuable if it benefits the end customer and the market as a whole. “Sharing ideas, experiences and good practices can be a valuable tool in driving up standards across the board and the end product is a better service for the customer,” he says. Alan Dring says that the more collaboration the better as long as words lead to actions. “The reputation of the sector lies in the hands of the three recognised bodies, their role now is to work with all stakeholders to ensure that reputation is enhanced,” Dring says. “That will attract more members of the right calibre.”

Other associations

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Feature

What our logo means Collectivism matters when you become a member of a professional body, like the NACFB - but with us you get a lot more than just a shared sense of identity. Being a member of a recognised trade association is more than just displaying the logo and getting on with business; it’s understanding what that logo actually represents, sharing its inherent value with your stakeholders and, ultimately, wearing it with a sense of pride. Our team spends the majority of our working day talking with NACFB brokers, and we are well versed in relaying what the logo means to our community. We often draw parallels between a business owner drawing a loan facility and a family booking a holiday. Both represent a significant financial outlay, both require advice from genuine experts and perhaps most significantly, both require a high level of assurance that the person providing you with a

Norman Chambers managing director, NACFB

James Bloom says that it is important the sector does not get too crowded but says that the ASTL could broaden its remit to also cover development finance, enhancing its offerings rather than creating more bodies in the sector. Benson Hersch does not see a requirement for a dedicated development finance association as there is a lot of crossover between that market and short-term lending. “If the market for development finance continues to grow, as it has, we may in the future consider a targeted working group to cover the specific needs of development finance providers,” Benson Hersch says. Jonathan Samuels questions whether a development finance association is the right course of action. “I think the industry needs to focus on quality rather than quantity,” he says. “If you start drilling too far down into various specialist finance niches, the volume won’t be there, which reduces credibility and also makes it commercially challenging.” He believes that merging the various associations in the specialist arena together under one umbrella may not be a bad idea. “The single entity would instantly carry more clout and its voice would travel further,” Samuels says. “The specialist finance sector has certainly got to a

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service is legitimate and can provide you with a level of protection if things go wrong. When you book a holiday, you look for the ATOL protection logo, a nationally recognised body who ensure that when you pack your suitcase you can pack some peace of mind too. We see the NACFB logo as an equivalent level of nationally recognised protection for SMEs seeking a business loan via an intermediary. Only full broker members are entitled to display the NACFB logo. This means they are an organisation that meets a stringent set of minimum standards and adheres to a Code of Practice, whilst operating under FCA permissions and a full data protection licence. The logo also means that the broker firm operates with professional indemnity insurance, there to provide protection should anything go wrong. These are all important elements that can provide the business you engage

with an extra layer of assurance and we always encourage all our members to relay this to their clients. If you’re a full member of the NACFB and you’re not displaying the logo on your website, business card or email signature, why not? It’s not just clients that seek the reassurance of a nationally recognised trade body, increasingly lenders are too. The association has grown to the largest it has been in its 27-year history - with over 1045 companies now operating as NACFB broker firms. Our trade body is the UK’s largest independent, and non-profit, association dedicated solely to the commercial finance broker. We are a community bound by a common interest, united by a duty to provide funding to small UK businesses and one that continues to operate for the greater good – we encourage you to make our identity a part of yours.

point, in terms of volumes and awareness, where it merits one overarching body. It would also be far more viable commercially, with a much wider membership base.” However, Peter Bloom does not agree with a potential merger. “I can see collaboration being a sensible idea but with a merger, each former body would still have to have a degree of autonomy to deal with specialist areas,” he says. “Collaboration - that’s all you need.” Benson Hersch says that there is always talk of the mergers of trade bodies but is against the idea. “We do appreciate that this makes life easier for regulators and HM Treasury, but feel that our members would have much less opportunity to have their say in a merged organisation,” he says. Trade bodies act as a voice for the industry and represent their members. All have their place and were praised by their members with many having membership of multiple trade bodies. Among criticisms were fees for memberships but the majority value what they receive back and believe its money well spent. With the associations busy campaigning and collaborating; it is very much a case of watch this space for 2020 to see what happens next.  www.specialistfinanceintroducer.com

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Underwriting – art or science? Perhaps the answer could be a mixture of both

Underwriting is fundamental to all lending. The ability to consistently make robust decisions that are considerate to a borrower’s individual circumstances, but also protect the interests of the lender, is an attribute that is valued by all lenders. But is underwriting an art or a science? There are different schools of thought on this topic. In a world of advancing technology, where algorithms play a role in most areas of life, there are those who are of the opinion that a robust, yet commercial, underwriting process can be delivered by an algorithm more effectively and consistently than by a human. Similarly, there is good logic behind the argument that experienced underwriters can spot the patterns and nuances in a human transaction that a machine never could. It is actually becoming more common these days for lenders to either meet borrowers face to face, or to use video calls

BRIDGING INTRODUCER

to assess the veracity of potential borrowers, but this may be less effective than we think. There is a fascinating book by Malcolm Gladwell called Talking to Strangers: What We Should Know about the People We Don’t Know, which addresses what happens when we encounter people we don’t know and why we automatically assume that they are telling the truth. The book uses research and examples to assert that we place too much emphasis on body language, facial expressions and appearance when making decisions. After all, the fraudster can create a favourable impression, whilst someone honest but worried may not. It has also been proven that we can expect other people to have similar facial expressions to ourselves, but either for cultural reasons or because these individuals are outliers, this may not always be the case, and can impede our judgement. So, is meeting borrowers face-to-face

NOVEMBER 2019

Benson Hersch chief executive, ASTL

likely to be more detrimental than advantageous? If you speak to anyone who has been involved in lending for a long time, they are likely to be advocates of the “sniff test”. Does a transaction smell right? Does the story hang together, and does it sound too good to be true? So, perhaps the answer is that underwriting is probably both an art and a science. It is important for underwriters to interpret the human element of a loan application – to understand the motivations and intentions of the borrower and to buy into their story about the exit strategy for the loan. At the same time, it is also important for underwriters to scrutinize this information with a healthy dose of scientific scepticism. People often won’t lie outright, but they will lie by omission rather than commission. This means that they might fail to provide information which they think will be detrimental to them achieving a successful loan application. The key to successful underwriting therefore might be to combine the disciplines of art and science, to understand the circumstances and the story at a human level but also to analyse this story through a scientific lens of suspicion. Addressing whether underwriting is an art, or a science is an issue that has been around since the beginning of lending but getting this balance right has never been more relevant than it is today. In an uncertain economic and political environment, with increased competition and pressures on business volumes, maintaining a robust and consistent approach to underwriting is fundamental to all lenders. www.specialistfinanceintroducer.com

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Build a Better Bridge

A bridge for all circumstances Can bridging be used to help your clients? Our experts answer your questions I am a Russian national and own a property in London valued at £4.5m. I bought the property in 2015 with cash, so I have no debt secured against it. I stay at the property with my wife and children when we come to the UK. Apart from that, the property is left empty. I need to raise £450,000 quickly for other investments in the UK. Can I use the property as security and get a loan? Lucy Barrett: Yes, this could be possible, albeit a few hurdles and challenges to overcome. Access to funds will be determined by your exact circumstances, which can take some time to establish. When beginning your application, it’s extremely important to bear in mind that there is a limited number of lenders that will consider your scenario. So, timescales may not be as quick as you envisaged. However, working lenders who have experience in mortgages for non-UK nationals will increase your chances of a successful application and the speed. If you were intending to sell your property to repay the £450,000 loan, funds could be less challenging to access. As you have not mentioned intentions of selling the property it may not be a straightforward process, and there are some of the obstacles. Firstly, your exit strategy to repay the loan will be one of the most important elements that a lender will use to decide on the plausibility of the application. If you were planning on applying for a UK mortgage to repay the loan - there are a very limited pool of lenders who consider non-UK nationals for a UK mortgage. Another aspect of your application which will require time and transparency will be verifying your source of wealth. This process takes time, and as you’re not a UK national the process will typically take even longer. On top of that, when large sums of money are being extracted from the equity of a property with no mortgage there will usually be extensive checks. To assess your risk as an applicant and whether they will be able to lend to you, lenders will look at either the Country Basel score or the 28

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financial sanctions register. To conclude, some lenders may be willing to consider your loan application, but this area of funding is niche and may take some time to complete. Phil Mabb property finance broker, Bridging Development

Lucy Barrett managing director, Vantage Finance

Phil Mabb: In short yes, but there is a bit of work to do in order clarify the most appropriate route. Firstly, we need to understand how the asset is owned i.e. in a company vehicle or personal name, and how the mortgage debt will be repaid. Compared to the ‘normal’ mortgage market, there is a limited appetite supporting foreign nationals, but nonetheless a healthy market exists. Further the sum required is modest being c10% LTV. Assuming it is owned in a personal name, I see two options, a regulated term mortgage (serviced monthly) or a regulated bridging loan serviced monthly or with interest rolled up for the term). If in company name the loan providers could include non-regulated entities, increasing your sources of finance. All options will be dependent on source and serviceability of debt. Whilst this is clearly a second home, would you not consider renting/offering Airbnb to assist with paying off the mortgage? My husband has left me and my children. I have three jobs and have been trying my very best, but I have unpaid debts (that my husband got me into), mortgage arrears and tax and credit card bills. I have no hope of clearing these. My parents have offered me to move in with them, but I don’t want to. I need to find some way of paying the bills and stopping our home from being repossessed until I can find a buyer for it. Can you help? LB: The major first step I would advise you take is reviewing your different debts and creditors (including your mortgage lender) and ensure you approach them for more time to find a buyer for your home. The last thing a lender wants to do is repossess a client’s property and they can be very understanding if they can see you have a plan to sell your property

www.specialistfinanceintroducer.com

Build a Better Bridge

and are making every effort to achieve this. In terms of a financial way to cover your circumstances, it could be worth considering a bridging loan, but there would be many factors to consider. Namely, there is a huge risk that in using a bridging loan you could reduce a significant amount of equity in your home because of the associated costs. For this reason, I would be very cautious and intensely evaluate the figures. The other risk of taking out a bridging loan could also be to delay the problem – once the funds are received it may reduce the pressure on you to sell the property. Another factor to consider with bridging loans is that the number of bridging providers prepared to lend in this situation would be limited, due to the mortgage arrears and any other adverse credit. But there may be a solution if they feel it won’t further damage your situation. The option of a second mortgage looks unlikely due to your mortgage arrears. There aren’t many lenders that would consent to a second mortgage if the applicant has fallen behind on their first mortgage. Each lender has their own strict criteria and if these are not met, they cannot lend. Despite the complexities of your situation, there are experts out there who deal with financial situations just like yours every day. PM: Bearing in mind your predicament, I suspect you would be well advised to contact Citizens Advise to address the wider picture, if only to help communicate with creditors alleviate financial stress. In the meantime, there are a number of lenders that may support your proposal and remove the immediate financial pressure. This will require a regulated mortgage contract and consequentially support from a suitably qualified regulated mortgage broker, since debt consolidation is a specialist area. Without providing some idea of debt quantum nor value of your home, I will have to make assumptions that the LTV is relatively modest - say <50%. On that basis a lender will provide both funds to consolidate the debt, interest roll up over an appropriate time frame to allow a sale to conclude. This way you can remove the financial burden, get on with rebuilding your life and seek more afford accommodation. As stated previously a suitably qualified broker should be sought to assist with the situation. Good luck. I am a dentist and have financed the build of two new houses with my brother in law who is a NHBC registered builder. The properties are at a stage where they are dry but are still just shells with a roof. My brother in law has been injured at work and won’t be able to finish the job. I know have to pay for another builder. However, because I have no building experience my own bank won’t help. Can you help me? LB: Most certainly. As you’ve mentioned, it’s difficult to

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turn to Banks at this stage because you don’t have development experience. They will also have concerns around the progress of the development - with it being part completed, lending at this stage could lead to potential structural issues in the future if the work wasn’t done properly. Lenders also prefer progress on development sites to be monitored by an independent monitoring surveyor. However, away from the high street banks there may be specialist bridging lenders willing to lend you the funds needed to complete your property project. One of the major deciding factors in this situation will be the Loan-to-Value of the properties. Any bridging lender looking to lend will want to be sure that they are not exposing themselves to the same risk as the high street banks due to the structural work not being completed properly. Approaching a bridging lender who would be able to advance the funds in stages, would be advisable. This is for two reasons - to keep interest costs down for you, and to put your properties into a healthy loan-tovalue bracket so that finding a lender won’t be so difficult. With bridging loans, the exit strategy is the most important element in deciding on whether the loan is feasible, and especially so in this particular scenario. In your situation, lenders would need to establish a timetable, plan to exit and viability of refinancing if that is the chosen route for the exit. The properties will be valued on a residual basis which means they look at the end value and deduct all the costs to finish, the cost of purchase (which someone would have if the property was sold in its current state), and the developer profit. Once all these figures are taken into account the lender will be able to decide on how much they can lend, if anything at all. PM: Sorry to hear about your brother-in-law’s circumstance - the good news is, on the face of it, there are many lenders available to support your situation despite your lack of experience, particularly in the Bridging market space. The fact that houses are watertight helps tremendously – primarily since the bulk of the perceived ‘development risk’ has been completed. In fact, there are a raft of lenders offering ‘watertight lending’ in the marketplace of late. There is a bit of missing information in your question - how much if any third-party debt is outstanding, the costs and timeframe to complete, finished value (GDV) and what you proposed to do with the finished houses - sell, rent or move into - the latter requiring a regulated mortgage contract. I will assume the works to date meet all regulatory requirements. This is important since the development works need to be certified at the end by both parties in order to exit. Further, it will be more appealing to lenders looking to support you. As for the funding itself there are a number of firms that suggest they support those without experience, but bearing in mind the situation, a good broker will walk you through the options.

NOVEMBER 2019

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Round-table

Our panel discusses trade associations, the year gone by and transparency

A collaborative effort in bridging Ryan Fowler: We’re approaching the end of 2019. How has the market performed this year? Has it been in line with expectations? Sam Howard: I think this year was always going to be an interesting year with Brexit uncertainty, stamp duty gluing up the property market with transactions above £925,000, a lack of properties for sale and from the developer’s perspective rising labour costs and materials. We were always expecting to see peaks and troughs but from our point of view we fund the lower-end of the value spectrum and Help to Buy has been a huge boon. Terry Pritchard: Are you doing a lot of refurbs? SH: It’s still mainly new-builds. TP: I’ve seen refurbs drop of a cliff a while back, but it seems to be coming back now. Where they were going to auctions and people were pushing the prices up, I think people stopped going. That’s come back more and auction prices have dropped. They’ve been coming in the past week. Gavin Diamond: We always knew it was going to be a tricky year. I think it was undoubtedly a slow start and took until probably the beginning of March for us to see the level of enquiries that we would normally expect. January and February were particularly subdued. But naturally there’s been far less appetite for the larger transactions, and I think we’ve seen average loan sizes come down. But in terms of the number of loans done we’re up year-on-year and probably broadly in line with where we’d expect it to be. I think the value’s been lower but there has been activity.

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There have been discussions about rebridging but it’s not something I’ve seen a particularly significant amount of. We tend to see rebridging where certain lenders won’t extend but it’s still a good lend and the person needs more time. RF: Do you think the fact you are not seeing it might be down to your proposition because you have a decent proposition? GD: The increase in volume of transactions we have seen hasn’t been those sort of transactions. TP: We’ve seen a lot of rebridging and we only do larger stuff - deals that have come to the end of their terms. A lot of times it’s within our criteria but it’s come within the end of what they can do with their existing lender and they are unable to extend it. I wonder if funding lines will change that because some are missing out on business. Or do you find they return? I had one where it was within 50% LTV and they lent very little to begin with, but I looked at the covenants of

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the funding line behind it and they said ‘we do one loan and one loan only’. I think there’s quite a few like that who don’t want to get into that return. Jonathan Newman: We see that. I don’t think it’s just about the funding, which is obviously a decisive issue for some lenders, but it’s also about the vision of the lenders. You’ll see some lenders transitioning into a bank or IPO and they’re looking to build their books and portfolios, so they have a willingness to extend. Other lenders might be in it for short-term gains to make their money on particular loans and they’ll be looking to get those out for refinance because they want the profit. A lot of it is down to the internal vision of the particular lender. TP: Those that have done it and not returned have been those that have got an average weighted LTV from their funders and they’re normally sub-62%. If you write a deal and it is at 55% when you get it and once returned with interest it is 68%, that affects their overall lending book. Five or six of those moves it up.

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(From L to R) Jonathan Newman, Brightstone Law; Terry Pritchard, Charter HCP; Alan Dring, representing Apex Bridging; Brian West, Central Bridging; Mark Standley, Assetz Capital; Gavin Diamond, United Trust Bank; Sam Howard, Magnet Capital

JN: A lot of lenders have diversity of funding. TP: People need to diversify to stop that happening. RF: We’ve seen increased activity from trade associations as they all try and increase membership. Are they all fulfilling your needs? Do you feel there should be a development finance association? SH: I would think it wouldn’t be a bad idea to have a specialist developer finance association. We are soon to be a member of a trade association. GD: I guess for me it’s a question of if you look at the

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development finance space what would it gain out of a developer finance association? There needs to be a strong reason to have one. The ASTL, with short-term lending makes sense, but within the developer finance space what would the benefit be other than a badge of honour? Brian West: I saw a development lender going down the route of not doing valuations. How on earth can that work? I suspect development lenders are as susceptible to poor practice as standard bridging lenders. There are good ones and bad ones. SH: A dedicated developer finance trade body could distinguish those lenders that were. TP: Would there be enough people that would want to do that? Development is quite unique and everyone has a different way of looking at it so I don’t know whether you can fall under the ‘you have to fit under these boxes’ but maybe there should be more education. There is a need sometimes to have some representation that understands development because a lot of people don’t understand it. BW: And that’s not easy. I think true ground-up

“We try and stay ahead of the curve by not just following the letter of what’s written down but what we think the intent is” MarkPage.strip.pdf Standley 1 07/11/2019 11:44 C

development lending is 10 times the complexity of a standard bridge. It’s huge and complex. TP: Getting it right is hard. RF: Is development finance something underserved in terms of associations because there are quite a lot for bridging? JN: I think the associations have done a very good job at bringing the community together - brokers, valuers, lawyers and lenders. We’ve seen an improvement in practices from that. Over the past 12 months I’ve had a procession of people come to me complaining about bridgers. We act for lenders not borrowers but I’ve seen many borrowers who have found themselves in the clutches of bridging lenders who are under the radar; some of whom are wealthy, sophisticated businessmen doing significant projects and some have just found themselves with a rogue lender. You have to ask yourself what are we missing as a community and how we are failing if people like that find themselves with bridging lenders with huge rates, difficult penalties and unusual business practices? That tells me, all of us - and the associations need to hear this - are not getting our message out to the public, we’re getting it out internally. That’s not an education piece, that’s a promotion piece. The consumer needs to say ‘who am I borrowing this money from and where do I get to see if they are using best practices, what badges do they carry and what do they mean?’ and if they are not they can make a reasoned decision. There’s a commercial decision here for everybody. They say the market is saturated but I’m seeing lots of big money significant deals landing in the hands of lenders under the radar, who are not part of any association and there are clear reasons why not. I’ve seen loads with people borrowing in excess of £50m development loans from unusual people off the radar. The associations need to get the message out to the brokers and not just internally, but to the public to say if you’re going to get short-term finance, there are minimum standards and trade associations out there and this is what you should get. RF: Your point is valid that you have to put this across to consumers, but the badge is only as good as the members and actions you take. JN: That’s exactly what the ASTL constantly tries to achieve. They look at practices closely.

Real world lending

CMY

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GD: How did those individuals find those lenders that have malpractices? The vast majority of the higher profile lenders in this space typically do most of their distribution through brokers because it’s far too costly and time consuming to try and do hundreds of loans a year with individual borrowers. Therefore I think most brokers in the market understand who the ASTL is and who the lenders are who make that up. Any broker will have to make the decision on who is the best lender for that applicant, whether they are a member of the ASTL or not, but I’m always interested in terms of the borrowers who find these off the radar lenders and maybe get themselves into trouble, in how they find these lenders. Are they placed by a broker advising them this is their best course of action or a mate saying they know someone who might lend them money? JN: In the three instances that have come across my desk, there have been huge consumer detriment: one didn’t involve a broker, one an intermediary who suddenly at the last moment rejected the application and found a mate who knew someone, and one from a traditional broker. So, it comes from all over. The important issue for me is all these people borrowing the money knew they were getting short-term finance but didn’t know where to get it and where to validate the people they were getting it from. Alan Dring: Trade bodies are there to benefit their members and my criticism is too often it’s just for the logo and the benefit to the member for their annual subs is not often tangible. I’ve been doing some work with networks and only 5% of network members have ever done specialist deals. The reality of that is ignorance.

“It wouldn’t be a bad idea to have a specialist developer finance association. We are soon to be a member of a trade association” Sam Howard education programmes and collaborating, but not necessarily with all stakeholders. It’s those opportunities that exist that people talk about and nothing gets done. BW: I entirely concur the ASTL needs to reinvent itself and needs full-time personnel, not just a full-time chief executive but full-time support staff to support that. The trade associations do need to work a lot more holistically and together now.

TP: Some of it is fear as well.

AD: But you don’t have fear once you have confidence, and that comes with knowledge which comes with education. You must start formatting the distribution opportunity which that market may or may not have. I think the managing director of the ASTL is a full-time job. I don’t think that if you give credibility to an organisation with 34 lender members and a similar number of associates that it can be run on a part-time basis. Benson has done what he’s done laudably but that was the contract he signed up to at the time. I think it’s Page.strip.pdf a full-time role. I 1think all the trade bodies 07/11/2019 11:44 Norman, Graham and Adam - are working on good

RF: There have been conversations around transparency of fees. How can the market rectify the view that there is a lack of transparency, if you believe there is one? What roles should the broker, the solicitor and the lender play in fee transparency? JN: We work with mainstream lenders and we’re really satisfied with the level of transparency we see from them in terms of their documentation of the way loans are transacted. In my experience we see a lot of challenges to lenders’ loans on all sorts of things like regulation and maybe on rate. It’s rare or virtually 

CMY

Real world lending

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those videos are protective for both parties. Jonathan’s practice has evolved over the years and we need more practices like Jonathan’s. TP: I think the biggest problem when you have declaration of fees is when the intermediary gets involved and doesn’t tell people what they’re being charged. BW: I don’t think the sort of lenders that’d be looking to get deals across the line with a lack of transparency would be interested in an education piece. I believe in independent legal advice. All my clients sit down with an independent solicitor who goes through pretty much every paragraph. There’s complete and utter transparency at that point.

“I think the associations have done a very good job at bringing the community together” Jonathan Newman unknown for me to be challenged on the basis that someone didn’t know what they were being charged, including default fees. I don’t see challenges that we didn’t understand or know, I see lots of challenges on regulation and fairness but not on challenges of people not knowing. Whether you should charge a default fee or whether it’s justified is a different issue to whether it’s been transparent or not. Whether it’s transparent is whether it’s been disclosed and understood. No legal documents are going to be one page and easy to understand because we’re trying to cover a lot of eventualities. But if you have a document which is transparent which most of the mainstream lenders’ documents are and you have a solicitor on the other side independently advising you, signing a certificate they’ve been through with you and it’s been advised, where’s the transparency argument on that?

AD: From what’s evolved from 2011 through to 2015 was the number of transparency issues were more evident in the early days. I was hoping what’s evolved is rather than signing ‘I understand that’ is an opportunity for more lenders to have tick boxes that isolates the legal jargon into simple questions and make thatPage.strip.pdf more transparent; doing it in a video 1 07/11/2019 11:44 environment between the lender and client, where

AD: You’d like to think the broker is a similar calibre as the solicitor. Mark Standley: The decision point comes before the lawyer though. When you go through the document with the lawyer and know exactly what you’re signing up to, you may be completing the next week, so it’s too far in the process. People need to understand that decision point of the buying process. It just needs a mechanism to bring that forward, whether a video or properly recorded conversation, we should be very upfront about this information. BW: There should be complete transparency on all fees and rates from the beginning of the process, all the way through. The ASTL legislated and built that into its charter three years ago. SH: The onus is on the lenders from day one to set out all the fees that will be charged throughout the life of the loan and avoid excessive admin fees and fees for visiting sites. We often lose deals because the headline rate is more attractive, but it’s as or more attractive when taking everything into account. The onus is on the lender to set out exactly what all of the fees are and for the broker to say ‘besides from the attractive headline rate, what is the client going to be paying for the life of the loan?’ and that needs to be documented and given to the client on day one. AD: How often do you get challenged on your fees Jonathan by the borrower? JN: Very rarely. Our legal fee is transparent because it’s

Real world lending

CMY

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Round-table

contained in the mortgage deed with a charging clause and it’s easy to justify because we run sophisticated time-costing software. BW: If you’re looking for a swift short-time loan with the backing of a quality solicitor and you’re faced with a scenario where you’ve bought a property at auction and you have an £80,000 deposit hanging by the thread because you need to complete in a week, then I think both the lender and law firm are justified in charging a slight premium for getting that through by that date. You pay for what you get. JN: On the front end it’s a virtually fixed fee and it’s transparently put out by the lender what that fee will be. BW: If that fee has a little bit of a premium because you’re turning the deal around in a matter of hours and days. I mean in a more standard conveyancing process and mortgage. JN: It’s easy to understand because it’s a fixed fee, it’s not moving and it’s a single figure. On the front end it’s not difficult, I’m talking about the back end.

on smaller, less sophisticated businesses but it’s still significant. TP: The FCA are clearly pushing P2P into a complete redesign on how it works. MS: Well the trouble is you can only run your own business, not anyone else’s. We’re not Lendy. TP: It’s not just Lendy though. There are a lot of other P2P lenders out there teetering on the edge with their default rates and investors aren’t getting their returns. We see it regularly now. I’m a fan of P2P investment, I think it’s good, but it’s just been badly abused over a period of time and needs to be changed. MS: You can have malpractice and poorly run businesses in any sector. JN: The FCA are there to look after the way individual companies meet the regulation requirements. But they’re not there to, and may not have the skillset to, understand the lending model beneath it and it’s that which is failing. You can be as compliant but have bad lending. 

BW: It’s a fairly mute point if you’re paying £200, £300 more in fees but saving an £80,000 deposit in the process. JN: I agree. RF: The FCA confirmed new rules for P2P platforms in June. How has the implementation of this gone and are you still concerned about the P2P sector?

MS: Well it won’t be the end of it. Regulation just comes in waves. The policy statement issued earlier in the year consumed an awful lot of bandwidth in terms of resources but we’re of a scale where we can invest in it and do it properly. We’re taking it seriously. The FCA guidelines are guidelines so you have to do an awful lot of interpretation, so we try and stay ahead of the curve by not just following the letter of what’s written down but what we think the intent is. We have a deadline of 9 December and will be ready in all things we do. But we are quite fortunate. We are quite a substantial businessPage.strip.pdf despite our young years. We’ve11:44 have helped 1 07/11/2019 over 900 people. There is a lower level of requirement

“I think other sectors are deemed riskier than the bridging sector” Gavin Diamond

CMY

Real world lending

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NOVEMBER 2019

BRIDGING INTRODUCER

Round-table

BW: Is it that difficult for the FCA? If some P2P lenders are offering a 12% per annum return and the average rate of mainstream lenders is about 0.6% per month, how can you possibly compete? JN: Their primary concern is monitoring their adherence to the regulation which is easy to do even if your lending model is wrong. MS: There’s investors, lenders and borrowers. It’s important investors and lenders understand what we’re offering, how we work and have free information to make proper judgments when it’s appropriate. On the borrower lending side, we have to make sure it matches what we are offering. Our credit function is extremely robust. We don’t do anything silly and therefore we can’t provide a 12% coupon because we wouldn’t take that sort of risk profile. We are probably between 3.5% and 7.5% maybe 8%. To get those higher coupons it tends to be things people choose to invest in directly as opposed to what comes out of the pool. What comes out of the pool also has a provision fund and all of our lending is secured. We take our responsibilities incredibly seriously. TP: I don’t think anybody’s doubting that but it’s others in the industry. I don’t think P2P will survive in its current format because investors are losing confidence all the time. It doesn’t matter that Assetz are lending better than some others, it’s about the perception in the marketplace about how their investments are going.

“I’m a fan of P2P investment, I think it’s good, but it’s just been badly abused over a period of time” Terry Pritchard

MS: It’s a container risk which we’re conscious of but haven’t felt yet. I guess it’s a possible risk – that is the nature of humans. There is a herding instinct. People start flying away and others tend to follow them. We haven’t seen that yet and all we can do is run our own business to the best of our ability which is what we do. TP: So, from a marketing perspective what do you do? Do you focus on telling people how safe their investments are? MS: The health certificates are on all of the communication we put out. We promote ourselves in a colourful and pleasant way, what business wouldn’t? The past is no guarantee to the future but it’s the best we have. Our track record is very good. If the world falls over like in 2008/2009 we were born out of those adverse conditions so we should still be okay. Interest rates in Europe are negative. Potentially if we get a Brexit deal we could be going backwards on our own interest rates over here. P2P is a range of options and should be part of a portfolio and not your total wealth investment. We’ve funded one in every 100 homes funded in the UK so it’s making a positive difference. BW: There are good and bad P2P lenders as in any sector. We just have to hope the collapse of the bad doesn’t taint the good. RF: Do you think we could see full regulation of the bridging market anytime soon and what else can be expected of the regulator? GD: No, I don’t think we’ll see full regulation of the bridging market. I think it’s a function of how the FCA views the market and its practices and how risky it deems it to be. I think other sectors are deemed riskier than the bridging sector. That’s one reason why trade bodies like the ASTL are trying to self-regulate to ensure whatever is within our control is good lending, treating customers fairly and transparent. There are always going to be a few rogues out there but that’s the same with any industry. It doesn’t mean because there are a handful of rogues the FCA will come in and say this is a problematic industry we need to regulate. The vast majority of lending that happens within the ASTL market is still deemed commercial in nature. It’s not lending against peoples’ homes per say although that’s still a small part of the market, it’s lending against commercial transactions. To me the FCA has never been about reducing customer choice. They’ve been about making sure the lending taking place is appropriate and I think by and large it is. RF: Do you think they now have a better understanding of the bridging market? GD: I think they have an understanding of the bridging

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market and they understand the regulated bridging market because it’s quite vanilla and straightforward but there’s a whole bunch of lending that goes on in the market which you can’t fully appreciate unless you’re a part of it. When you’re talking about the commercial arena which is where some of the more complicated types of transactions are likely to be, my gut feeling is the FCA are far less concerned about that because of the nature of the type of lending it is. BW: I agree. I think regulation is probably some considerable way down the road. I think the FCA has bigger fish to fry and other areas to focus on. I think there could be lender collapses. We’ve seen Amicus, I didn’t think that would be particularly problematic from an FCA perspective because it is private funders losing money. My one principal fear is if a few big P2P lenders collapse, there is a scenario where there are potentially tens of thousands of sophisticated investors who havelost money from their pension and then the focus would very much be like that with Lendy and the Lendy Action Group. Investors spring up and are good at banding together on the internet. I think that would bring real pressure on the FCA to act on the industry and I don’t think at that point they’d necessarily make a distinction between P2P lending and the standard bridging market. I think that would be lumped together. That would be my fear. GD: That’s interesting because to me one is the type of lending going on and the other a funding model. TP: I do agree and I think they’ll lump it all together. They are a long way off it, but a long way is two years. It’s inevitable it’s going to get regulated. AD: The FCA has got other fish to fry. TP: They have at the moment. Plus they haven’t got the resources to take it any further. AD: And that’s where the trade bodies have a growing role to make sure the communication between those trade bodies and the FCA is where it needs to be at any time and the feedback is given. It has to be one of the ASTL’s priority agendas even though it could well be five years down the road. How much regulated bridging is going on now? Two or three years ago the FCA believed it was 15% and the market thought it was 40%. These sort of things don’t build up confidence. BW: Industries that effectively self-regulate will always temper the effects of the FCA when it ultimately does feel obliged to come in. If it looks at an industry that’s actually been proactively working to get themselves in order, then if they come into regulate it, it’d be a considerable lighter touch. With regulators

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“You have to be seen as proactively selfregulating as an industry” Brian West you have to be seen as proactively self-regulating as an industry. TP: Did you think that with mortgages? That was when we self-regulated and when they came in on the back of self-regulation, they changed everything overnight. JN: The wider political context has a big context on this. The political will of those who want to leave is all about deregulation so if we do end up leaving there is no political will coming from the present people to add further regulation because part of the whole mantra is we’re going to be able to deregulate and it’s all about control. On the other hand, if we end up with a Corbyn led government anything could happen including regulation. SH: I think Gavin’s right. There’s a fundamental difference lending on peoples’ houses where you can evict people if something goes wrong and commercial transactions where you have experienced developers borrowing from a privately funded lender. TP: I don’t think the lender separates it. I think they’ll do the whole thing together and not separate it. Regulation is a way off. BW: The regulator will never be particularly concerned if private money is lost. They will however take a far more robust view if the average man in the street is losing money in his thousands, such as the Lendy situation. 

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A reliable partner Mark Standley, national commercial director at Assetz Capital, talks entrepreneurialism, the need for reliable lender partners and the firms plans for growth The UK peer-to-peer industry has been making headlines of late due to a small number of inexperienced lenders closing down. However, let’s not forget that this is a relatively young sector in the UK and the government and FCA always expected that there would be winners and losers in this critical new market for business funding that they wished to see develop strongly. Firms like Assetz Capital however can be seen as one of the success stories when it comes to this new breed of innovative lender. Indeed, when compared to the rest of the P2P industry, Assetz, and its co-founder and CEO Stuart Law, is a grandee of the industry. It was the first P2P property secured lender in the country when it commenced lending in March 2013 and has been at the forefront of the sector ever since. To date it has lent approaching £1bn in its quest to support UK SMEs with property backed lending and is a key player in the property development space throughout the

BRIDGING INTRODUCER

UK having funded around one in 100 of new homes last year. We caught up with Mark Standley, national commercial director at Assetz, to find out what makes the lender stand out from the pack and its plans for 2020 and beyond.

Banking on P2P

It’s two and a half years since Standley joined Assetz following the best part of three decades in the banking sector. But what would convince a banking veteran to move into the world of marketplace lending? “My background had always been banking,” says Standley. “I had a 

“Assetz will look at deals on an individual basis with what Standley refers to as a ‘blank sheet of paper that allows us to structure the right deal for the right borrower’”

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Mark Standley

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chance meeting with Assetz and the proposition just really resonated with me. “It was something that just fit like a glove. As a business Assetz is honest, decent and has a good moral code. It’s also an entrepreneurial business. I couldn’t really ask for anything more when I was looking for my next move.” And Standley is not alone at Assetz when it comes to having a background in banking with many of the 100 strong team having worked in more traditional finance. But how big a change was it moving from the mainstream banking space to fintech? “It depends how you operated when you worked in banking,” Standley says, “When I was there it often felt like pushing water up a hill as I always wanted to do things in a more entrepreneurial way. “Assetz allows you to do that so it’s been an easy transition.” That entrepreneurialism comes from the fact that Assetz will look at deals on an individual basis with what Standley refers to as a “blank sheet of paper that allows us to structure the right deal for the right borrower.” He adds: “Moving out of the banking sector was a leap of faith, but I could not have asked for a better fit than Assetz.”

And Standley admits that when he first joined the business, he was pleasantly surprised by the quality of the customers that Assetz has. “We have really exceptional customers. They want to do business and want to get things done which works well with us as a business. “From our side we try to be as reliable as possible and do exactly what we say we will. Our aim is to be a good and reliable trading partner for our borrowers.” One of the ways that Assetz goes about that is by being extra diligent when it comes to scoping out deals in their early stages. Standley says: “It’s quite a process we go through to make sure it works. We go to great lengths to make sure that it’s a deal that we want to do and that it is suitable for all the stakeholders in the process and getting that done early means borrowers have certainty of funding and that important new questions won’t be asked at the last minute derailing deals.”

Brokers

One of the key stakeholders is of course the broker and Standley says that whilst the firm does a significant amount of direct to borrower business the broker channel remains key. Indeed, broker introduction still accounts for the larger part of Customers As a business Assetz has over 36,000 business that Assetz carries out as a lender. registered investors and is pushing And this looks like it will rapidly on towards the £1bn lending continue to be the case with mark. The lender also funded the Standley full of praise for brokers. equivalent of the entire growth in He says: “Working with brokers is new build homes in England this a very efficient way to work. Good past year. brokers filter the deals, they know With such a strong lending what the lender likes and what fits, record and investors who are and they have a relationship on both growing their investment with the of the deal. It’s a great way to platform Page.strip.pdf it shows that they1 are07/11/2019sides 11:44 work.” doing the right deals.

If a broker does not know or has not worked with a lender for a long time, they can find themselves wondering what type of deals fit. Standley advises brokers to give them a chance with most deals but says one of the key advantages of dealing with Assetz is that it can help brokers when a deal is perceived as being complex. “We can rationalise very complex deals especially on the development finance, bridging and commercial sides of the business,” he says. “Our pricing is fair and balanced and we always work to get the best outcome. “We’re here to get a deal done. We aren’t afraid of the bumps in the road. If we can make it work, we will make it work and that’s an attitude that is very much lacking in today’s banking world.”

The proposition

Alongside bridging, development and commercial finance Assetz also has a buy-to-let offering. At present the business has a what Standley calls a “nice blend” of those types of business. But, whilst not taking their foot off the pedal in any market, Standley says he sees strong opportunity moving forward in the bridging space. “We want to step up our bridging business levels moving forward,” he says. But in a crowded marketplace it’s a tough ask. Many lenders have found themselves having to move up the risk curve to drive business. As an investor platform Standley steadfastly refutes that is something which Assetz would do. So how will Assetz increase its bridging business? Standley says: “We’ll touch on rates possibly but to be fair we are very competitive as things stand.

Real world lending

CMY

BRIDGING INTRODUCER

NOVEMBER 2019

www.specialistfinanceintroducer.com

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“What we will be looking at is how we execute deals and finding ways where we can do things that we would not do at the moment.”

The year that was

Ireland Department for Communities, 7,100 new houses were delivered locally in 2018. Assetz Capital provided funding for nearly one in 25 of all of the houses built in NI during that period – an impressive feat. “We make sure we spend a lot of time over there to make sure we have a strong grasp on what the market needs., Standley says.

we are a safe set of hands for their funds. These funds work well with our business and are providing us with additional funds to push the business on to the next level.”

2019 has been an annus horribilis for the UK with political turmoil leaving elements of the property market in limbo for the past 12 months. And this is on the back of a static few years following the Brexit Funding referendum of June 2016. How has Like many of the experienced peerthis impacted Assetz? to-peer players Assetz is diversifying “Like any business with good the way in which it is funded. stewardship you try and be ready There has been a shift over the for all scenarios,” Standley says. past few years as the established, “One of the things the last recession taught me though was that so-called industry experts can be wrong. “We’re here to get a deal done. We “All you can do is make reasonable balanced judgments aren’t afraid of the bumps in the based on what is in front of you.” road. If we can make it work, we One of the things the lender has noticed of late is the differences will make it work and that’s an between the regions. attitude that is very much lacking in Standley adds: “There are pockets across the UK that are performing today’s banking world” in different ways. It’s not a uniform market at the moment. “We’ve seen some of the froth successful platforms move towards come off of London but other becoming what is termed as areas are performing strongly. As a marketplace lenders. business we aren’t London centric. Whilst maintaining their We are a true national business current investor operations these with a team Relationship Directors marketplace lenders are also situated all over the country, so we courting retail funds which are are able to offer solutions where invested in the same way. they are needed.” And Standley says Assetz this One such place that Assetz is has been a successful move for offering solutions is in Northern the lender: “We are a marketplace Ireland (NI). A territory that over lender now. We are seeing banks, the years many bridging lenders family offices and institutional have chosen to ignore. lenders come to us as they like what However, Assetz has a strong we do and have seen the results. footprint in NI especially in the They invest alongside our retail development finance space. This investors in the same loans and in can be borne out in the latest the one marketplace. statistics Page.strip.pdf on house building. “They 1 07/11/2019 11:44 know we are well equipped According to the Northern to deploy funds and appreciate that

Looking ahead

So what now for Assetz? The lender has ambitious plans for 2019 with the goal of maintaining the growth it has experienced since launch. With a headcount of over 100 the lender is not resting on its laurels and is looking to get more people onboard. However, Standley stresses that it’s not just about getting bums on seats but actually all about getting the right people in place. “For us it is about achieving growth in a measured way. We would never look to do anything reckless,” Standley says. “We aren’t in a hurry, we want to make sure that this is done in the right way it’s the same with everything we do.” So, whilst the peer-to-peer sector has been much maligned in the past year thanks to a couple of outlier companies, it’s worth remembering that there are businesses out there – Assetz most certainly being one - that are in this in for the long-term. Speaking to Standley it’s clear that this is a grown-up lender that can hold its own with the other lenders that operate in the bridging, development finance and commercial spaces. For these guys it’s about being a reliable trading partner to borrowers, investors and brokers alike. You can’t ask for much more than that from a lender. So what’s Standley’s final message for brokers who haven’t used Asstez “Give us a try – you will not be disappointed.” 

CMY

Real world lending



www.specialistfinanceintroducer.com

NOVEMBER 2019

BRIDGING INTRODUCER

Comment

Time to get ready Are lenders and brokers prepared for 2020?

The UK economy could not be more unpredictable going into 2020. Prudent businesses, going into November, are usually mid-way through their next year planning meetings determining what they need to do to gain the competitive advantage that will drive their growth ambitions. In uncertain times when predictions are being made that the post Brexit economy will shrink by as much as 3.5%, never has planning for the future determined by as much information as brokers and lenders have at their disposal, been more important. You cannot leave it to chance so I thought I would give lenders and brokers some suggested areas that their planning should embrace. I have always had a tick box list that begins mid-year in preparation for the following years planning exercise that starts to take shape in mid-September, nothing set in stone, but essential if the planning process is to have the desired results and deliver the required growth. Reviewing the topics that contributors (brokers and lenders) have focused on in recent issues of this publication I would suggest the following should be high on planning schedules if businesses are to be as prepared as is possible for the uncertainties of the 2020 markets;  The transparency of your proposition Is regulation on your agenda or as a result of feedback from clients are you confident you are as transparent as the market requires? A difficult one but certainly a priority. How do you market your model?  Default levels Are they anticipated and managed in a transparent manner and not seen as income generating?

BRIDGING INTRODUCER

 Stakeholder relationship management. Is the data used to determine who you should partner with comprehensive enough? Are you comfortable that your partners are like minded and will be proactive for mutual benefit? Do you have agreed targets and all parties agree to their role in delivering those partnership targets? Does ‘The Knowledge Bank’ have a role in your planning?  Risk Assessment model. Be aware of small property numbers supporting high ticket values. Does open banking have a role to play in our future?  Development funding is only for the experienced. If this is a market you are looking to diversify into make sure your resource is experienced in the sector. The cost of recruiting is not cheap and both lenders appointing underwriters, and brokers approaching developers, need quality individuals and that comes at a cost that must be budgeted for at the start of the planning process and not be treated as something that will be dealt with as and when.  An education programme Do you have one? How involved are you in the development of your stakeholder partners education programme(s)? How does your promotional and media activity profile your commitment?  Technology and the future How efficient is your software support? Does your software deliver to your stakeholder’s expectations? How often do you review its efficiency following a survey of clients and partners?  The bigger picture

NOVEMBER 2019

Mike Dring Strange Alan managing director, director, MAD Approach Funding 365

 Would a consultant improve your performance in a particular area of the business?  Do you do an annual (sixmonth?) business S.W.O.T?  Do you act on the outcomes of the S.W.O.T?  Do you assess the broader economic UK picture for its impact on your growth plans? Just a few questions for consideration. I would encourage any business to gather their teams together and at the start of the planning process design your own brain stormed tick box pro-forma. Done with purpose over the years it has been an invaluable support to the teams I have managed, large and small and of course to the success those teams achieved over many years. You will all have your own approach but the one piece of advice I would give as an essential requirement, if your plans are to bear fruit, is to ensure your stakeholder partners and clients buy into your plans because in 2020 no one can go it alone. Just as in our private lives, choose the right partner(s) and you will be successful, and divorce will be an unlikely outcome. Be selfish and ignore your partner and the outcome is likely to be inevitable... failure. In conclusion a good source of broader economic data information is The Money Charity. We have an election on 12 Dec, even more reason to be prepared for the stormy waters that could well be ahead. Good luck, use your vote wisely having ticked your boxes on the chances of what party is going to help you deliver your 2020 growth targets but don’t forget to get the opinions of your partners. www.specialistfinanceintroducer.com

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