Commercial Broker (NACFB Magazine) September 2019

Issue 73 SEPTEMBER 2019

Broker COMMERCIAL

The award-winning magazine for the National Association of Commercial Finance Brokers

20 LEAD BY EXAMPLE Challenging habitual behaviours and mindsets

24 THIS IS MANCHESTER Riding the finance boom in the North-West

Unlocking SME potential Why the broker remains key

34 A RETAIL REVOLUTION Growing opportunities to repurpose commercial units

48 IT’S A KNOCKOUT Ten tips to sway a lending decision in your favour

Contents

In this September issue NACFB News

Special Features

4 6 8

10-11 12-14

Note from Graham Toy Updates from the Association Lloyds: Working Capital Index update Industry news round-up Patron news

24-25 26-28

30

32

34-35

Cynergy Bank: This is Manchester NACFB: Unlocking SME potential Roma Finance: A place in the sun 365 Business Finance: Flexible funding solutions Together: Reinvigorating the high street

Industry Insight 36-37

38-39

18 Case Study 16

Cambridge & Counties Bank: To the manor born

Patron Profile 18-19

Funding 365: A good innings

Compliance Update

Jackson Cohen: The encroaching regulatory scope BVRLA: A shift in vehicle usership

Opinion & Commentary 40-41

42-43

44

46

48-49

50

FinanceWell: The road less travelled Rivers Leasing: Stepping outside the box Hampshire Trust Bank: Building global Britain – brick by brick Early Morning Media: Rise and shine Asset Advantage: Crafting a knock-out proposal Five minutes with: Kate Silcock, Business Development Manager – Lloyds Bank

48 Further Information KIERAN JONES Communications Manager & Editor

33 Eastcheap | London | EC3M 1DT Kieran.Jones@nacfb.org.uk LAURA MILLS Graphic Designer

33 Eastcheap | London | EC3M 1DT Laura.Mills@nacfb.org.uk MAGAZINE ADVERTISING T 02071 010359

20-21 Locke Lord LLP: Conducting

Magazine@nacfb.org.uk

Ask the Expert

MACKMAN Design & Production T 01787 388038

22

from the top

Laura Mills: Let your broker brand shine

36

mackman.co.uk

NACFB | 3

Welcome

Graham’s Note

Y

ou’re reading the September issue of Commercial Broker; does it feel different? Well it should do. The magazine formerly known as ‘The magazine for the National Association of Commercial Finance Brokers’ now prefers to be identified as... ‘The award-winning magazine for the National Association of Commercial Finance Brokers’.

That’s right, just after our summer issue went to print, the Association won both the prestigious ‘Publication of the Year’ and ‘Event of the Year’ at the Trade Association Forum (TAF) Best Practice awards, for our Commercial Broker magazine and the Commercial Finance Expo respectively.

These awards embrace two vitally important engagement platforms and are a testimony to the professionalism of the whole team who are passionate about continually raising the bar for the benefit of our Members.

Graham Toy CEO | NACFB

We were thrilled to see off competition from over 300 UK trade bodies to take home both awards, and we were also highly commended in the ‘Good Governance’ category; with judges praising efforts to enhance the processes, documentation and cultures that the trade body operates under ‘from the ground up’.

Another key engagement platform we are proud of this year is our findsmefinance.co.uk platform. We’re calling upon our Patron lenders to direct clients who they can’t provide finance for, to the platform as a way of ensuring the door to finance remains open.

For the sake of the UK’s 5.7 million small businesses, we want the broker network to be part of the solution and you can read the ways in which the intermediary can unlock an SME’s potential on p.26.

Finally, I wish to thank all the lenders who put forward one of over a hundred award submissions for our sold-out industry awards ceremony in November. I implore all our broker Members to have their say and cast their vote in each of the thirteen categories, find out more on p.6.

4 | NACFB

Supporting brokers and their customers to thrive in the long-term We see the potential for growth and provide straightforward asset finance solutions to support this.

Contact our team of experts today to discuss your latest requirements.

0330 134 6400 broker.support@closebrothers.com

Close Brothers Business Finance is a trading style of Close Brothers Limited.

Close Brothers Limited is registered in England and Wales (Company Number 00195626) and its registered oďŹƒce is 10 Crown Place, London, EC2A 4FT.

NACFB News

Association updates for September 2019

NACFB news round-up Association launches autumn events programme

NACFB brokers: Vote for your top lenders of 2019

The NACFB will be hitting the road once again this autumn for a diverse range of events tailored to the UK’s commercial broker community.

NACFB brokers can now cast their online vote recognising Patron lenders across thirteen categories for our annual awards ceremony.

This autumn will see us host eleven sector specific roundtable events that provide the ideal forum to enhance your business proposition. Each day features up to five lender Patrons from each sector who rotate around tables in five twenty-minute ‘speed dating’ style sessions. We have also scheduled two free online webinars examining the impacts brokers should be aware of ahead of the new Senior Managers & Certification Regime (SM&CR).

We tweaked the award’s format for this year, encouraging lender Patrons to provide an award submission detailing why they are deserving of industry recognition; this longlist was whittled down by a broker panel to a shortlist of lenders.

Join us for any of the below broker events: • • • • •

• • • •

• • • • • •

NACFB Members Day – 12/09/19 – London Asset Finance: Documentation & Processing – 17/09/19 – London Commercial Mortgages Roundtable – 18/09/19 (AM) – Newcastle Buy-to-let Roundtable – 18/09/19 (PM) – Newcastle A new era of personal accountability: Senior Managers & Certification Regime – 24/09/19 – Webinar New Members Day – 25/09/19 – London Factor & Invoicing Roundtable – 01/10/19 (AM) – London Asset Roundtable – 01/10/19 (PM) – London A new era of personal accountability: Senior Managers & Certification Regime – 03/10/19 – Webinar Unsecured Roundtable – 17/10/19 (AM) – Birmingham Bridging Roundtable – 17/10/19 (PM) – Birmingham Advanced Buy-to-let Roundtable – 05/11/19 (AM) – London Commercial Mortgages Roundtable – 05/11/19 (PM) – London NACFB 2019 AGM – 21/11/19 – London/Webinar NACFB Gala Dinner & Awards 2019 – 28/11/19 – London

You can register for any of the above events at bit.do/BrokerEvents Are we not coming to a location near you? We’re building our 2020 events programme now, let us know where you would like to see the NACFB visit via events@nacfb.org.uk 6 | NACFB

Full NACFB Members can put forward their nominations for recognition in any of the below categories by filling in the online survey, the process takes two minutes, with voting closing at 5pm, on Friday 18th October.

• • • • • • • • • • • • •

Development Lender of the Year Business Bank of the Year Buy-to-let Lender of the Year Commercial Mortgage Lender of the Year Factor & Invoice Discounter of the Year Hard Asset Provider of the Year Soft Asset Provider of the Year Motor Finance Provider of the Year Most Innovative Lender of the Year Short Term Lender of the Year Specialist Lender of the Year Unsecured Lender of the Year Rising Star of the Year

What makes the NACFB awards different from other industry awards is that they are voted for by the membership which means that the process can often throw out some surprising results.

This year’s NACFB Awards Ceremony will take place on the evening of Thursday 28th November where the winners will be announced and presented with the prestigious trophies.

Vote for your top lenders of the year at bit.do/NACFBAwards

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Note from our Sponsor

Key takeaways from our Working Capital Index The 2019 edition of the Lloyds Bank Working Capital Index shows that as much as £593 billion of excess working capital is tied up in British businesses. We take a look at the reasons behind this build-up and how businesses can boost cash flow

Andy Bishop National Director of Business Development SME Banking Lloyds Bank

T

here’s no denying that change is afoot for the UK economy, and in order to adapt and keep up, businesses will need good cash flow to enable them to invest in future growth.

Economic and business uncertainty a ‘big concern’ Given the ongoing uncertainty around Britain’s future relationship with the EU and the ups and downs across the global economy in general, it is unsurprising that the Index pointed to economic and business uncertainty being businesses’ biggest concern for the year ahead. There are signs that businesses are starting to act cautiously, with the proportion of cash being reinvested falling significantly in the past five years.

Proactively managing working capital and having the right financing support in place is key to unlocking the cash flow needed to stay competitive. Rather than adopting a ‘wait and see’ approach, it’s worth businesses reviewing their current situation and planning ahead.

In fact, now is a great time to get ahead of the curve by accelerating investment decisions. Low demand means there could be opportunities for better deals on assets, while funding rates are at historically low levels.

Stockpiling reaches historic highs The Working Capital Index has highlighted the trend for stockpiling for some time, with total inventory for the firms analysed jumping 29.2% (£35 billion) in the past three years.

8 | NACFB

It’s clear that concerns around economic uncertainty have been the motivation for many companies to build up their stock levels.

However, with uncertainty surrounding the UK’s EU exit persisting for longer than anticipated, this is impacting logistics, storage costs and working capital that needs financing.

With some firms still forecasting high stock levels for 2020, one option for businesses might be to use full asset-based lending with stock funding to free up some capital for investment.

Payment practices putting pressure on working capital Payment practices have a huge impact on businesses’ working capital, and despite various campaigns and government measures, our report showed that one in four companies have faced worse payment times in the past year. Our research also shows that only 24.5% of firms pay less than 10% of their invoices late.

Asset-based finance options such as invoice discounting and factoring can help companies optimise their cash flow and ensure they have the capital available to make any investments they need.

Productivity continues to be a challenge Another challenge faced by UK businesses is productivity.

As automation and disruptive technologies become the norm, there is a real need for companies to be as productive as possible, which is why we have worked with Be the Business, an organisation which aims to help British businesses share best practice, become more competitive and, ultimately, grow.

Visit lloydsbank.com/workingcapital for more guidance.

Visit lloydsbank.com/workingcapitalindex to read the Index in full

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Unregulated deals only. Standard fees and ERCs apply (no ERCs apply during bridging term). Visit www.funding-365.com for full product guides.

Funding 365 Limited is registered in England & Wales. Company Registration Number: 08488034. Company Registered Address: 20 - 22 Wenlock Road, London N1 7GU.

Industry News

Industry News 3. EU signals tighter financial market access A new EU policy document indicates Britain will not automatically have direct access to the European Union’s financial markets after Brexit, even if it meets all the conditions set out by Brussels. Updating its policy on market access for foreign banks, insurers and investment firms, the EU’s executive European Commission said countries outside the bloc would not necessarily have market access even if their rules were equivalent.

1

5. SMEs criticise government response to late payment plans

1. Lagging high street hits commercial rents The British prime commercial property market has seen its largest quarterly slide in rents for a decade amid declining demand for high street shops and shopping centres, according to CBRE. Rents for high street shops, shopping centres and retail warehouses fell by 1.1%, 1.2% and 3.1% respectively in Q2 of 2019, CBRE said in its latest quarterly index.

Retail warehouse rents fell by more than any other property asset class in the quarter.

2. Lord questions FCA over P2P failures Former City minister Lord Myners has questioned the level of scrutiny the FCA gave to peer-to-peer platforms Lendy and Collateral UK, which collapsed leaving investors’ money at risk. With the FCA having previously ordered Lendy to pay compensation over misselling loans, Myners asked if the watchdog will remunerate investors yet to be compensated after the lender folded. He also questioned how Lendy paid dividends to its owner when it was under review by the regulator.

10 | NACFB

5

3 4. Young people see ten-fold rise in bankruptcy Rising self-employment and easily obtainable credit has pushed Generation Z into debt with the number of young people going bankrupt increasing ten-fold in three years. Under-25s now make up 6.5% of all personal insolvencies, up from 1% three years ago, according to Insolvency Service data. Concerns have been raised about the rise in sub-prime credit cards being targeted at people with low credit scores.

The government’s recent proposals to give the Small Business Commissioner new powers to tackle the UK’s £16 billion late payments problem have been criticised by trade bodies and SMEs. The measures include new fines, binding payment plans, company boards to be held accountable for supply chain payment practices for the first time, and a fund to encourage businesses to use technology to simplify invoicing, payment and credit management.

6. Firms must do more to help vulnerable customers, FCA warns Banks, insurers and other financial firms must do more to help customers who are in financial difficulty or may be suffering from poor health, according to the FCA which has urged financial firms to better serve struggling consumers. Proposed improvements include better training to help front-line staff identify vulnerable customers. Christopher Woolard, of the FCA, said: “The guidance should drive improvements across the industry, improving outcomes for millions of vulnerable consumers.”

7. CBI: Manufacturing output lowest since financial crisis

8. Ten freeports to be established after Brexit

The Confederation of British Industry (CBI) has published figures showing that British manufacturing output shrank at the fastest pace since the financial crisis over the last quarter. With 19% of manufacturers reporting that output increased and 30% saying it fell, this gave output a minus 11% balance for the three months to mid-July. CBI chief economist Rain Newton-Smith remarked: “It’s being hit by the double-blow of Brexit uncertainty and slower global growth.”

New trade secretary Liz Truss has announced plans to establish up to ten freeports across Britain in areas surrounding seaports and airports that would be “…free of unnecessary checks and paperwork and include customs and tax benefits”. After Brexit, ports and airports will be invited to bid to become one of the new freeports with the aspiration of increasing trade with new markets across the world.

7

9. Wider financial services could benefit from open banking revolution Sam Bowman, senior fellow of the Adam Smith Institute, has suggested that the open banking revolution is a model for other industries to follow. Were it extended to products like mortgages, insurance, energy and telecoms, he suggests, customers could use open banking-based services that monitor the market on their behalf – driving competition and lowering borrowing costs in the market.

8 10. Post-Brexit regulation review launched A review of how regulation of finance could be improved after Brexit has been launched, with Financial Services Minister John Glen saying: “It is now right that we step back to look at how the system is working more widely, and what changes may be needed in the future to adapt to the UK’s new position outside of the EU.” The FCA and Treasury Select Committee are also reviewing future regulation of finance.

A bank of knowledge not simply a bank of money Our support for your broker business goes beyond finance. We can connect you with the right people, with the right knowledge, to boost your clients’ businesses and help them grow.

Search: NatWest Brokers

NACFB | 11

Patron News

Patron News More lenders and brokers become signatories to the Women in Finance Charter

Aldermore: Lack of available funding holding back a fifth of UK SMEs

Over 350 organisations throughout the lending community have now signed up to the Women in Finance Charter following the latest round of signatories, which saw 21 new additions.

Aldermore’s Future Attitudes study reveals that nearly a fifth (19%) of UK SMEs have missed a new opportunity in the past 12 months due to a lack of available funding. Medium-sized businesses are worst hit, with over a quarter (28%) saying they have been affected.

New signatories included NACFB Patrons Fiduciam and Apex Bridging who were also joined by Members LDNfinance and VIBE Financial Services.

The Women in Finance Charter now covers more than 800,000 people working in financial services.

Commenting on the initiative Johan Groothaert, CEO of Fiduciam, said: “We have signed the Women in Finance Charter in order to be held publicly accountable for our equality and gender diversity practices. We believe that diversity and inclusiveness in our workplace are conducive to a successful and dynamic business environment.

As a growing international business with employees from 15 different countries speaking twenty different languages, diversity and gender equality are integral parts of our culture.

The report, which surveyed over a thousand business decision-makers across the UK, found that those impacted are missing out on income worth an average of £76,888 each year.

Regionally, businesses based in London are losing out on the most additional income due to missed business opportunities, £135,791 on average annually. This is followed by those based in Wales, Scotland and Northern Ireland (£67,380 per year).

Lack of funding poses problems for those SMEs focussing on scaling up. Achieving growth is the top business objective for almost two fifths (37%) of SMEs, while almost a quarter (24%) are prioritising developing and expanding their products and services. Additionally, just over a fifth (21%) are concentrating on expanding in the UK.

“We also believe that the Women in Finance Charter is a fundamentally important initiative to broaden the diversity of financial services companies across the UK. The more companies sign up to initiatives such as these, the more it influences other firms to do the same thing, providing better career opportunities for women but also a better outcome for society as a whole.”

Tim Boag, group managing director, Business Finance at Aldermore, said: “It’s concerning to see that almost a fifth of SMEs are missing out on opportunities as a result of financing issues. Small businesses need adequate cash to innovate, grow and keep up-to-date with the latest developments.

Women in Finance Champion, Dame Jayne-Anne Gadhia, added: “I’m delighted to see the Charter continue to grow. It’s the businesses that address their culture and understand the power of diversity that really succeed. The top quarter of businesses on gender diversity are 21% more likely to have above-average profits than the bottom quarter.”

“That’s why it’s important that lenders understand and are responsive to the needs of SMEs. By providing specific solutions in a timely way, which meet business needs, we can start to address this problem and ensure SMEs – the lifeblood of our economy – continue to thrive in uncertain times.”

12 | NACFB

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It’s why we’ve built a team of experts across the UK ready to engage with you and your clients in person. It’s how we’ve helped fund businesses with more than £400 million so far – with a further £800m standing by.

Whether your clients are looking to fund growth, an acquisition (including Management Buy Outs or Buy Ins), capital expenditure or refinance existing loans we share the same goal: helping UK entrepreneurs realise their potential.

Bespoke business loans from £250k up to £15m

Visit thincats.com or call 01530 444 061 ThinCats is a trading name of Business Loan Network Limited (BLN).

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Patron News

Patron News UTB: Over a third of asset brokers expect lender pricing to increase in the next year

Assetz Capital: Patron launches its first legal panel in Scotland

14.5% of asset finance brokers responding to United Trust Bank’s most recent Broker Sentiment Poll believe that pricing in the asset finance sector is unsustainable, with 37% expecting to see lender pricing increase within the next 12 months.

Peer-to-peer lender and NACFB Patron Assetz Capital has launched its first legal panel after securing partnerships with six leading solicitor firms in Scotland.

However, the NACFB Patron also revealed that 71% of asset brokers believe that current lender pricing is about right with a further 14.5% suggesting pricing is too high.

In a further question, brokers were asked to select from which channel they felt they were experiencing the most competition.

Top of the list was competition directly from high street banks followed by other brokers in second place. The poll also revealed that brokers are competing against businesses self-sourcing finance more so than vendor and sales.

Keith Sangwin, head of sales – Asset Finance, commented: “Competition in the asset finance sector is fierce with pricing down to pre-credit crunch levels. It is apparent there’s still a need for volume but as Brexit draws near, now under Boris Johnson’s leadership, the impact of a potential ‘no deal’ Brexit may place us in uncharted waters.

“The Organisation for Economic Cooperation and Development (OECD) predicts that the UK economy will grow by less than 1% in 2019 and 2020 if Brexit goes smoothly but may sink into recession in a ‘no deal’ scenario. Although 71% of brokers feel that current pricing is about right, funders may feel the need to review their strategies this side of the 31st October, especially if it looks like a no deal outcome is most likely.”

14 | NACFB

The panel will support the firm’s UK – North team, which covers all of Scotland, including the Highlands and islands, and will provide a more efficient and cost-effective solution to Assetz Capital’s borrower clients. As part of the service, clients are guaranteed initial contact within 24-hours of enquiry and will receive client engagement documents within 72-hours of instruction time.

In addition, Assetz Capital is offering savings of £250 on legal fees per transaction if a panel solicitor is used to act for the borrower.

The legal panel consists of Boyd Legal Solicitors, CMS, Gillespie Macandrew, Gilson Gray LLP, Harper Macleod LLP and Lindsays.

Each of the firms are experienced in transacting the Assetz product range, which includes development finance loans, commercial mortgages, residential refurbishment loans and bridging loans.

John Hewitt, Regional Director, UK – North at Assetz Capital, said: “For our clients who find it difficult when choosing a solicitor, we’ve built this panel of experts to help streamline the process and make their lives easier.

“We are excited to be working with such an experienced list of lawyers, who have provided an impeccable service through the years in which we have been working together.”

Assetz Capital has lent a total of £820 million since its inception in 2013, which has led to the construction of 4,000 homes in the UK.

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Case Study

Minding your manors Working with brokers across a wide variety of client types and market opportunities

Simon Lindley Chief Development Officer Cambridge & Counties Bank

O

ne of our recent deals in Wales showcased our support for clients and our desire to work with brokers across a wide variety of client types and market opportunities.

Through the client’s broker, Simon Harrison at Flexible Commercial Funding Ltd, the bank supported a family run business, Miskin Manor Hotel & Health Club, by refinancing existing debt and funding further upgrades to the Hotel and Health Club. The works included the refurbishment of bedrooms and bathrooms and the creation of new outdoor wedding venues.

Miskin Manor Hotel & Health Club, a Grade II, 4-star country hotel located ten miles outside Cardiff near Pontyclun, is set in 25 acres of award-winning grounds and manicured gardens. The hotel has 43 boutique bedrooms as well as four self-catering lodges.

It has become a popular location for weddings, corporate events and as a hotel for people visiting Cardiff’s Principality Stadium.

Since our launch in 2012, the team at Cambridge & Counties Bank have been focussed on delivering strong support for UK real estate investors. Our appetite for lending and working with brokers and their clients is as robust as ever.

The key to success has been putting the client and broker at the heart of how the bank operates. In simple terms, if a product or process doesn’t benefit either the client or the broker, then we find a way to tailor the product and timings to meet the customer’s need.

Whilst this can often be a costlier method of delivery, there are real tangible benefits as customers continue to return to the bank (repeat business accounts for over 60% of the bank’s new lending volumes), 16 | NACFB

which means that service quality and strong relationships are absolutely key for us.

Through our relationship approach, Cambridge & Counties Bank has become the primary lender to Miskin Manor Hotel & Health Club. The bank has been able to offer the owners a highly attractive, long-term facility that has allowed them to organise their finances and focus on investing in the hotel.

Amanda Rosenberg, managing director, Miskin Manor Hotel & Health Club, said: “We are really proud of what we have achieved over the 23 years. We are now looking forward to new opportunities and plans for our Hotel and Health Club in order to enhance what we offer to South Wales. The support from Cambridge & Counties Bank has been instrumental in helping us meet our ambition.”

Cambridge & Counties Bank has developed a strong property investor client base, and we have continued to support professional real estate investors in the UK. Deals such as the one for Miskin Manor Hotel & Health Club underline our commitment to putting the bank’s clients at the centre of how we work and supporting them with a team of proven and trusted property professionals who understand the importance of delivery.

“

In simple terms, if a product or process doesn’t benefit either the client or the broker, then we find a way to tailor the product and timings to meet the customer’s need

Specialist Buy-to-Let

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Contact us today

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Patron Profile

A specialist all-rounder Pushing the boundaries with our uniquely simple processes Laura Kendall Director Funding 365

Furthermore, we keep our bridging fees transparent and simple – no exit fees or ERCs, just a 2% arrangement fee plus valuation and legal fees at market rate.

Flexibility

B

ridging finance historically occupied a narrow niche in commercial finance, deployed at the last minute to purchase properties when other forms of funding could not move fast enough.

Times have changed. Over the past decade bridging finance has broken free of its restrictive shackles, emerging as a versatile, multi-tasking, all-rounder source of funding which every commercial broker should have in their tool kit.

Of course, bridging finance still enables businesses to acquire and refurbish property swiftly. However, these days it is just as likely to help them to exit development loans, refinance commercial loans, free up business working capital and achieve all sorts of other immediate commercial objectives.

Affordability Increasing affordability has undoubtedly boosted the uses for bridging finance. Cheaper funding lines and greater lender competition have meant that interest rates have come down across the bridging industry. The average bridging rate is now, according to industry statistics, as low as 0.74% per month.

At Funding 365 we strive to keep our interest rates as low as possible – they start at just 0.59% per month for residential bridging and 0.69% per month for commercial bridging, for up to 18 months.

18 | NACFB

Another explanation for the expansion of the bridging industry is the ability of lenders to adapt quickly to fill gaps in the market.

Hardly a day goes by without a bridging lender announcing a new product, a reduced rate or an increased appetite. We’re able to do this because, by and large, we’re small and nimble compared to high street lenders.

Those of us who have principal-led funding models are able to be especially flexible because of our autonomy. This autonomy allows us to tailor a loan to perfectly suit the requirements of a specific project – something that high street lenders are unable to do.

“

Another explanation for the expansion of the bridging industry is the ability of lenders to adapt quickly to fill gaps in the market. Hardly a day goes by without a bridging lender announcing a new product, a reduced rate or an increased appetite

“

We encourage brokers to speak directly to our underwriters rather than be passed through a business development manager. In fact, we don’t have any business development managers

Innovation At Funding 365 we make it a priority to listen to brokers and borrowers in order to develop innovative solutions to their problems.

How is this possible, even though each and every one of our loan offers is entirely bespoke? In a nutshell because we’ve made our processes uniquely simple.

One result is the new flexible three year property loan products that we’re launching this month. Our research found that brokers felt that they did not have enough choice to offer their clients in the mid term property finance market, especially in scenarios where the loans would be secured against commercial or specialist (such as HMO) properties.

We encourage brokers to speak directly to our underwriters rather than be passed through a business development manager.

In fact, we don’t have any business development managers.

Or case managers or loan servicing officers or administration assistants or suchlike. Our underwriters do all of these jobs.

Our new ‘Flexible 3 Year’ and ‘Bridge to 3 Year’ products offer huge flexibility for borrowers, with customisable pay rates from as low as Libor + 3.45% per annum and retained rates between 1-3% per annum. We will consider a wide variety of securities, including various residential buildings (including HMOs), semi-commercial buildings and commercial buildings across England and Wales.

Funding 365’s underwriters are heroic multi-taskers who are empowered to take full control of a case from initial enquiry right through to loan completion and beyond. Brokers can call them directly for quick decisions over the phone and receive bespoke, credit-backed Heads of Terms within the hour. The same underwriter then manages the case through the valuation and legal processes to completion, keeps in touch during the loan term and manages the redemption at the end. This makes for a simple, efficient and pain-free process for everyone involved.

A different way of working Of course, the appeal of bridging finance is still largely in the speed of funding it offers. Funding 365 is well known for its service and ability to operate at high speed. We’ve completed a huge number of bridging deals – including some complex, multi-million-pound, multi-property portfolio cases – in three working days or less. We processed one particularly pressing deal (worth over £6 million) over a weekend.

In cricketing parlance, you could say that our underwriters are the star all-rounders of the specialist finance industry.

Speak to our underwriting team via 0800 689 0650 or underwriting@funding-365.com NACFB | 19

Compliance

Being good is good for business Challenging the habitual behaviours and mindsets that characterise an organisation

Joanne Davis Partner Locke Lord LLP

​I

n March 2018, the FCA released ‘Transforming Culture in Financial Services’ a discussion paper examining how ‘culture’ in financial services is now widely accepted as a root cause of some major conduct failings that have occurred within the industry in recent history, resulting in harm to both consumers and markets.

The FCA define ‘culture’ as the “habitual behaviours and mindsets that characterise an organisation” and in April 2019 sent a Dear CEO letter to wholesale market broking firms. This letter provides us with an idea of what the FCA considers good practice for brokers. They see four key drivers of harm or bad practice: •

Compensation arrangements which incentivises poor conduct by linking broker remuneration directly – and potentially exclusively – to the commission they earn… allow little or no scope to recognise non-financial indicators of performance in a fair and objective manner;

•

Governance arrangements… do not give Boards and senior managers the tools they need to properly oversee their staff and business, and act accordingly [and]… fail to embed clear accountability for conduct standards;

•

Workflows which do not recognise that a broker may be performing different regulated activities or acting in different capacities from time to time… do not ensure the necessary arrangements are put in place to identify and address conflicts of interest, or… ensure compliance with… regulatory obligations;

20 | NACFB

•

A culture and mindset which underestimates the risk of brokers committing or facilitating market abuse and financial crime through their role as market intermediaries, combined with poor monitoring and controls.

So, what can you as broker do? Below is a checklist that can be used as a lens through which to review your current practices: • Review your compensation arrangements to ensure they are not driving bad behaviour • Work with your lenders to update your compensation structures so that they include non-financial performance measures •

Ensure that you have strong governance arrangements in place that allow for the correct culture and values to drive decision-making across the firm

• Ensure you comply with the Senior Managers & Certification Regime (SM&CR) •

Have in place policies and procedures which identify risks of conflict of interests and manage them appropriately and never to the detriment of customers

• Ensure that you have financial crime prevention measures in place.

The SM&CR (known commonly as the Accountability Regime), referred to overleaf, takes effect from December 2019 and is setting minimum standards for individuals in firms with the intention of driving a culture of accountability for misconduct.

Traditionally senior leaders were thought to play the biggest role in driving culture since they could ‘set the tone from the top’.

More recent thinking is that everyone influences the culture they are in from middle managers to junior employees.

Whilst recognising that there is no ‘one size fits all’ approach the FCA have set out minimum standards of behaviour in the form of five conduct rules that sit at the heart of the SM&CR. These rules for conduct state that: • You must act with integrity • You must act with due care, skill and diligence • You must be open and cooperative with the FCA, the PRA and other regulators • You must pay due regard to the interests of customers and treat them fairly • You must observe proper standards of market conduct.

They can be found in the COCON chapter of the FCA Handbook which forms part of the High-Level Standards section. As the conduct rules apply to staff directly, it is hoped that they will help shape the culture, standards and policies of firms as a whole and promote positive behaviours that reduce harm. Firms are required to train relevant staff on how the conduct rules apply to their role.

The FCA states that each firm will have a different culture, which is fine – it is not their role to dictate a firm’s culture any more than it would be for them to dictate a business model or strategy. They also outline that whether you conduct meetings sat on beanbags and funky sofas or whether you enforce a ‘top hat and tails’ dress code, it is not a matter of importance to them.

An ethical culture could though be a sound business proposition.

A sense of inspiration not only enables some firms to deliver the right customer and conduct outcomes, it also leads to greater employee engagement, better teamwork and more innovation – being good is looking like it could be good for business.

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Traditionally senior leaders were thought to play the biggest role in driving culture since they could ‘set the tone from the top’. More recent thinking is that everyone influences the culture they are in from middle managers to junior employees

NACFB | 21

Ask the Expert

Beyond the logo: enhancing your broker brand

Q Laura Mills Graphic Designer NACFB

What constitutes a broker’s brand?

A brokerage’s brand is all-encompassing.

Your brand is not just your logo, your website, and your tagline. Your brand is your colour scheme and your tone of imagery. It’s your office, your employees, your management team, and it is your culture. It’s your products or services. It’s your pricing model and it’s the way you do business. A broker’s brand is all of those things.

The UK has thousands of lending organisations, how can a brokerage stand out from the crowd?

It isn’t easy to build a strong brand, but it is worth it. It’s also never too late to start – even if you’ve been in business for decades. Building a strong brand takes time. My top tip for standing out from the crowd is consistency – specifically consistent tone and voice. Maintaining this requires a heightened attention to detail.

How does a brand find its ‘voice’?

As a broker, what you say is important, but don’t overlook how you say it. Your brokerage’s ‘voice’ is the language and 22 | NACFB

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personality you and your employees use to deliver your branding message and reach your clients. All successful brands speak with a unique voice. Think about the brands you admire – what makes them unique? How do they communicate with you and other customers? What do you like about their voice? Apply these learnings, where relevant, to your own business.

What tips would you have for smaller brokerages considering a brand update?

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What quick fixes can a brokerage make to turn around a stale brand?

Simply put, there are no quick fixes. Before seeking any inspiration, you should assess who your audience actually is. If a brand is working successfully the mechanics of it shouldn’t appear obvious – it should dovetail seamlessly with all other parts of the business. Remember though, a brand that feels stale to you may still be doing its job, so ask for the opinions of clients, lenders and even your trade body.

What advice do you have for those without much creative experience?

When building your brand, think of it as a person. Every one of us is an individual whose character is made up of beliefs, values and purposes that define who we are and who we connect with. Build-up a profile of what your ideal customer looks like and how they behave; it is easier to second-guess their responses this way.

Some of the most impressive broker brands come from some of the smallest operations. It is worth investing in the time to clearly define your vision from the outset. Ask yourself what you are trying to say to your clients, are you trying to convey a sense of professionalism and service expertise? Then Comic Sans is perhaps not the best font to converse in or use on your website? Want to be seen as agile and dynamic? Then dated imagery or heavy use of stock photos may be detrimental to the message you are seeing to convey.

What examples have you seen of poor branding?

One quick fix that can do a lot of heavy lifting brand-wise is simply ensuring your logo has been resized proportionately.

There are few things that jar more than seeing a resized logo that has been knocked out of shape. Another example of poor branding I came across recently was an advert from a lender featuring misogynistic imagery. We operate in an industry that strives for the highest standards in all aspects and this, to me, is an obvious misstep that could and should have been avoided.

Special Feature

“This is Manchester, we do things differently here” Speed and certainty: lending in the booming North-West market

Rob Dawson Director Property Finance, North Cynergy Bank

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he skyline of any major city is a useful indication of the health of its economy – so much so that Deloitte calls its annual development reports on our major economic centres the “Deloitte regional crane surveys”. By that measure, Manchester is booming, with 14,400 residential units under development in the city last year, across 48 separate projects.

This will come as no surprise to anyone living or working in what many people regard as the UK’s true second city, as the evidence of Manchester’s sustained commercial boom is all around them.

Early successes like Salford’s MediaCity – home to the BBC, ITV, Ericsson and hundreds of other digital and media businesses – led the way, with the pace of expansion showing no sign of slowing.

The former Granada Studios site has been reborn as St John’s, combining the heritage of an iconic Manchester landmark with a pioneering mixed-use development. Something similar is happening at the riverside business and leisure development at New Bailey, which is attracting globally recognised commercial names like Freshfields.

The list of exciting new commercial and mixed-use developments

continues to grow, as does the roster of internationally renowned businesses choosing to base all or part of their operations in the city. The new home of Amazon in the North also recently welcomed Swinton Insurance.

With prime commercial property rents hovering around the £36 per square foot mark – compared to £80 in London – the financial attraction is obvious. But there are many competitive hubs across the British regions, and Manchester offers much more than comparatively affordable rents.

The businesses filling these developments know that in Manchester they have access to a highly educated local workforce. The city’s thriving higher education sector – internationally renowned thanks to the University of Manchester, which is one of the top 30 universities in the world – provides a steady stream of talented graduates, and other people are attracted by Manchester’s deserved reputation as a great city to live in. People come from all over the country and beyond to enjoy the fashionable Northern Quarter, for example, and Manchester plays host every week to the biggest names in art, sport and culture.

The city’s attributes do not end there: Manchester is at the centre of a trans-Pennine economic community, linking it with thriving economic centres such as Sheffield and Leeds to the east and Merseyside to the west, and the Commonwealth Games of 2002 gave a legacy of more than just sporting achievement: local infrastructure, especially WiFi connectivity, received a boost that endures to this day.

With all this in mind, it’s not hard to see why Cynergy Bank, in our previous incarnation as Bank of Cyprus UK, set up our Manchester office in 2017. I’ve been here from the beginning and have supported Manchester’s investors and businesses since the mid-90s, so can testify to the long-term, sustainable growth this city has achieved.

That growth lends itself to business growth, and I’m delighted to report that our lending doubled in our second year of operation and is likely to double again in our third year. Our current portfolio is heavily concentrated in the student residential market, as the sector continues its transition to purpose-built accommodation and away from the flat-shares many readers will remember from their university years.

The University of Manchester is the UK’s largest single-site university and has the country’s biggest student population of 40,000, making this a highly sustainable lending market for some time to come.

We also have a non-student residential portfolio and envisage greater exposure to commercial property as the business grows.

Several of my colleagues have experience of the sector, making that a natural area of expansion for us. We are particularly excited by the growth of mixed-use projects, propelled in part by the relaxation of planning laws for developers turning under-used office space into residential sites in 2015.

The broker community is a critical support to us. The majority of our business is broker-introduced and we believe that the relationship between brokers and lenders is a symbiotic one: we value their insights into the local market, and seek to reward them with speed of decision, providing brokers and their customers with the certainty they need about access to funds.

We look forward to growing, as Manchester continues to grow, and to meeting any NACFB Members who’d like to know more about how we can work together.

Cynergy Bank is a specialist bank that understands the blended (or interdependent) business and personal financial needs of business owners, property entrepreneurs and family businesses from offices in London, Manchester, Birmingham and Brighton.

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With prime commercial property rents hovering around the £36 per square foot mark – compared to £80 in London – the financial attraction is obvious

NACFB | 25

Special Feature

Brokers remain key to unlocking SME potential Exploring the role our community can play in helping to keep the door to finance open

Nicholas Murphy Business Engagement Officer NACFB

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t is said that there has never been a better time to be an SME seeking finance. There are numerous ways for a business borrower to access growth capital from an ever-expanding array of funders, all – it would appear – awash with liquidity. But, when speaking to our commercial broker Members, one thing remains clear, the single biggest barrier to finance lies not in access to business loans but in broader awareness of available funding solutions.

A June report from law firm Smith & Williamson revealed that 70% of small businesses fail to secure finance at the first attempt, with 40% of companies saying that they had been turned down for funding more than three times. These are the small businesses who have already made the decision to seek growth funding who have been turned away upon initial enquiry, potentially at a time of dire need.

There have been attempts to ensure that the door to finance isn’t slammed shut when a potential borrower is first turned away.

Unfortunately, the government’s own Bank Referral Scheme (BRS) seems to have failed the very small and medium-sized enterprises it was designed to help.

The BRS was launched, after an announcement by the Chancellor in the 2016 Spring Budget, with the aim of helping make finance more available by referring those rejected by mainstream banks to alternative lenders. It set out to legally require any of the main seven banks to refer businesses they turn down for funding to one of four designated online platforms (Alternative Business Funding, Funding Options, Funding Xchange and Business Finance Compared).

Statistics from HM Treasury show that during the first 20 months of the scheme, 19,000 UK SME businesses were referred, but only 900 were successful at getting funding (at an average of £17,000) accounting for a total of £15.6 million in total funding up to mid-2018 – the latest period for which data is available for.

Critics of the scheme have not pulled their punches. Earlier this year, in an open letter to the then Chancellor Philip Hammond, Christoph Rieche co-founder and chief executive of SME finance lender iwoca, slammed the scheme which he said had “…failed to deliver any meaningful impact.”

Kirsty McGregor, the Chair of The Corporate Finance Network, a UK-wide group of accountancy firms providing advice to SMEs on funding, joined a growing chorus of voices calling upon the government to abandon their scheme, labelling it: “…a harmful policy that generates so much cost and bureaucracy the government is keeping the figures secret.”

Kirsty pushed against the BRS harder still, branding the policy ‘immoral’.

“It sounds good in theory that businesses who are rejected for funding by the banks should be offered other options. But the reality is by this stage such businesses have generally spent 4-6 months in the funding process and are getting desperate for the finance.

“If they are offered high-cost finance from another lender, they will unsurprisingly be very tempted to take it to tackle a short-term need while building up even bigger problems for the future.”

A network of finance professionals With faith in the BRS clearly waning, the lending community has a duty to find ways of keeping the door to finance open for small businesses. We all know that applying for a business loan can be daunting, complex and time consuming, but there does exist a growing UK network of experienced, knowledgeable and connected finance professionals. Enter, the broker.

It is always surprising how many enterprises believe that, beyond the traditional avenues, the funding options stop there. You can try it yourself. Mention crowdfunding, short-term loans, merchant cash advances or invoice financing to a small business owner and gauge their reaction. There is typically a vague acknowledgement that they have heard of such sources but often very little beyond that.

This is to be expected. A business owner who is stretched both in terms of time and resource does not need to be familiar with the latest finance products and categories available to them – the broker has this covered.

In an era when some lenders are scaling back their face-to-face operations, the modern finance broker has inherited and enhanced the role of the local bank manager. Commercial finance brokers are well placed to act as trusted advisors for the SMEs who otherwise hit a dead end when exploring funding options.

“

Since its launch six months ago, the findsmefinance platform has received 1378 searches for funds totalling £455 million.

We’re projecting that searches will total over £800 million in the first year – but this is just the beginning

NACFB | 27

If you build it, they will come As part of our efforts to ensure the door to finance stays open, the NACFB developed and launched an enhanced online portal, findsmefinance.co.uk, offering UK businesses access to the trade body’s growing membership of commercial brokers.

The free directory enables UK businesses seeking finance to filter their funding requirements by loan size, type and location, the user is then presented with a range of the Association’s commercial brokers to approach who can meet those funding requirements.

Since its launch six months ago, the findsmefinance platform has received 1378 searches for funds totalling £455 million. We’re projecting that searches will total over £800 million in the first year – but this is just the beginning.

We built the findsmefinance platform with a clear vision in mind and we see the NACFB, and our Members, as part of the solution.

We see the platform as a wedge under the closing door; providing SMEs with an alternative route to finance. But we need the support of all our stakeholders, both lenders and brokers, to help increase both the number of businesses using the platform and brokers able to provide funding solutions.

Lenders – lead the way:

Brokers – be the answer:

We’re calling upon all lender Patrons of the Association to share the platform with businesses who they are unable to help but were made aware of by direct enquiry.

Since February, over 350 NACFB brokerages have signed-up to the lead generation platform.

It may be the case that the likelihood of obtaining finance can be increased with the support of an experienced broker.

We would encourage you to direct SMEs you are unable to help to findsmefinance.co.uk

28 | NACFB

All full NACFB Members, that also hold FCA authorisation, are eligible to sign-up and can do so in minutes.

NACFB brokerages can find out more and register today at findsmefinance.co.uk/broker

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Special Feature

A place in the sun How holiday lets are providing growing opportunities for property investors Scott Marshall Managing Director Roma Finance

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uying investment property to generate long-term income remains hugely popular. Landlords have not been deterred by recent tax changes and the ban on tenant fees when it comes to taking a view on how to sustain income in the future.

A number of landlords with portfolios in their individual names have been selling off properties to repay off their mortgage commitments leaving those remaining unencumbered and selectively retaining those high-yielding properties that deliver the most monthly income.

An example of such property types are holiday lets. These can generate high income in the season from Easter to September, but depending on the location, can provide a good income all year round. There’s more work involved in taking multiple short term, often weekly, bookings but the income can be higher than Buy-to-lets during peak season. Income is influenced by location as the property will need to be close to historic sites, rivers, marinas and seaside resorts but these can prove to be very lucrative.

For tax purposes, holiday lets are also treated slightly differently in that they are viewed as a trade rather than an investment, and landlords can reassign some properties in their portfolio suited for this purpose. With increasing popularity, I can see lenders viewing holiday lets as the modern-day guest house so treating the lending as providing business finance rather than Buy-to-let mortgages.

For initial acquisition of investment property bridging finance is still a very useful option – it can be agreed quickly and can fund any initial renovations to the property to get it in a rentable state before longer-term finance is needed.

However, the market is changing for other forms of property that 30 | NACFB

have traditionally generated good returns. An example is the semi-commercial or mixed unit where there is a flat above a retail unit. With the high street struggling to attract shoppers, there is a growing trend for the ground floor retail units within such properties to also be converted into residential, helping to prevent the situation where the shop may not be let for long periods of time.

Other examples of good opportunities are city centre HMOs and student accommodation, for which there is a steady demand.

The location near a university can mean income is often guaranteed for the academic year. This allows for the yield to be projected which is useful for a lender to take into account when assessing the viability of the case.

To get into owning property to generate income, experience is not necessarily required. As long as the business plan is viable, and the property can generate a suitable level of income for the location. As a holiday let often requires minimal works to be done prior to letting out, maybe some light refurbishment, they could be an ideal option for the first-time landlord as well as the established investor.

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For tax purposes, holiday lets are also treated slightly differently in that they are viewed as a trade rather than an investment, and landlords can reassign some properties in their portfolio suited for this purpose

Special Feature

Supporting business growth with merchant cash advances We’re seeing a surge in demand for flexible funding solutions Andrew Raphaely Managing Director 365 Business Finance

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mall and medium-sized businesses are increasingly in need of flexible funding to support their growth plans and manage cash flow. Alternative funding solutions are becoming ever more popular, as traditional bank loans aren’t cutting the mustard.

A merchant cash advance, also known as a business cash advance, is a finance solution that is based on future debit and credit card sales. Repayments mirror a business’ cash flow, as they pay back a percentage of the advance with every card payment they take – unlike a bank loan, which sees a fixed amount of working capital taken from the business every month, regardless of sales – not to mention admin charges and late fees.

There is a single, all-inclusive fee agreed up front, which does not increase over time; the repayment period is flexible dependent on the business’ sales (although we typically see most advances repaid in five to ten months). Whether the advance takes six months, a year or even two years to repay, the amount repaid remains the same – that’s one of our key value propositions for businesses seeking funding, as it turns ‘conventional’ bank funding on its head and offers greater transparency and fairness to our clients.

The mechanics of the funding and repayments are simple, as is the application process. Unlike a business loan from a bank, there is no requirement for a business plan or security. Approval is typically granted within 24-hours and funding is made within days, instead of the weeks it would take with a bank.

As with all services that support SMEs, service and transparency are key. We’re very lucky to have a dedicated team of funding specialists who act as dedicated relationship managers to our clients. It’s proven to be a winning approach, as our clients 32 | NACFB

appreciate having a single point of contact, not being passed from pillar to post. In terms of transparency, there are no hidden costs, admin fees or late payments, just a fixed total repayment amount, regardless of how long it may take the client to repay.

The same ethos applies for our NACFB brokers, who are integral to the growth in SMEs’ understanding of merchant cash advances and have shown terrific support for us at 365 Business Finance over the years. We have supported brokers with product training, co-branded materials, dedicated contacts and an attractive commission scheme – all to support them as they introduce the right financial product to the right businesses. Naturally, this year’s NACFB Commercial Finance Expo proved a highlight of our year, enabling us to connect with new potential business partners and catching up with our good friends in the industry.

The results have been incredible, as we’ve seen 100% year-on-year growth. The hospitality sector has been particularly busy, with a surge in demand for our merchant cash advances. Independent restaurants have looked to buck the trend of closures of homogenous chains like Prezzo and Jamie’s Italian, and taken the opportunity to establish a stronger foothold in the sector. It’s these independent small and medium-sized businesses, be they restaurants, pubs, hotels, retailers, high street businesses or – increasingly – online businesses, that our merchant cash advance is tailored for.

Whether funding expansion, refurbishment, investment in staff and training, stock or simply to help with working capital and VAT payments, we’ve so often heard from brokers and clients that banks have let them down, leading them to seek out alternative funding. To us, then, it’s come as no surprise that the demand has steadily increased.

We’ve enjoyed significant growth across all sectors – and we’d like to thank our NACFB broker partners for their support.

Together we’re educating UK businesses about the suitability and advantages of merchant cash advances, promoting flexible financial solutions that ensure business owners do not fall into debt-spirals, and building a stronger foundation on which businesses can grow and thrive.

An easier route from A to B(TL) Introducing Bridge-to-Let Starting at just 0.49% interest, with flexible terms that don’t tie them in to our Buy-to-Let product, it gives your clients a smooth ride through their next project – no hold-ups, no dead ends.

Try our online calculator for an immediate quote: lendinvest.com/intermediaries

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Special Feature

Saving the high street: the era of retail reinvention How the growing trend of repurposing properties can offer opportunities for brokers Marc Goldberg Commercial CEO Together

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ccording to new research, traditional stores are closing at record pace as the beleaguered retail property sector struggles to cope with the rise in online shopping and Brexit uncertainty.

The figures are stark. Last year saw 2,481 high street shops shut their doors – the largest full-year net decline in stores in recent times – while 451 went into administration in the first quarter of this year, up 27% year-on-year.

Many well-known high street shops, as well as restaurants and bars, have bitten the dust as more and more shoppers go online to purchase goods.

Recognising the need for a shot in the arm for ailing town centres, the government has launched its £675 million Future High Streets Fund. Now more than 50 towns and cities in the UK, from Whitehaven in Cumbria to Penzance in Cornwall have been accepted onto the scheme designed to help civic leaders re-invent their towns.

This investment should provide a welcome boost. But how, exactly, will the make-up of our beloved town centres change over the next 34 | NACFB

few years – and how can commercial brokers help their clients take advantage of this seismic shift?

New research from the world’s leading market intelligence agency, Mintel reveals that the busiest shopping destinations last year were those which provide shoppers with a ‘great experience’ with a mix of retail, restaurants and bars and leisure.

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As more people move in, it may be the case that businesses start to migrate back to the remaining unwanted retail and leisure space that hasn’t been converted into accommodation – putting town centres back at the heart of the community

Claudia Preedy, Mintel’s B2B analyst, who wrote its latest Commercial Property UK report expects this to continue. The report also highlights the growing trend towards repurposing empty space previously occupied by thriving shops.

“The ideal aim of repurposing is to create places where people want to socialise, shop, live and work,” the report reads. “Repurposing may include residential property conversions, more flexible working spaces and community care facilities to address the ageing population.”

Ms Preedy also predicts that, while investment in retail centres has fallen substantially over the past five years, investors are expected to show increased interest in retail assets “that offer great opportunities for repurposing”.

This kind of reinvention makes sense. Town centres already benefit from quality transport infrastructure, public amenity space and decent internet speeds, meaning new residents could be better served than they would be in out-of-town locations.

And, as more people move in, it may be the case that businesses start to migrate back to the remaining unwanted retail and leisure space that hasn’t been converted into accommodation – putting town centres back at the heart of the community.

Another boost to the retail sector may come from the conversion of closed shops into leisure facilities – think indoor trampoline parks, climbing walls, laser tag or crazy golf – breathing new life into old spaces and giving people more reasons to visit for a day out.

According to Mintel, shopping centre developments need to embrace this ‘leisure experience economy’. Research by commercial property consultants Cushman & Wakefield shows 147,000 square metres of new shopping centre space was delivered in 2018, an 8% rise on the previous year. “Leisure extensions, mixed use developments and the

“

Securing finance for these types of repurposing projects can be difficult, even for experienced property experts, and those seeking finance may well need the help of commercial brokers

redevelopment of vacant city centre sites are a key focus,” Ms Preedy said.

However, securing finance for these types of repurposing projects can be difficult, even for experienced property experts, and those seeking finance may well need the help of commercial brokers.

These often more complex cases may fall outside the risk criteria of high street lenders, including traditional banks. Even potential borrowers with solid business plans may find some institutions unable or unwilling to lend if they don’t have a long track record of development or refurbishment projects.

Specialist lenders like Together are able to look past the sometimesrigid view of the mainstream when agreeing finance such as bridging loans for broker clients, particularly if the borrower has enough equity to support the risk and strong plan to exit the short-term loan.

This could offer fresh opportunities for brokers to generate new business by helping their entrepreneurial clients realise a bold vision of what the future high street could become.

NACFB | 35

Industry Insight

Is the regulation of all mortgages coming?

With the FCA mulling an expansion of regulatory scope, how can brokers future-proof their activities?

Ray Cohen Director Jackson Cohen Associates Limited

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or the first time since the start of mortgage regulation in 2004, I now believe it is only a matter of time before all mortgages become regulated, along with unregulated holders of mortgages, and here is why.

At a debate in Parliament on 6th June covering both mortgage prisoners and the poor treatment of SMEs who have borrowed from the banks, there was a vote to recommend regulating all mortgages including capturing those who buy them.

This is, of course, not binding on the government and, on its own, may or may not get taken further. It had been hoped many of the issues would be resolved by the FCA looking at helping mortgage prisoners. However, it is clear the FCA proposals could only help a small proportion of mortgage prisoners at best, and not help those with unregulated loans at all, both key issues in the debate.

36 | NACFB

This was followed by a Treasury Select Committee on 25th June with the Head of the FCA, Andrew Bailey, saying he now believes the only answer is to regulate all mortgages. He said he hadn’t yet had the conversation with Treasury, to which they replied they may have the discussion for him, setting out that they intend to push this agenda come what may.

This is a marked change of approach, as the FCA haven’t been keen on expanding mortgage regulation in the past.

Such noise may have been politicking by Andrew Bailey, given his rumoured ambitions to be the next Governor of the Bank of England.

However, the statement let the genie out of the bottle and firmly into play. The FCA are thought to be unimpressed with the quality of underwriting standards that has seen some P2P lenders get into difficulties, and it would also cover off some of the concerns over how regulated firms treat their non-regulated customers.

A new PM, Brexit and maybe an election may dominate for a while, but the All-Party Parliamentary Group intend to push this issue.

The call for change appears to cover mortgages to incorporated firms as well as individuals in order to address the concerns over SME

lending. It is possible there may be a ‘carve out’ for larger companies but it is by no means certain that that is the intent. Can the banks be trusted more with larger customers than smaller ones?

There could be a decision to create a new permission for business mortgages separate from consumer mortgages and consumer Buy-to-let lending. However, it could leave some opportunity for potential gaming as well as a lack of clarity for mixed loans, so it may be cleaner to keep them all in one bucket.

Clearly any change would require a consultation, so there is no need to panic just yet. Such implementations are also unlikely to be backward looking so only impact new lending. Broker firms should, however, consider factoring the potential of having to become regulated into their plans.

In a worst-case scenario brokers would have to become authorised for regulated mortgage contracts and advisors obtain the appropriate permissions. Although getting authorised as a broker is a lot easier than as a lender, there will still be a need for management to make time to put together the application or consider any variation to their permissions as well as ongoing time on half yearly returns etc.

Non-regulated lenders will also have to consider the impact and whether or not to become regulated or give up lending on property.

This could cause a significant change in the market as some firms will not be willing or able to become regulated, thus removing some of the competition for business. With the sheer volume of non-regulated bridging lenders out there, the FCA may also need to consider an interim permission approach in order to cope with the volume, a bit like they did with second charge lenders, albeit

they already had a consumer credit permission – something unregulated bridging lenders generally do not have.

Similarly, those who buy lending books and are not regulated, or hold them in non-regulated entities, will also have to become regulated even if they currently outsource administration to regulated firms. Depending on how this is carried through it could mean some funders pulling out of the market. The key to avoiding this might be to ensure that the management and rate setting of the loans remain with the originating regulated lender, but that is by no means certain.

I now believe a change is likely to happen so watch this space.

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In a worst-case scenario brokers would have to become authorised for regulated mortgage contracts and advisors obtain the appropriate permissions. Although getting authorised as a broker is a lot easier than as a lender

NACFB | 37

Industry Insight

Leasing brokers: driving the shift to vehicle usership Is car ownership on its way out?

Andrea Davies British Vehicle Rental & Leasing Association (BVRLA)

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he shift from vehicle ownership to usership continues to pick up pace as an increasing number of businesses and individuals opt to lease or rent vehicles rather than buy outright.

There are many reasons for this shift. Economic uncertainty has instilled a reluctance to make large investments as people choose to keep cash ‘behind the clock’ should cashflow get tight or key investments be needed elsewhere.

Leasing a vehicle not only enables customers to keep more cash in the bank, it also removes risks associated with fluctuating residual values when the vehicle is sold. Who knows what impact Brexit will have on vehicle values if World Trade Organisation tariffs get applied? And what about residual values for electric vehicles?

These uncertainties are all contributing factors driving the shift towards the less risky option of leasing, and brokers are at the forefront of this market growth.

The BVRLA’s most recent Leasing Broker Survey showed that the combined leasing broker car and van fleet grew by 10% in 2018, with a similar 10% growth in new business. Long established at dealing in the business-to-business space, leasing brokers are increasingly dealing with individual customers and are adapting their business models to suit. According to recent BVRLA leasing broker funder 38 | NACFB

data, the proportion of personal contract hire (PCH) cars on contract has risen from 26% in 2013 to 57% at the end of 2018.

Whether buying or leasing, choosing a vehicle is a complex business.

There is a lot to consider, particularly around affordability, flexibility, suitability and maintenance costs, and customers are increasingly looking to the leasing broker community for expert advice and consultative services.

The impending arrival of Clean Air Zones and the merits and limitations of different fuel types are all things to consider when choosing a vehicle and it’s not always straightforward. Despite the negative ‘dirty diesel’ headlines, diesel is still likely to be the best option for those making regular long journeys or carrying heavy payloads. As it stands today, there is no suitable alternative to diesel for many commercial vehicle applications.

“

Although it still has its place, we continue to see a downward trend

Leasing a vehicle not only enables customers to keep more cash in the bank, it also removes risks associated with fluctuating residual values when the vehicle is sold

in diesel demand. The latest BVRLA leasing data showed petrol’s share of the new leased car market exceeding 50% for the first time, hitting 52% for the first three months of 2019, whilst new diesel registrations fell by 15% year-on-year, delivering a market share of 40%.

When it comes to fuel types, one size does not fit all and helping customers to identify the most suitable vehicle choice and finance

option for them is where leasing brokers really come into their own.

The BVRLA has over 300 leasing brokers in membership, all of whom adhere to a Code of Conduct and are subject to a robust ongoing audit regime. This provides customers with the confidence that the company they are dealing with is professional and meets the highest industry standards.

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NACFB | 39

Broker Voice

The road less travelled Chronicling the journey from lender to broker

Karen Bennett Partner FinanceWell

W

hen I made the tough decision to leave the corporate world and my great commercial colleagues, after 17 years, the goal was to stay true to my values and alongside Stephen Johnson and Nick Ellis-Calcott, to build a business from the ground up again. I wanted to get back to working closely with clients and their businesses. I missed that proximity.

I guess it is more common to see brokers transition into lenders rather than the other way around. A few friends have been honest and been surprised by this decision, challenging that we’re lenders and good ones at that, so why explore the broking business? Firstly, our businesses have always been built around brokers – we have always respected this profession immensely and are proud to move into this field. Over the years we have seen many who do it extremely well and would have prided ourselves on really understanding the channel. We would hope we have built businesses that work for intermediaries in terms of process and service.

I must say after a few short months the transition has already opened our eyes, so much so that we would advocate any lender reading this article to consider seconding their staff for periods to work with their brokers. I would suggest that until you stand in the shoes of those interacting with clients, working to manage

“

In the 20 years we have been in the commercial industry we would often discuss why our forms were so important to us, the irony is not lost on us that we now understand the inefficiency this causes by not allowing brokers to provide the colour on the client that you need

their expectations to an exacting timetable and requirements, drawing together all the appropriate information and working through what are in many cases drawn out and inefficient processes – you don’t really understand the true customer journey.

We often discuss many of these experiences in the office specifically reflecting on what we previously would have thought as the lender.

We are already finding processes or approaches we held dear now feel over-engineered and, in some cases, you question actually what they are really achieving – especially when considered through the lens of how it impacts the timetable and journey of the customer.

The contrast between what you think it is like to be a broker compared to the reality has been a revelation – and it is still early days.

From our experiences as a lender, like many ex-banking professionals that have become brokers, we feel we should be well placed to identify great client opportunities for the lender and present them in a way that makes the lender’s job easier. Already we have experienced the key frustrations of decisions you find hard to understand and information provided in a detailed summary not being fully read or considered. It really strikes you how hard facts in prescriptive forms restrict how you can portray the client and case story. In the 20 years we have been in the commercial industry we would often discuss why our forms were so important to us, the irony is not lost on us that we now understand the inefficiency this causes by not allowing brokers to provide the colour on the client that you need.

The role of disruptive technology in our lives and economies is everywhere. It is striking to think how our market could change, the opportunities to improve the customer journey seem vast given the volume of paperwork. How though can you marry these benefits with the brokers who have in most cases spent a significant amount of time getting that deep understanding of the client and their business?

We know well that the broker channel is seen as higher risk by some lenders and that you must have controls to manage the lending risk effectively. Those lenders that get the balance right and can harness the insight of the broker however will surely prosper, and perhaps technology could be the key.

We are excited about working closely with our lender panel and other broker specialists, some of whom we have known for many years. It will be great to build partnerships with many of those that we have respected as competitors, and I am sure it will really help educate us on the different ways lending can be done.

One of the reasons we are so excited about this opportunity is that we believe we will learn; it will take us outside our comfort zone.

If you do the same thing for many years it is inevitable that you become set in your ways. This move for us will shatter those blinkers and we believe make us more rounded professionals. Above all though it is just great to continue to be part of our wonderful market, with its camaraderie and relationships.

NACFB | 41

Opinion

What does the future hold for asset finance and leasing?

Tim Shand Business Development Director Rivers Leasing

I

n so many ways, leasing is an industry that doesn’t change all that much. The basic tenets of what we do, remain the same as always. We deal in the same product and the concept, as a whole, is as old as time. So how can it stay relevant today?

If we take the periodic fluctuations of the economy out of the equation for a moment – simply because they are in perpetual ebb and flow – we are living in a time where the SME market is growing at an unprecedented rate.

What people want from their lifestyle is necessitating a change in the way they work. As a result, the last decade has seen the rise and rise of start-ups and entrepreneurialism. Today, SMEs account for at least 99.5% of businesses in every main industry sector in the UK, and they’re spread around the country rather than being centred on London.

filling a gap in the market, but they’re also approaching what they do differently in order to meet demand in a sensible way.

These people and places are thinking differently, bringing in skills from different spheres including marketing and e-commerce, and challenging the ‘that’s the way we’ve always done it’ mentality.

It’s also making space, in a world that’s heavily reliant on algorithms and computerised box checking exercises, for human intelligence to bring loans together.

This is where the role of the broker is invaluable, working on a relationship basis rather than just a transactional one, adding value and getting the more challenging deals placed – not just the easy ones that are easy on paper. They channel the variety of opportunities and challenges to the right funders using their experience and customer knowledge, and they work on a geographic basis that matches the distribution of SMEs across the UK. Keeping in mind that SMEs account for at least 99.5% of businesses in every main industry sector in the UK and are spread out with around 10% in the North West, 8.7% in the South West and almost 15% across the Midlands.

But in many ways finance has not caught up. Reports continue to show that over half of the country has seen bank lending to SMEs fall over the last year, and at many banks SMEs are considered a less stable bet than bigger organisations (a strangely reductive generalisation).

A changing mindset is not to throw the baby out with the bathwater and to totally change the status quo, but it is to make additions and adaptations that reflect a forward-moving business environment and economy, working with real people in smaller businesses that do not always present in cookie cutter precision on paper. It is to stay relevant.

That has created opportunities for challenger banks, independent lessors and dynamic intermediaries. Not only are these entities

SMEs are very much the backbone of industry in the UK. For all the big shiny companies building end products like aircraft, there are

42 | NACFB

“

vast swathes of SMEs involved in the supply chains to make the big businesses possible. They make the literal nuts and bolts; the little nozzles and caps for big brand sunscreen bottles for example.

It’s not just big British products our SMEs support either. It’s part of an interconnected ecosystem of businesses; the hoses and grommets for Swedish cars and some of the unseen but imperative details of big brand German kitchen equipment. So it is vital that their growth is supported.

For all the big shiny companies building end products like aircraft, there are vast swathes of SMEs involved in the supply chains to make the big businesses possible. They make the literal nuts and bolts; the little nozzles and caps for big brand sunscreen bottles for example

Recognising that need and adapting with good corporate governance and practical, flexible policies and procedures to accommodate that changing market, is the future. It won’t always fit into a check box and it sometimes requires people to think outside the box where an algorithm will not, but it will make a difference to us all individually and collectively.

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NACFB | 43

Opinion

Lending to foreign nationals How the foreign investment boom is building global Britain brick by brick Charles McDowell MD Specialist Mortgages Hampshire Trust Bank

T

he UK property market has been, still is and always will be an attractive location to overseas buyers. You may think I’m having delusions of optimism, but I am as embarrassed as anyone of the complete shambles that the last three years have been within the UK’s political sphere.

However, there are many positives that we within the UK often fail to see. The stability, security and diversity of the UK property market due to its strong legal framework and regional offerings make it a long-term value proposition. This is not something that many countries can offer to overseas investors.

As it stands over one in three homes across London are now bought by foreign investors. Numbers are on the rise outside of the capital too, as investors take advantage of the rich variety in the UK property market. Different property types and regions offer varied return profiles, meaning there is something to suit every investor’s portfolio, offering security, as well as excellent value and rental yields.

Another key driver in demand from foreign investors is the weakening pound. We have experienced sterling depreciation since the Brexit referendum, with the value of the pound falling approximately 13%. This has meant that sterling valued property is cheaper for overseas buyers.

Undoubtedly, Brexit has had a significant impact on the UK’s reputation with foreign investors and although we witnessed a brief knee-jerk reduction in investment levels immediately after the referendum, the market has bounced back and continues to provide strong returns for investors.

44 | NACFB

That being said, foreign nationals are often turned away from high street lenders as their requirements are more complex in nature.

This is where specialist lenders can make a real difference.

At HTB, we love complexity. In these cases, experienced, flexible underwriting and knowledge of the risks involved are crucial in supporting the right decisions on complex borrowing requirements.

When lending to foreign nationals, we believe that expertise is not just in the underwriting process but must be delivered throughout the end to end process; from enquiry right up until the moment the borrower receives the money. Every case is different, and every client has unique requirements, so it is important to maintain a bespoke approach when designing and delivering tailored solutions.

We aim to provide the best of a specialist lender supported by the strength of a bank. Our expert and pragmatic approach to lending enables us to cater for underserved market segments. These niches are where we can deliver specific expertise and achieve sustainable levels of return. We are not a ‘flash in the pan’ lender; like your clients, we are here for the long-term.

“

We have experienced sterling depreciation since the Brexit referendum, with the value of the pound falling approximately 13%. This has meant that sterling valued property is cheaper for overseas buyers

MFS have several funding lines available and in times of financial uncertainty when we say yes, we really mean yes!

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Should you wish to speak to one of our Business Development Managers please call us on 020 7060 1234 or drop us a line at enquiries@mfsuk.com

Opinion

Making sense of abundance How the NACFB delivers the news that matters to its Members

Charles Webster Director of Client Services & Business Development Early Morning Media

T

ry as you might to stay on top of it, we are all used to a newly refreshed inbox each morning, full of news about Netflix releases or holiday offers, clothing discounts or something that briefly had a flicker of interest years ago but is now long forgotten. And that is without the slew of news sites and segregated information providers, firewalled publications and links that demand a mythical password.

One of the challenges facing any business or Association is how to keep in contact with clients and members in a way that adds value to both parties. We therefore trust you enjoy the daily NACFB Morning Briefing, providing you with the latest news in commercial finance, regulation, compliance, and the wider business environment.

Here at Early Morning Media, we partner with the NACFB to deliver their daily briefing. We cut through thousands of sources (of varying integrity and value) and deliver the salient events, developments and innovations that really set the agenda for your day.

A newsletter should fulfil its purpose by engaging, informing and fostering relationships – rather than be something else that just defaults into spam. In order to meet this expectation, and in an age of information overload, how do we collate the pertinent issues?

We are a very person-heavy organisation. Yes, we have our own automated searches to bring the stories to our attention; however, that is where the work starts. From the outset, we worked closely with the NACFB to define the brief – as well as categories and themes, key sources, optimum number of articles per day and, ultimately, to understand the audience.

46 | NACFB

The vast majority of our team work in editorial, and we have two editors dedicated to the NACFB service, ensuring consistency and continuity – hopefully it is difficult for the reader to tell which editor produced that day’s edition.

Our USP is the depth of the summaries we produce, giving the reader as full an understanding of the article as possible, yet also then linking through to the article in question should you wish to read the original (copyright allowing, of course).

Each evening, we are provided with the latest Association and Patron updates, which we include as we compile the edition overnight.

Once completed, we move the content into an NACFB-branded, responsively designed template, to mirror their own branding and house style. You will also notice that when you click the image at the top, you are directed to the latest online version of Commercial Broker, something that we update each month.

We like to think we are an extended part of the NACFB team; we are trusted to source and present agenda-leading content and work at a time when they can clock off for the day.

Anyone can sign-up to receive the daily NACFB Morning Briefing via: bit.do/MorningBriefing

“

A newsletter should fulfil its purpose by engaging, informing and fostering relationships – rather than be something else that just defaults into spam. In order to meet this expectation, and in an age of information overload, how do we collate the pertinent issues?

Decades of experience Specialists in fast non-status facilities from ÂŁ30k to ÂŁ250k

info@charterbank.co.uk | 01392 340150

| Auction Finance | Business Finance | Development Finance | | Bridging Finance | Farm & Land Finance |

Listicle

10

tips for creating a knock-out proposal Crafting a proposal ought to be more than simply writing down a client name, the amount they want to borrow, pressing send and keeping your fingers crossed

Philip Knight Credit & Risk Director Asset Advantage

8. Provide an explanation for the adverse

Y

10. Give us warts and all

In addition, if you can reduce the number of follow-up questions then you might encourage the funder to not even ask that one question.

It is essential that you tell a funder everything you know about a customer. As tempting as it might be to forget to mention that the customer has, say, just moved premises, there is almost zero chance that a funder won’t find out this information. Not only is the internet the underwriter’s friend, credit agency reports suck in all kinds of data.

Our thinking goes: ‘If they didn’t mention that, what else didn’t they tell me?’.

ou should treat every proposal as a presentation not only of the customer but of the brokerage.

A well put together proposal isn’t just about the deal; they also say a lot about the person who wrote it. A good reputation for comprehensively put together deals will go a long way to ensuring yours get looked at first and may also sway a decision in your favour.

Building a good proposal doesn’t require strong writing skills or hours of work. Succinctness ought to be the order of the day. Getting the customer to do the heavy lifting on some aspects is not only a time saver but avoids any detail being lost in translation.

So, in ascending order let’s start with top tip number ten...

48 | NACFB

9. Don’t copy and paste Nothing frustrates me more than proposal information which has clearly been copy and pasted from the customer’s website.

Like the school essay that has been lifted from Wikipedia it automatically implies, even when that wasn’t intended, that the writer really couldn’t be bothered to do any original work.

Most funders will sensibly avoid lending to businesses with adverse information.

This can be as obvious as them being loss making and or less visible in the form of a CCJ. If you have a customer with less than sparkling information, then ask them why they think that it shouldn’t affect their credit rating.

5. Provide up-to-date financial information Don’t rely on the funder being able to source up-to-date financial information.

The combination of ten months to file and abridged accounts often means that there can be very limited information in the public domain, so obtaining and supplying the latest set of full accounts speeds up the underwriting process.

2. Explain what your client does It’s not always obvious what a customer’s business is, so try and explain it in straightforward terms: what it is they do? Who they do it for? In my experience customer websites are a sea of buzz words and marketing speak and rarely actually tell you what they do.

4. Tell us who your client is Businesses are run by people, so the more credibility you can add to them the better.

Sometimes this information can be found via LinkedIn, but if you know that the MD doesn’t have a profile, then perhaps ask them for their CV. Personalising the proposal in this way adds depth to the proposal that pure numbers can’t achieve.

3. Share any schedule of existing finance

7. Let us see the provenance Let the funder know where the deal came from. A huge amount of comfort can be taken from the fact that the customer or supplier relationship is a long standing one. By the same token, don’t be tempted to fudge the source when it’s less strong; remember tip number ten.

If the customer has other borrowing then let the funder know what they have, what’s outstanding and what it relates to. Sometimes funders will take comfort from other lenders working with the client, other times they might be scared off. But if nothing else, it gives you visibility to whom the customer is already borrowing from.

6. Build the business case

1. Tell us something we don’t already know

Every genuine application for finance is underpinned by a genuine need for the finance. So, the more background you can give to the need for the requirement the better. Perhaps they need the additional IT kit because they are so busy that they have had to hire new staff. It’s rare that any sensible business raises finance on a whim, most will have carried out at least a cursory cost benefit analysis or have budgeted for the purchase.

The best proposals are the ones which add value to the bare information. They lift the curtain on the business model and give me the hook to approve the proposal. They demonstrate an interest in the customer and show the work that has gone into qualifying and presenting the deal. It doesn’t have to be the most important element of the proposal, but that little nugget of information can make all the difference.

NACFB | 49

Five Minutes With

​ ive F Minutes with: Kate Silcock Kate Silcock Business Development Manager Lloyds Bank

Describe your role in ten words or less?

Challenging, rewarding, motivating, fastpaced, solution-oriented, team-working, responsible, committed, flexible, focussed.

In your view what are the key elements to a successful deal?

Understanding the client and their long-term vision, not just their short-term needs.

What advice do you have for the modern commercial finance broker?

What is your favourite SME success story?

I worked with a manufacturer based in the North West. They were looking to purchase their own premises, so they didn’t have to rent their space any longer but didn’t have a deposit. We worked with another funder to help them with the deposit – a great team approach to find a collaborative solution for the client. Since then they have gone from strength to strength, and we’ve been there to help with their long-term success.

Who do you admire most and why?

Understand the client need from offset.

Keep it simple and inform clients of all the stages, start to finish. Communication is key, and make sure to set expectations and explain why information is needed from the client.

As a football fan, I’d say Cristiano Ronaldo as he came from a poor family and moved away as a young child to pursue his career.

He’s dedicated to his profession but also makes time for his family and stays humble.

Where is your favourite place in the world?

What was the last great book you read?

New York.

The Secret by Rhonda Byrne.

50 | NACFB

What recent professional accomplishment are you most proud of?

When Lloyds Bank introduced a unique Asset Finance offering for non-specialist brokers, I worked hard to educate brokers and generate new opportunities for them and their clients. This has been hugely successful with fantastic broker and client feedback.

If you could have dinner with anyone from history, who would it be and why?

Marilyn Monroe, an idolised female icon from the past who changed a lot of things.

How do you think commercial lenders can improve client experience?

Be flexible and creative. Speak to the client to really understand their needs and long-term goals. Talk through the process, explaining what’s involved and why and keeping them informed throughout.

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