Issue 77 FEBRUARY 2020
Broker COMMERCIAL
The award-winning magazine for the National Association of Commercial Finance Brokers
18 RELEASING THE SQUEEZE
24 RETURN TO NORMALITY?
Trusting the broker as an authoritative source of advice
Out of the woods yet? Entering a new political era
How we can help kick the economy back into gear
36 APPLES AND ORANGES Demystifying the nuances of lender interest rates
46 SCALING NEW HEIGHTS The importance of cranes to British construction projects
Contents
In this February issue NACFB News
Special Features
4 6 8 11 12-14
24-25
Note from Graham Toy Updates from the Association Headline sponsorship Industry news round-up Patron news
27-28 30-31
33-34
36-38
MFS: Light at the end of the tunnel NACFB: Out of the woods? CAF Bank: Lending with purpose Nucleus Commercial Finance: Today’s tech tomorrow The Sancus Group: Apples and oranges
Industry Insight 40-41
42-43 44-45
36
Opinion & Commentary 46-47
Case Study
48 50-51
16
52-53
Trade Finance Global: Breaking the glass ceiling
Patron Profile 18-19
Allica Bank: Releasing the SME squeeze
Asset Advantage: Survival of the fittest Hope Capital: Time to re-bridge Asset Finance Policy: Difference in Charges
54
56
58
Chenalfame Ltd: Scaling new heights Relendex: Peer-to-peer in 2020 UK Finance: Collaboration underpins success Ultimate Finance: Combatting rising insolvencies LendInvest: An industry in revolution Listicle: This year’s growth industries Five minutes with: Dean Williams, Compliance Officer, NACFB
KIERAN JONES Editor & Feature Writer
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@nacfb.org.uk
NACFB: Broking on your terms MACKMAN Design & Production T 01787 388038
Ask the Expert 22
Further Information
MAGAZINE ADVERTISING T 02071 010359
Compliance Update 20
50
Helen Lam: Young lives vs cancer
40
mackman.co.uk
NACFB | 3
Welcome
Graham’s Note
A
s we head further into 2020, I wanted to take the opportunity to share with you some of our priorities for both this year and beyond. The challenges that we face as a membership organisation are arguably no different from those faced by many of our Members and their SME clients. We survive and succeed by understanding our market and having clarity of purpose. We must blend this with the agility to anticipate and embrace change. Thinking the unthinkable is now the norm. With this in mind, we have developed our mission into four strategic priorities to ensure that we keep a tight grip on ensuring we add value at every turn.
Graham Toy CEO | NACFB
To ensure we continue to be the professional association of choice, our horizon scanning needs to be alert and insightful. Our Members are relying on us to be their eyes and ears. Innovation and disruption are all around us so our agenda seeks to be on the front foot in understanding how the future might impact on our sector as well as participating in the drive for new ideas. Professional and regulatory expertise is a key responsibility. Our passion to protect and grow the professionalism and reputation of Members has never been stronger and our plans for this year are to focus on a more collaborative approach with Members and Patrons to help demonstrate an inclusive and engaged approach to Member due diligence. A key measure of success is the degree to which we achieve sound and productive engagement with all our stakeholders. New IT systems and a comprehensive programme of events are just two initiatives which you will be hearing about this year. Integral to all these plans is the need to contribute to the prosperity of our Members. Whether this is by identifying and minimising risk, or by saving costs or generating income, we continue our quest to add to the value portfolio, as well as being able to monetise the value of membership.
4 | NACFB
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NACFB News
Association updates for February 2020
COMMERCIAL FINANCE
Registration opens for NACFB Expo 2020
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egistration is now open for the NACFB Commercial Finance Expo 2020. The biggest industry event of the year returns to Hall 3A at Birmingham’s NEC on Wednesday 17th June 2020 from 9.30am until 4.30pm. We’re immensely proud of our flagship annual event. The NACFB Expo remains the largest event of its kind in the UK and the best place for finance intermediaries to network with over a hundred lenders all under one roof on the same day. With attendance increasing 24% year-on-year for the last two years, we’re already predicting that 2020’s show will be the biggest we’ve ever staged. At the time of going to print more than 90% of stands have been secured from a wider range of lenders than ever before. The event is about doing business, networking and education, but it is also an entertaining affair with a well-established and good-natured rapport between all exhibitors and attendees. It remains one of few places that brokers can see all their lenders and funders in one place on the same day.
register early as we are projected to get very close to capacity.” The Association’s Chair, Paul Goodman, added: “For me, our Commercial Finance Expo has always been a place to do business – first and foremost. I have seen deals made between brokers and lenders of all sizes, and I’ve also seen connections forged that continued to be fruitful for years after. “The event is now in its eleventh year at the NEC and we’ve had to increase capacity in order to accommodate the volume of delegates as well as the increased stand-size of exhibitors. The quality of the conference sessions and workshops on offer is reason alone to attend, and our expert speaker sessions can offer direct support and advice for your brokerage.”
Date for your diary NACFB Commercial Finance Expo
Speaking of the Association’s return to Birmingham in June Graham Toy, NACFB CEO, said: “This will be my third Expo as CEO of the Association, and as a former lender, I am well aware of the value in attending the largest finance event of its kind.
Wednesday 17th June – 9.30am–4.30pm
“The quality of both the exhibitors and the variety of delegates ensured that the day was always the first trade event we marked on our calendars each year.
Early bird registration is now open via commercialfinanceexpo.co.uk
National Exhibition Centre, Hall 3A Birmingham, B40 1NT
#CFE2020 “Looking back at the attendance figures for the last five years reveals a very positive trajectory. I would encourage anyone interested to 6 | NACFB
Headline Sponsorship
Lloyds Bank announced as 2020 NACFB headline sponsor Association welcomes high street giant as returning headline sponsor – enhancing specialist support for brokers across the UK
T
he National Association of Commercial Finance Brokers (NACFB) is thrilled to announce the return of Lloyds Bank as the trade body’s 2020 headline sponsor.
Building upon their support over the last two years, the sponsorship will see Lloyds Bank partner with the NACFB to further promote the vital role the broker market plays for UK SMEs. This year’s headline sponsorship will see Lloyds Bank take prominent position at all flagship and regional events as well as online and in the Commercial Broker magazine. Andy Bishop, National Director of Commercial Broker Development, SME and Mid Corporate Banking at Lloyds Bank, said: “We are proud to once again be headline sponsor for the NACFB in 2020 and our aim is to help deliver more education, innovation and value across this highly competitive market. “The NACFB’s commitment to transparency – coupled with their advocacy of the many benefits to customers of using a professional intermediary – are just a few of the many reasons why returning as headline sponsor for the third time was an easy decision for us. “We pride ourselves on the relationships we have with NACFB brokers and recognise that the bank they recommend to their clients is a reflection on them and their company’s reputation. As founding NACFB Patrons, we look forward to further enhancing our relationship with the Association and its Members.” Graham Toy, NACFB CEO, spoke of Lloyds Bank’s returning sponsorship: “I speak on behalf of everyone at the NACFB when I 8 | NACFB
say we couldn’t be happier to have Lloyds Bank return as headline sponsor for the third time. “Their support will stand us in good stead for the inevitable challenges we will face in 2020 and beyond, and I would like to extend our gratitude to Andy and the team for their ongoing support – both to the NACFB and the broker market.” “Our mutual commitment to championing intermediaries, as well as our focus on supporting the delivery of positive outcomes for their clients, is hardwired into the DNA of both organisations,” Graham added.
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We pride ourselves on the relationships we have with NACFB brokers and recognise that the bank they recommend to their clients is a reflection on them and their company’s reputation
Introducing the NACFB’s inaugural Commercial Broker Awards 2020
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Industry News
Industry News “levelling up” of economic performance across the UK. It is understood that Sajid Javid will announce a shake-up of the way the Treasury allocates investment in an attempt to even up the spending disparity between UK regions.
1 1. Shortage of financing for EVs could restrict market growth Although electric vehicle (EV) sales are continuing to increase, a shortage of financing options could restrict the market’s growth and negatively impact the UK’s ability to meet carbon emission targets, according to Shoosmiths. The law firm said financing packages on offer from captive and non-captive finance providers have failed to adapt to distinctive characteristics of EVs.
4. SMEs owed £50bn in late payments New research from digital banking platform Tide revealed that UK SMEs are chasing an estimated £50 billion in late payments with the average small business chasing five outstanding invoices at once, wasting an hour and a half every day. Londonbased businesses are the hardest hit with an average of seven invoices outstanding. Oliver Prill, Tideʼs chief executive, said: “It is shocking to see exactly how much time SMEs, and particularly the self-employed are wasting by having to chase clients to pay promptly.”
2. Self-employed tax crackdown called into question Groups representing the self-employed are calling into question the government’s pledge to review its tax avoidance crackdown around contractor use. The new rules, known as IR35, would make sure only genuine self-employed workers were paid off-payroll, allowing companies to reduce their tax liabilities. The Association of Independent Professionals and the Self-Employed have said the new rules were “precipitating a crisis” and that reviewing them now was “inadequate”.
3. Javid sets date for Budget to ‘level up’ UK regions The Chancellor has confirmed the 11th March as the date for a tax-and-spend Budget designed to begin a promised
4
6. City says strength must be maintained post-Brexit The financial services and banking industries paid a record £75.5 billion in taxes last year, according to a report for the City of London Corporation. The total was up on the previous yearʼs £75 billion and comprised of £33.4 billion in direct taxes, including corporation tax and business rates, and £42.1 billion collected from employees and customers. Taxes from the sector made up 10.5% of the Treasury’s entire tax take. The report added that financial services firms employ 1.1 million people across the country – around 3% of all UK employment.
7. Accounting the most stressful task for micro-businesses A study by Starling Bank has found that micro-businesses in the UK spend approximately 15 hours every week on finance administration. The report revealed that micro-firms (0–9 employees) spent 19% of their time on financial admin work, equating to just under 10 weeks a year. In addition, 33% of respondents claimed that financial-related work impacted their personal life. The most time-consuming and stressful finance task was accounting, which took up 1.7 hours each week.
5. Data-drive future from financial services sector Proposals for a data-focussed future for the UK financial services sector have been outlined by the Bank of England and the FCA. The strategy details an increased focus on using advanced analytics and automation techniques to gain a better understanding of how each market functions. The FCA hopes this will improve the way the organisation predicts, monitors and responds to firm and market issues.
7 NACFB | 11
Patron News
Patron News Lloyds announce new £18bn lending commitment
Nucleus: UK business performance exceeds expectations in 2019
Lloyds Bank has committed to lending £18 billion to UK businesses over the course of 2020, the same amount as it promised in 2019 despite the uncertainties of the year ahead. The announcement underlines to existing and new businesses that the Group is committed to supporting UK businesses through 2020 and beyond.
Research from Nucleus Commercial Finance found that the majority of businesses have performed better than expected in 2019. Despite political and economic uncertainty, 55% of UK SMEs said that their business performed better in 2019 than 2018.
This £18 billion will support entrepreneurs looking to start a new business, micro-businesses seeking to scale-up and small businesses considering trading internationally for the first time. It will also support established mid-sized businesses and large, multinational corporations seeking further growth. This new lending commitment for 2020 follows on from the Group’s pledge in 2019, also for £18 billion. Despite the continuing challenging economic environment, the Group is not lessening its backing for British businesses and is on hand to support their growth aspirations. António Horta Osório, chief executive of Lloyds Banking Group, said: “In 2020, our commitment to supporting businesses is undiminished and we will lend up to £18 billion to businesses across the UK. We know that during uncertain times our customers look to us not just for financial support but also for expert guidance to navigate the challenges they may face. Whatever the future brings, we will continue to support UK businesses as part of our commitment to help Britain prosper.” 12 | NACFB
This success was most prominent among young business owners (aged 18-34), with nearly three quarters (74%) saying their business had performed better in 2019, compared to just 39% for those aged 55 and over. The research also found that businesses in the North East fared the best in the last twelve months with 74% reporting improved performance, compared to 54% in the South East and just 45% in Yorkshire and Humberside. When asked what their business ambitions were for 2020, delivering greater profit came out on top, with 36% of SME owners choosing this option. In order to achieve these ambitions, more than half (54%) of business owners are planning to change their business strategy for 2020 compared to the previous year. This was most popular among younger entrepreneurs, with eight in 10 looking to change their business strategy, compared to 57% of those aged 35-54 and just 36% of those business owners aged 55 and over.
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Patron News
Patron News Tuscan Capital secures additional funding
Ultimate provides more than £1.6bn of funding in 2019
Bridging lender Tuscan Capital has secured additional new funding from a UK-based provider to further support its growth plans into 2020 and beyond.
Ultimate Finance broke its own annual lending record by providing funds of more than £1.6 billion to SMEs across the UK last year.
Complementing its existing debt-funding lines, both of which remain in place, Tuscan’s third funding facility is a forward flow-funding agreement which, according to the lender, will enable it to broaden its broker-facing product range whilst providing capacity to increase its loan book size to over £150 million. Colin Sanders, Tuscan Capital’s CEO, said: “Signing the new funding facility as we draw to the end of our second year’s trading sends a positive signal to the market that we expect to continue to grow and expand throughout a challenging economic period. “Our proposition has been very well received by our broker partners. This additional capacity means we can continue to offer certainty of funding as the market reacts to the recent general election outcome, and all its consequences, throughout 2020. “As a result, Tuscan Capital now expects to extend both its product offering and geographic reach to support a long-term and sustainable business that will shortly burst through the milestone of £100 million in originations.”
14 | NACFB
The newly released figures show that Ultimate Finance finished the year with a record high loan book of £265 million. Further growth in the size of the company’s client base means Ultimate Finance ended the year supporting more companies than ever. This growth is on the back of continued focus on strengthening relationships with introducers across the UK and another year of strong development of Ultimate Finance’s asset-based lending portfolio. Highlights include the average size of Invoice Finance deals more than doubling with facilities of up to £5 million, Asset Finance hitting a new annual high, with the loan book exceeding £55 million and Ultimate’s Bridging Finance loan book growing close to £40 million, an exceptional year-on-year increase of 23.5%. Josh Levy, CEO at Ultimate Finance, said: “Ultimate Finance has prospered in 2019 against the backdrop of an unsettled year for many UK businesses. Uncertainty surrounding Brexit and the general election were contributing factors to business investment falling in five of the last six quarters, however it is encouraging to see business confidence returning.”
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Case Study
Breaking the glass ceiling Financing thirty-four million sustainable glass jars
Nikhil Patel Analyst Trade Finance Global
A
company in the packaging sector approached Trade Finance Global (TFG) with an urgent request. The company, which had been trading since 2009, was selling mostly plastic packaging into the retail market, with only 10% of stock being glass based. However, due to environmental and sustainability concerns, as well as demand from their retail customers who were rapidly changing direction towards more sustainable packaging, they wanted to move towards working with an overseas-based glass manufacturer to produce jars for the goods. Orders grew, but due to the new supplier-trade relationship, the company could not access pre-shipment finance to ease working capital before the product reached UK ports. Revenue was set to double and this was based on the increase in glass requirement and competitors being unable to source suitable suppliers. TFG worked with White Oak IE to raise a £500,000 revolving trade finance facility. Having consistently grown the business since 2009, the company required quick support to assist their growth in the food and beverage industry. The contract to supply 34 million glass jars was crucial as it was worth £2.3 million spread across 195 separate containers, which were delivered weekly. TFG structured a revolving purchase facility of £500,000 +VAT, allowing a crucial bridge between the payment of their suppliers and the raising of debtor invoices. This trade finance facility assisted a fast-growing business with a sudden change in their supply chain and buying patterns. Consumers are increasingly putting pressure on corporates and retailers to be accountable for sustainable supply chains and to 16 | NACFB
reduce plastic packaging. At TFG, environmental and sustainable governance (ESG) is at the heart of our business. We were delighted to structure this innovative facility, which helped bridge the gap between payment to the supplier and raising of the debtor invoice to a UK business. We hope to continue working with this business and also our funding partners to support the long-term sustainable growth which is also in line with the UK’s sustainable development goal’s commitment to net zero emissions by 2050. Andy Beck, managing director at White Oak IE, who funded the deal, said: “We were delighted to provide a £500,000 revolving trade finance facility to support this fast-growing creative packaging company, which has an excellent track record of delivering highquality product into the food and beverage industry. This was an excellent opportunity to work together with TFG who really understand trade finance and made the whole process run smoothly. We look forward to continuing to support the growth of our client and other prospective clients with TFG.”
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Trade Finance Global structured a revolving purchase facility of £500,000 +VAT, allowing a crucial bridge between the payment of their suppliers and the raising of debtor invoices
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Patron Profile
Let’s release the squeeze on SMEs Partnering with brokers to empower Britain’s small businesses
Nick Baker Head of Intermediaries Allica Bank
B
efore joining Allica Bank, I spent thirteen very enjoyable years as a broker and experienced first-hand the growing challenge SMEs have finding solutions right for them.
The problem is that it’s becoming harder and harder for the big banks to meet the needs of small business owners. SMEs are finding themselves squeezed between retail bank customers and large corporate clients. Then, when considering different finance products, they’ll often end up on the phone to a call centre rather than speaking to a dedicated relationship manager with knowledge of their local area. It’s created a tremendous opportunity for brokers to plant their flag as the go-to advisers for SMEs exploring their options; able to provide a unique blend of local awareness and financial expertise. After all, in today’s climate of uncertainty and misinformation, authoritative sources of advice to help businesses choose the right products have never been more pertinent. Actually, I’m starting to think I left my brokerage too early. 18 | NACFB
Expert banking for business Britain At Allica Bank, we’ve recognised this opportunity by putting brokers firmly at our core. Securing our banking licence in 2019, our team has built a contemporary business bank – one powered by modern technology but guided by traditional values. Currently, we offer commercial owner-occupied and commercial investment mortgages, however Allica Bank’s ambitions go far beyond that. We will develop a full suite of banking products to meet
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In today’s climate of uncertainty and misinformation, authoritative sources of advice to help businesses choose the right products have never been more pertinent
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For me, though, what’s most significant is how Allica Bank and brokers work in partnership to empower SMEs to succeed. We will do all we can to support you as you look for the best solutions for your clients
the needs of small businesses, with business savings accounts and an asset finance proposition also coming later this year. Real, human relationships will always be a central part of our service. We have relationship managers based across the UK – in the North West, West Midlands, East Midlands and London, with further regions to follow – who are all experts on their area and embedded in their respective local business communities. What’s more, you’ll never get a ‘computer says no’ decision from us. Our credit team looks individually at the strength of every application and take far more than just a few data points into account.
to drawdown. You’ll be able to login ahead of any client meetings to get the latest on its progress and you’ll get regular status updates too.
The team has been working incredibly hard the past 18-months to build Allica Bank’s introducer proposition specifically with brokers in mind. Our combined experience means we’ve been able to make the deal process as simple, straightforward and intuitive as possible. As with everything we do at Allica Bank, there are three key principles we’ve been focussing on to turn this into reality:
We propose simple, honest and useful solutions. We don’t overclaim but do deliver.
1. Clarity I know more than most how important client relationships are for brokers. That’s why a top priority for Allica Bank is making sure we’re always clear about what we can offer you and how a deal is progressing. Our dedicated Introducer Dashboard means brokers can easily submit applications and manage the deal all the way through
2. Consistency All that said, human support is a central component of our service. So, while you can easily access plenty of information yourself, there’ll always be a dedicated and highly experienced account manager available on the other end of the phone.
3. Collaboration For me, though, what’s most significant is how Allica Bank and brokers work in partnership to empower SMEs to succeed. We will do all we can to support you as you look for the best solutions for your clients. Whether it’s by providing marketing material to help explain what we do, or one of our experts talking through a potential transaction with you on the phone. Working effectively together is what matters. If you’re interested in learning more about Allica Bank or have a client that could benefit from our services, then please get in touch via introducers@allica.bank
NACFB | 19
Compliance
Broking on your terms Utilising the right documentation can help your business prosper James Hinch Senior Compliance Officer NACFB
M
ember prosperity can be measured in many ways and can come in many guises. Starting with bottom line profitability, is as good a place to begin as any, and both our mission and strategic priorities focus on helping Member businesses prosper. Helping our Members run their business professionally with documentation that protects their income fits this agenda. Many of our Members will know that we offer a full suite of model office documents and included in this library is a Terms of Business which is provided for Members to tailor to their business needs. This is such a critical element of a broker’s business, that we have recently undertaken a comprehensive review of the document which has included the appointment of lawyers for an external perspective. What has surprised us, is that some Members often don’t see the need for a Terms of Business, especially in the early days of starting their business. New brokers in particular, prioritise developing and growing a client base coupled with establishing a network of lenders to accept business. This could turn out to be a short-sighted decision. One of our roles, which is not often publicised, is our activity in 20 | NACFB
receiving and researching complaints from Membersʼ clients. This activity provides us with valuable insight into the client journey. You may not be surprised to learn that a good proportion of these complaints relate to disputes around fees. In most instances the presence of a robust and professional Terms of Business puts the matter to bed, where one does not exist – or is poorly drafted – this can present difficulties. Taking a different perspective, our whole industry is based on good customer outcomes and embracing the principle of treating customers fairly. If a broker does not advocate this approach and is less than transparent with the fees and costs and when they become payable, it could be argued that they haven’t fully understood their responsibilities. In essence, the broker needs to understand the potential risk to their business and mitigate it with the adoption of an appropriate Terms of Business. Failing to specify terms from the outset can have a significant financial consequence for your business and your bank balance. For example, a broker may be thinking that a fee from the client is due before commencing any work, and the client may think that a fee is not due to be paid either until the loan is drawn or that nothing is due to the broker because they will be remunerated directly by the lender. If the client has not agreed any terms to pay a fee this could make recovery of the payment quite challenging. Finally, it is important to ensure that your Terms of Business relates to your enterprise. Every business is different, so seek legal advice to help construct your Terms of Business. You can then be confident that they are bespoke for your business, rather than running the risk of assuming the template will be an automatic fit.
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Ask the Expert
Young lives vs cancer
Q Helen Lam Fundraising Engagement Manager CLIC Sargent
Who are CLIC Sargent?
CLIC Sargent: Young Lives vs Cancer are the UK’s leading children and young person’s cancer charity, providing support to families across the UK, both during and post cancer treatment and providing bereavement support if the worst were to happen. We are the NACFB’s charity partner for 2019/20.
What does CLIC Sargent do?
CLIC Sargent limit the damage cancer causes beyond just a young person’s health. Last year CLIC Sargent provided bespoke support to 6,733 children and young people with cancer. Those first days, weeks and months after a cancer diagnosis are overwhelming, when young cancer patients are confused, scared and anxious. From the moment of diagnosis, we’re there and ready to help families cope. Our care teams provide day-to-day support for each child, young person and family, from information and guidance to clinical care and specialist play during treatment. 22 | NACFB
What are the best ways for smaller businesses to raise money for charity?
&
If a company can’t raise funds directly, how can they raise awareness?
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Engage and motivate your colleagues by taking on a sport or challenge event together. Not everyone can run a marathon, so why not all take on a combined challenge, each pledging to walk a certain number of miles a day? This way you can get your external partners and clients involved too. Alternatively, a really simple fundraising idea is to run a sweepstake or host a quiz night.
Can you share a CLIC Sargent success story?
Two in three parents are already in debt as a result of their child’s cancer diagnosis. It’s simply not right they should also have to worry about funeral costs as well, if the unthinkable happens. This is why we campaigned for the government to create a Children’s Funeral Fund. In July 2019, after two years of tireless campaigning by CLIC Sargent, cross-party MPs and our supporters, the government announced the implementation of the Children’s Funeral Fund. The move means grieving parents no longer have to fear being plunged into debt by the cost of their child’s funeral – something no one would ever think of saving for.
CLIC Sargent campaign the government and policy makers to make positive change happen for families facing a childhood cancer diagnosis. Companies can show their support by signing a petition, sharing a post on social media or alternatively you can volunteer your time to help others – even joining a cheer squad at a major sporting event.
How much does the NACFB plan to raise for CLIC Sargent? The ambitious team at the NACFB are hoping to raise an incredible £30,000 for CLIC Sargent and are already well on their way to achieving this!
How can I donate?
You can create your own Just Giving fundraising page with the money going directly to the charity or donate through the NACFB’s page. You can also very simply donate directly to the CLIC Sargent website. Visit: justgiving.com/fundraising/nacfb
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Special Feature
Advertising Feature
There is light at the end of the tunnel The economy needs to be kick backed into gear. Here’s how… Paresh Raja Chief Executive Officer Market Financial Solutions
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ast year proved to be a testing time for those of us involved in the property market. The government’s failure to strike a consensus on Brexit put investors and businesses in a precarious position. There was simply no guarantee as to what the future held, making it virtually impossible to plan, budget and invest in the long-term. This was made more complicated by party divisions and the fact a minority-led government was in power. It seems as though the most recent turn of events, however, could once more instil some certainty in the market. The government’s decision to call a general election in December was seen by many as a last-minute bid to break the political deadlock in Westminster. Theresa May’s successor Boris Johnson ran a campaign based on one pledge – getting Brexit done. Brexit also featured heavily in Labour’s election campaign, though some would say their position was undermined by their lack of cohesion on the issue.
A return to political normality? With the dust now settled on the 12th December general election, the UK now faces a Conservative-majority government in power for the next five years. It seems Johnson’s gamble has paid off, but is it enough to inject new life into the financial and property markets? In the immediate aftermath of the general election result, there were some notable gains on the stock and currency markets. The value 24 | NACFB
of the pound jumped to a three-and-a-half-year high against the euro, while the FTSE 100 share index rose by 1.1%. One could argue that these market movements reflect new investor confidence and appetite for UK-based investments. Nonetheless, many of the early gains were quickly erased in the coming week once the newly elected government alluded to the possibility of no-deal Brexit. What’s more, while house prices are projected to rise by 2% in 2020 according to Rightmove, there are still questions over whether prospective homebuyers are confident enough to now commit to new property investment opportunities given Brexit still has not been technically resolved.
“
History has demonstrated the resilience of bricks and mortar as an asset class able to weather periods of economic and political instability, all the while maintaining consistent capital growth over the long-term
Following the eventual passing of the withdrawal agreement last month, the economy now needs a boost to reassure investors about the long-term viability and attractiveness of UK-based assets. Importantly, this encouragement cannot and should not only come from the government. Rather, the onus also falls on private companies who have to think creatively and provide the stimulus needed for investors to act on prospective investment decisions.
Boosting the economy through enticing incentives Here at Market Financial Solutions (MFS), we have been supporting the financial needs of domestic and non-UK residents in need of fast access to capital. In our experience, Brexit has done little to dampen the appetite of our private clients in pursuing new property investment opportunities. However, for property investors in need of loans quickly, political uncertainty has made it difficult and time-consuming for borrowers to acquire finance from mainstream lenders . High street banks adhere to a strict application approval process, and do not offer the flexibility and bespoke services offered by challenger banks and those lenders operating in the specialist finance market. December may traditionally be a quiet time of year for the property market, but MFS sought to take this interval between the general election and Brexit to shake-up the real estate market by offering new low rates on our bridging loans. While we understand there is a degree of hesitancy at the moment, our new rates are designed to ensure that those keen to take advantage of these quieter months are supported by competitive bridging loans. These new rates apply to a dedicated ÂŁ50 million fund which is now live and receiving applications.
Looking to 2020 History has demonstrated the resilience of bricks and mortar as an asset class able to weather periods of economic and political instability, all the while maintaining consistent capital growth over the long-term. The 2019 general election signifies that certainty is on course to once again return to the market, and as investors and businesses look ahead, now could be the opportune moment to take advantage of property. As a supporter of the UK economy, MFS will continue to play our part to ensure property investors have access to the finance needed to complete on lucrative investment opportunities as soon as they arise, stimulating investment and boosting the economy.
“
For property investors in need of loans quickly, political uncertainty has made it difficult and time-consuming for borrowers to acquire finance from mainstream lenders
NACFB | 25
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Special Feature
Are we out of the woods yet? We may not have found ‘x’ on the map – but at least we’ve found the map Norman Chambers Managing Director NACFB
I
f you listened carefully in the House of Commons in early January, you could hear the faintest of pings as the cooking timer went off – it was the signal that the Prime Ministerʼs ‘oven-ready’ Brexit Bill had sailed through the House of Commons. Quietly and without much triumphalism, Boris Johnson’s version of the Bill that Theresa May had failed to get through so many times, passed into law. Gone was the log jam, gone was the judicial debate and gone was the unending uncertainty. Whether you favour it or not, Brexit is happening, and we must all make the best of it. That means it is imperative – and in all our interests – that, in the forthcoming negotiations on our future trading relationships, the government secures the best possible trading links with the EU for the sake of British jobs, businesses and our economy.
Beyond Brexit There have been whispers that from here on in, the very word Brexit will cease to be uttered publicly by government officials, no doubt in a bid to maintain some semblance of collective closure. Johnson’s thumping majority, coupled with a sustained period of rudderless opposition, will see him able to establish his domestic agenda and, with the anarchic Dominic Cummings as a key adviser, we can expect a programme of reform and bureaucratic efficiencies. There have though been further clues to the direction the government will take in the next five years.
and development, the establishing of a National Skills Fund, and the tabling of changes to business rates – standard Conservative promises one might think. But this new government will be unlike any previous Conservative administration; in its lurch to the right to secure election victory it also scooped up an unlikely set of voters; those of the former Labour northern and Midland heartlands – the so-called Red Wall. Johnson has been quick to reassure this new voting bloc that he has no intention of taking their trust for granted. As such, long overdue investment in public infrastructure has been muted, as well as a series of measures designed to boost towns, including the towns fund and a cultural capital programme. Perhaps boldest of all is talk of a North of England World Cup bid, celebrating the region’s footballing heritage. Such measures, if delivered, will be welcome news to the thousands of SMEs who have yet to feel too much heat from a Northern Powerhouse project that has failed to produce much light either.
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The NACFB is calling for tax reliefs and incentives to support UK SMEs with their ambitions to grow and invest in new technology
Last year saw two Queen’s Speeches in as many months, the second of which saw promises to increase tax credits for research NACFB | 27
Championing the broker Results from last year’s NACFB broker survey (see Januaryʼs issue of Commercial Broker) showed the Association’s broker Members alone were responsible for at least £15 billion worth of funding to UK SMEs. We will be proudly utilising this data throughout the year when engaging with key policy, regulatory and industry stakeholders. The renewed certainty, clarity and clout with which we can open a dialogue, means that in 2020, when the NACFB starts a conversation, others will sit-up and listen. We’ll be certain that our efforts to effect meaningful change will also feature the direct views of our membership, sharing what they would like to see from both the government and the regulator. We asked all our brokers what changes they would most like to see in 2020, and the results were conclusive. Most brokers want to see a simplification of the compliance process (65%), coupled with greater clarity of the FCA’s perimeter (16%) with others calling for more regulatory protection for SMEs (9%). Lenders too are drawing up wishlists and expectations for the incumbent government. Many we spoke to welcomed – in the short-term at least – a working majority and the certainty it brings. However, Avamore’s senior underwriter, Philip Gould, remained cautious of Brexit’s short-term impacts: “…the passing of the Withdrawal Agreement by no means solves all challenges; if suitable post-Brexit immigration legislation is not agreed with the EU, the supply of labour to the UK construction market may continue to contract.” In the medium-term, Nick Baker, head of intermediaries at Allica Bank called for: “An agenda focussed on progressive, forwardlooking infrastructure projects, regional ‘devolved’ investment decisions and training top talent,” viewing these as ‘essential drivers’ for continued SME success. In the longer-term, Paresh Raja, CEO at MFS, called for Johnson to look beyond Brexit, suggesting the government seek to: “… implement positive measures to improve liquidity for lenders”. “I’d like to see the government review the regulatory capital reserve requirements by banks, to allow them to improve the way in which they can lend, increasing their overall appetite to support commercial businesses,” he added.
The Brelephant in the room Just because its name will no longer be uttered, it doesn’t mean Brexit has gone for good, far from it. Michael Gove has shared his 28 | NACFB
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With uncertainty having sapped energy and momentum from the economy in recent years, politicians must now show their mettle by making up for lost time on investment
confidence that a new Brexit deal will be concluded by the end of this year and, with high-level political negotiations with the EU already well under way, the detail of getting Britain ready for Brexit will be where the devil lies. Much work still has to be done on the new systems that must be in place for the worst possible outcome of talks in relation to the Dover-Calais crossing and other UK-EU trade issues. No detail has yet emerged on the Great Britain to Northern Ireland routes that, under the Johnson deal, will soon be treated as a UK-EU border. HMRC has previously said it would take five years to get what was known as a maximum facilitation customs IT arrangement in place.
2020 vision With uncertainty having sapped energy and momentum from the economy in recent years, politicians must now show their mettle by making up for lost time on investment. The NACFB is calling for tax reliefs and incentives to support UK SMEs with their ambitions to grow and invest in new technology. We support a major reduction in business rates for smaller firms, with thousands struggling to survive as they face spiralling operating costs. We are backing such measures so that when a small business makes a decision to seek finance through one of our trusted broker advisers, they are doing so in a positive manner – investing proactively in their vision as opposed to seeking to plug funding gaps to merely stay afloat. Our growing network of commercial finance brokers are well-placed and primed to support UK SMEs and share their vision for growth. They too come ‘oven-ready’ and will work tirelessly, with the support of their trade body, to ensure Britain prospers in the coming years.
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Special Feature
Responsible lending with a purpose Climate change and our severe housing shortage can be tackled together
Scott Newman Head of Personal Banking CAF Bank
I
f you can remember a time before Brexit, you may recall that politicians, the press and even conversations in the pub would on occasion turn to the dire lack of housing, spiralling rents and – thanks in no small part to Sir David Attenborough and Blue Planet – climate change. Despite Brexit’s dominance, the government has taken some steps to address the housing question through their Help to Buy and Permitted Development office-to-residential conversion schemes. I think it’s fair to say that of late, the only other issue to share the evening news spotlight at the end of last year were the Extinction Rebellion climate protests at a number of transport hubs across London. It’s a brave person who crosses a commuter in rush hour. As one delayed passenger pointed out he was “just trying to feed his kids” – whilst no doubt having a large part of his take-home pay covering rent or a mortgage, commuting costs and energy bills. All of this does beg the question; could a move away from traditional construction methods and the drive to greener renewable energy be a vital step towards alleviating both issues? It’s exciting stuff and feels that this could become the norm in the future. Modular construction methods such as Cross Laminated Timber (CLT), built with high levels of insulation coupled with renewable energy, like air or ground source heat pumps, photovoltaics and power walls is perhaps where our focus should be. If it became the new norm, then current skills
30 | NACFB
shortages could be reduced, construction times could be shortened (resulting in lower finance costs) and running costs would be kept to a minimum. This will, in turn, help to offset some of the cost of green energy equipment. This might feel like a leap of faith for some developers. However, as the millennials start to buy more homes over the next decade or so, developers will likely find increasing demand for properties that reflect younger generations’ strong views on addressing climate change in a meaningful way. Similarly, if the pressure is ever released from our much-maligned planning system, developers may find that they don’t have a choice. Now that the Brexit fog is clearing, some form of planning reform and better funding for council planning departments will ideally find their way onto the agenda – a move that will no doubt be very welcome by those of us working in this industry. The move towards more sustainable homes, from an energy and human life cycle perspective, started many years ago. Changes in regulations and standards will inevitably continue to carry us along this path; Lifetime Homes rules, Energy Performance Certificates and the level of detail on water drainage measures now required for a development, to name a few. A frustration our clients have highlighted is the lack of consistency from planning department to planning department, especially when it comes to green energy requirements. Some planning authorities are undoubtedly more proactive than others. Even so, this adds another layer of uncertainty in what has long been considered an area of high risk from a lenderʼs perspective. Lenders need to play their part in encouraging the adoption of green construction methods and energy systems, as there aren’t
many projects that are self-funded. At CAF Bank, we want to support projects that have some form of social purpose; be it homes for first time buyers, for retirees or for projects that deliver good quality accommodation at affordable rent. We support projects that use renewable energy and modern construction techniques for the obvious environmental and community benefits. However, these types of build bring with them another set of risks to consider, as not all modern construction methods are straightforward to fund. That said, like all banks, our job is to manage risks. Perhaps we feel this more than most, given that CAF Bank is owned by the Charities Aid Foundation (CAF). Any surplus we make is reinvested in CAF’s work to encourage more effective giving and help charities make a bigger impact.
We want to assist small and mid-sized local schemes such as projects that are looking for overall financing of less than £2 million – the type of builds that some lenders will consider too small. CAF Bank’s underwriting levels are high – and we are very hands on. Across our entire loan book, we have visited every charity, every client and every development site before we lend a penny. Our debt levels are conservative, in what is a highly competitive marketplace. And we insist on a full suite of construction security such as step in rights and collateral warranties. Some may find this over cautious. My firm belief though is that to help our clients deliver the wide-ranging social impact they are looking for; we need to achieve that fine balance of being both supportive and responsible in our lending.
That’s 3 more reasons to search: NatWest Brokers Thanks to everyone who voted for us!
NACFB | 31
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Special Feature
Taking today’s tech into tomorrow 2020 is the year of instant finance
Chirag Shah Chief Executive Officer Nucleus Commercial Finance
I
t cannot be denied that technology has transformed and still is transforming our day-to-day lives. Not only is it changing the way in which we communicate with each other, whether that be email, Slack, WhatsApp or FaceTime, but it’s also changing how we access information through image and video-led apps such as Instagram and a multitude of newsletters that are curated ‘just for us’ via AI. These technological developments are shifting. We’re seeing this increasingly influence the world around our business too. Business owners now expect to be able to access information and finance with a click of a button; and those lenders and brokers who fail to keep up with the fast pace of digital transformation, risk losing their competitive edge. While there has already been lots of conversation around the potential of technology and data, 2020 is the year we expect technology to truly have an impact on SME finance, through increasing access to finance, eliminating risk from decision making and making sure SMEs can get finance at the moment they need it most. Ultimately, we expect the narrative to shift from lenders talking about funding small deals in a few hours to funding large deals in just seconds.
and support more businesses, but we expect to see it increasingly embedded and relied upon. For us this means designing and delivering finance journeys that align with business expectations. At Nucleus Commercial Finance, we now have automated processes in place, which significantly speeds up the time from a request for funding coming into us, all the way through to the payout of funds. What this means is that SMEs (and the brokers supporting them) can now access the funds needed instantly, further improving the quality of our offering. Ultimately, arming an experienced team with timesaving tools and technology is the best way to ensure that SMEs get access to finance that fits their needs.
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Ultimately, we expect the narrative to shift from lenders talking about funding small deals in a few hours to funding large deals in just seconds
Business lending hasn’t been immune to using technology to reach NACFB | 33
Open Banking, an initiative designed to give providers access to customers’ financial information, has made it easier and quicker for business owners to apply for finance, by eliminating the need for customers to upload information multiple times, streamlining the process. Similarly, tools such as DocuSign allow customers to review and electronically sign documents, removing risk in the creating and sharing of confidential information. Anti-Money Laundering (AML) and Know Your Customer (KYC) processes can be completed in minutes by the borrowers using their smartphones. For brokers this means less time spent on administration, giving them more time to advise the businesses they’re working with to ensure they get the best outcome. Brokers remain in their unique position of being able to help businesses see the benefits of external finance, find the product that is best suited to their needs, as well as save time, money and stress when they’re sourcing finance. Technological advances are not just limited to securing additional finance but are helping businesses increase their financial prowess on a day-to-day basis – from automating receipts and accounting, to having better oversight of their finances and cashflow. This is only a positive addition to SMEs increasing their financial literacy and understanding how good finances and cashflow underpin their long-term success. Businesses are also utilising technological advancements to improve their operations, whether that be using scheduling apps to book meetings, marketing platforms to help target specific customers and payment apps to speed up the process. Over the last decade, we’ve only just seen the beginning of what the digitisation of complex tasks can do to increase efficiency 34 | NACFB
and streamline processes for businesses and brokers alike. As we continue to harness the power of digitisation, this next decade will present itself with many more opportunities for us to further tailor and evolve our offering to meet the needs of tomorrow’s SMEs and help them to invest in their future.
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Technological advances are not just limited to securing additional finance but are helping businesses increase their financial prowess on a day-to-day basis – from automating receipts and accounting, to having better oversight of their finances and cashflow
Meet the real estate funding specialists who are built to think ‘how’, not ‘if’. To find out more about funding residential, commercial or development real estate – with loan terms from as little as one month – call 0800 294 6850.
Visit octopus-realestate.com or search Octopus Real Estate Octopus Real Estate is the trading name of Octopus Property Lending Ltd (Reg No 7531926), Bridgeco Ltd (Reg No 6629989), Fern Trading Ltd (Reg No 6447318), Nino Ltd (Reg No 9015082), Octopus Healthcare Adviser Ltd (Reg 09082100), Octopus Healthcare Development Ltd (Reg No 03788979) and Octopus Co-Lend Limited (Reg No 8913299), all registered in England & Wales at: 33 Holborn, London, EC1N 2HT, and Octopus Real Estate S.ar.l. (Reg No B189290) registered in Luxembourg at: Parc d’Activité Syrdall, 6 rue Gabriel Lippmann, L-5365 Munsbach, Luxembourg. Octopus Co-Lend Ltd, Octopus Healthcare Adviser Ltd and Octopus Property Lending Ltd are authorised and regulated by the Financial Conduct Authority. OP000141
Special Feature
When is an apple not an apple? Why lender interest rates can sometimes be misleading
Richard Whitehouse Head of Business Development The Sancus Group
W
hen I was setting myself up at university and looking to buy a printer the advice my father gave me was to focus on the price of the ink cartridge, not the printer itself. He was of course telling me to consider the total cost of ownership rather than the headline cost of the printer alone. Essentially getting me to compare apples with apples and consider the true cost. Little did he or I know that his advice would be transferable into the world of bridging and development finance. “Give me your best interest rate quote”, is a common request and I am consistently surprised by how much importance borrowers place on this one metric. Especially when there are several cost lines to term sheets and often different ways of calculating them. How do borrowers give themselves a chance to compare apples with apples when lenders are not converting their costs to an Annual Percentage Rate (APR)? What should they and their advisor be looking out for? Let’s start with the primary focus of that attention, the interest rate.
If the headline cost is the rate, then is 9.5% per annum really cheaper than 10% per annum? The answer comes down to whether the lender is charging interest on a simple basis or on a compound basis? We’ll call the simple interest lender “White Bank” and the compound lender “Grey Bank”.
•
Is the lender using a fixed rate or a floating rate? If it’s a floating rate what base rate is the lender using? LIBOR is not the same as Bank of England Base Rate, which is also different to the Bank’s own base rate. Always find out the basis and the base rate number.
On a £1 million bridging loan over 18 months it would be cheaper to take the 10% deal from White Bank than the 9.5% from Grey Bank, assuming the Grey Bank compounds on a monthly basis. Some lenders will compound on a daily basis (“Black Bank”), in that scenario the simple interest lender can be 0.75% more on their headline rate compared to Black Bank and still cost less in total. 0.75% is a significant difference on the headline rates – see example one.
•
When the lender presents their price at X% plus base, always re- write the number to the total interest rate. Assuming base rate at 0.75% then you might read 8.75% plus base rate. Grey Bank looks great on their rate as the inevitable focus is on the printed number, the reality is that it is 9.5% and that’s before we go back to the issue of compounding.
•
Does the lender apply a floor rate to the base rate they are using? The floor rate means that irrespective of the base rate reducing, the lenders base rate will never fall below their floor number. For example, a floor rate of 1% means Grey Bank will always add 1% to their margin even if base rate is at 0.25%. Grey Bank could now state their interest rate as 8.5% plus base rate and be more expensive than the 10% option from White Bank.
Example 1 White Bank
Grey Bank
Black Bank
Loan
£1m
£1m
£1m
Term
18 months
18 months
18 months
Arrangement Fee
2%
£20,000
2%
£23,000
8.75% Interest Bill
10% £150,000
Total cost Cost of Capital % Difference
1%
£10,000
1%
£23,000
8.75%
Plus Base £152,500
9.50% Exit Fee
2%
Plus Base £148,960
1% £11,500
1%
£11,500
£180,000
£187,000
£183,460
18.0%
18.7%
18.3%
n/a
3.90%
2.00%
It’s also important to keep an eye out for the following approaches to interest charging:
What else might the Grey Bank be doing to boost their income? The starting point is the ‘in’ fees and this becomes especially relevant where interest is rolled up. Does the lender calculate the arrangement fee on the loan amount or do they include the expected interest amount in the loan and charge the arrangement fee on the higher number? For a large loan and particularly over a longer term the differences can be painful. Even in the example of a £1 million bridging loan, and assuming a 2% arrangement fee, White Bank will be charging £20,000. Grey Bank will be charging just over £23,000, see example one. When the exit fee is applied on a similar basis, assuming a 1% fee rate, then White Bank is going to charge £10,000 and Grey Bank will charge just over £11,500, see example one. NACFB | 37
All in all, that’s £4,500 more in fees or a 15% higher cost, despite the headline percentage rates appearing to be exactly the same. Recently, I have seen examples on development loans of lenders charging their exit fees as a percentage of GDV. If that isn’t understood properly at the outset, the client will be in for a rude surprise on redemption. The particular example required a £1,000,000 loan on day 1 and a further £1,000,000 to develop the property which had a GDV of £3,500,000. The headline rate of 8.75% plus base rate seemed attractive, but below was the real breakdown for the borrower.
Example 2 White Bank
Grey Bank
Loan
£2m*
Loan
£2m*
GDV
£3.5m
GDV
£3.5m
Term Arrangement Fee Interest Bill Exit Fee Total Cost Cost of Capital % Difference
18 months 2%
£40,000
10%
£230,000
1%
£20,000 £290,000 15% n/a
Term Arrangement Fee Interest Bill Exit Fee Total Cost Cost of Capital % Difference
18 months 2% 8.75% Plus Base
1.3%
£44,240 £232,000 £45,500 £321,740 16% +10.9%
*Note - Construction advances are assumed to be equally drawn over the term of the loan
Grey Bank are over 10% more expensive than White Bank despite the apparently attractive interest rate. One more practice that might be employed is the discounted interest rate. If the Black Bank compounds daily, then the discounted interest rate is used by “Blackhole Bank”. This approach to interest rates shows the borrower a headline rate of say 9% per annum which is a discount to the contractual rate of 24% per annum. The discount applies for the six or 12 months and then the loan reverts to its standard rate 24% per annum, 9% is the number in large letters but the expectation on the part of Blackhole Bank is that you cannot achieve an exit to the loan in the discount period and they will benefit from a long period of standard rate interest. Blackhole Bank will even try to ensure the discounted loan term is too short to force the move to standard rate. 38 | NACFB
Generally smaller fee items, but also worth checking, are the professional costs levied by the lender. For example, I have seen cases where the lender charges the Monitoring Surveyor (MS) fees to the loan account and settles with the MS directly. Those charges were more than twice what we would normally expect to pay an MS for a similar project. To ensure that apples are indeed being compared with apples the borrower and their advisors should ignore the headline interest rate and work out the total cash cost of the options in front of them. That will give a clearer picture of the price for working with each lender. Given that cash advances will often vary too, then a proxy for APR would be to take the total cash cost of the facility and divide it by the money made available to the borrower (i.e. not including the interest or fees). Expressed as a percentage the borrower will have a better figure for comparison to focus on rather than the headline interest rate.
C
M
Y
CM
MY
Borrower and advisor can then start to think about the softer but probably more important elements of selecting a lender from certainty of funding to ease of use. Pricing is only one component of the choice and I would argue it’s not the same as value. Nevertheless, I would advocate pricing is an important metric to have a clear understanding of.
“
So, in short, always focus on the price of the ink.
“Give me your best interest rate quote”, is a common request and I am consistently surprised by how much importance borrowers place on this one metric
CY
CMY
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Industry Insight
Survival of the fittest The evolution of a broker panel Philip Knight Credit & Risk Director Asset Advantage
F
un fact: apparently Charles Darwin didn’t coin the phrase ‘survival of the fittest’. It was actually first used by the philosopher Herbert Spencer and then referenced in Darwin’s fifth edition of Origin of the Species. I definitely think that there’s an evolutionary flavour to how broker panels have changed and the links to the natural world are curiously similar. Survival of the fittest was certainly relevant to the first part of the last decade. The ‘Great Recession’ of 2008-13 was certainly tough for both funders and brokers alike. Many lenders culled their broker panels in an attempt to manage bad debt. We relied at the time on a very small group of brokers. These were virtually all small operations usually sole traders or partnerships. We deliberately avoided working with larger brokers on the basis that our lending was relatively expensive and so only really suited ‘story’ deals rather than volume supplier led finance. Having only just started in the industry we were simultaneously challenged by the state of the economy and desperate to take advantage of the disruption caused by the departure of a number of lenders. In a very short space of time the whole market was turned on its head as credit became harder to get as lenders scratched their heads trying to work out how to pick the good deals from the bad. We, and many other funders, became more demanding in the depth and quantity of information we required on deals. Some introducers, and their customers, clearly found this a step too difficult and so 40 | NACFB
inevitably we saw some brokers simply shut up shop. As the decade progressed, we grew as a business and the economy improved. Our niche credit offering meant that there was a cap to the amount of deals any one broker could give us. Our uniqueness was therefore both a blessing and a curse. Good in that we were, and arguably still are, the only home for certain types of deals, but a challenge to meaningfully grow our book. The solution was to increase the size of our panel. This meant moving beyond our comfort zone of brokers that we personally knew and getting out on the road and finding new introducers that had never heard of us. Moreover, we started to move beyond small broker operators and work with larger brokerages with formal sales teams. Contemporaneously we started to see some members of our panel actually using our credit appetite as a marketing tool and more closely aligning their business with ours. Unsurprisingly perhaps this was challenging to do. The larger salesled brokers had less experienced staff and more formal processes that didn’t fit with our bespoke approach. We therefore had to evolve our processes to acknowledge the needs of a different style of broking – faster turnaround times, vendor led introductions etc – whilst at the same time maintaining the personal touch needed to support our long-standing relationships. Many of the large broker businesses that we work with are substantial entities in their own right. Some running their own loan books and many employing more staff than we do. That former element is one area where we have taken a Darwinian approach to the book and taken the view that some introducers have evolved beyond our appetite. In 2017 we took the decision to break ties with brokers that support sizeable own books. There were three principle legs to this decision. Firstly, a natural concern that they would cream-
off the best deals, secondly that we were essentially supporting a competitor and thirdly that it was enabling them to compete with those brokers that weren’t running their own books. The past few years have seen a number of new quasi-broking strategies appear, some of which we participate with and some we have avoided. The former group include platforms dealing with bank rejected customers. Whilst there is an element of holding our credit nose as we deal with a web sourced introduction (albeit ones with a strong provenance) we’ve built strong relationships with a few core platforms that we feel comfortable with. We’re not quite at the point of taking deals off the internet, but there’s a whiff of evolutionary change in the air. Some changes to the market haven’t evolved or had as much an effect on our panel as I would expect. For example, despite the growth of data the core face-to-face work of most of our brokers appears to remain key to them finding business, working with us to get the credit approved and closing the deals. Meeting and speaking with customers remains as important as it ever was. In actual fact I’m unconvinced that there’s much more useful data available to us now than there was ten years ago. Whilst there was a lot of noise around FCA regulatory requirements I don’t think there has been as much impact on our broker panel, or us, as I had perhaps expected. In truth this probably reflects the fact that the industry has always been pretty clean and clear about how it does business. I am both surprised and not surprised that not one broker has managed to really dominate the introductory market. I think this reflects the fact that training is difficult to do and experience hard to get and keep within the business.
especially if it gives SMEs rights more akin to consumers. I think that crowd funders have shown how the internet can be used to effectively market direct to end users. That’s both a threat and an opportunity to our broker panel. The most interesting aspect of this review is how quickly the broker market is able to respond and change to meet market conditions. It is quite remarkable how robust the sector has been whether it be weathering the storm of 2008 or feeding the deal hungry lenders in 2018. Extinction seems a wholly unlikely event for this particular species.
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In a very short space of time the whole market was turned on its head as credit became harder to get as lenders scratched their heads trying to work out how to pick the good deals from the bad
As to the future evolution I think that greater regulation maybe on the cards, and that could affect introducers and funders alike NACFB | 41
Industry Insight
When to re-bridge Supporting borrowers who find themselves unable to exit bridge loans
Gary Bailey Managing Director Hope Capital
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e-bridging often gets a bad press. However, re-bridging can be a sensible thing to do in the right circumstances with the right lender.
In an ideal world, every borrower will have a secure exit route and will pay their lender back on time, but as we all know we don’t live in an ideal world. Sometimes for example a refurbishment, renovation or development can be delayed due to no fault of the borrower. Where a bridging loan has been used for this, it can become impossible for a borrower to repay the funds back on the due date. It’s not too difficult to imagine, for example, a situation where the borrower has hired a contractor to do some of the work, who subsequently pulls out or ceases trading. It is not always easy to find a replacement who can step in at short notice, brief them fully on what is required, and get started on the task in hand. Equally, the development or renovation might turn out to be more complex than originally envisaged and involve a significant increase in costs, not covered by the original loan. In some instances, even where the development itself has been completed, the borrower may not have been able to find a buyer to 42 | NACFB
sell the property onto at the right price. If they have more time to make the sale, they may be able to achieve a higher price, adding additional benefit for the borrower and reducing the LTV. Where the borrower has kept a lender well informed, many will extend the term for a period to give them the time to complete their project and realise their exit strategy – but some externally-funded lenders have funding restrictions themselves which can mean that it is not possible for them to extend the term. In these circumstances, a re-bridge for a few weeks or months makes perfect sense. For a pragmatic lender, who has carried out due diligence and can see a clear exit route, it is perfectly sensible to offer a re-bridge. Other circumstances where a re-bridge is rational can be when something has happened to the previous lender – perhaps they have had their funding pulled, for example – and their borrowers then need to re-bridge their loan rapidly. Or if a borrower is in receipt of staged payments and the lender can no longer provide some of the agreed money, again the developer will be forced to re-bridge. When it is not sensible to re-bridge an existing bridging loan is when the borrower is just going from lender to lender with no clear exit route. Each time they take out another loan they will incur more fees and more interest and so the equity, and LTV, in any property will increasingly be eroded, possibly to the point where even possession and sale of the property will not cover the outstanding debt and fees. The same can also be the case if a borrower extends their loan
for too long with their existing lender, especially if they are paying default interest at the same time. In these circumstances it is obviously not the right thing for a new lender to take on the debt if it is only going to make the situation of the borrower worse. There is a clear duty on the part of the lender in these circumstances, to ensure that a further loan is in the best interests of the borrower. If it is clearly going to leave the borrower worse off it is not treating the customer fairly or providing an appropriate product. Brokers have a really valuable and important role in this, to
encourage their client to look at different options to exit their loan to leave themselves in a sensible position. Perhaps it is to take out a long-term loan or to sell the property while they still have enough equity to clear their loan and pay any fees or interest due. So, there are situations where it is a suitable solution, but others where it is manifestly not in the borrower’s best interests and lenders have an absolute duty to decline a loan in these circumstances. However, by the broker and lender gaining a full understanding of the borrower’s situation and needs, and then applying skill, care and diligence, there are a number of occasions where a re-bridge can be the ideal solution for the borrower.
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Industry Insight
Defending Difference in Charges Why the regulator needs to differentiate between dealers and brokers Julian Rose Director Asset Finance Policy
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y the time you read this, the FCA’s consultation over its proposals to ban ‘Difference in Charges’ (DiC) commission models being paid to brokers of motor finance will have finished, but the regulator’s engagement with the industry will hopefully continue as it looks to finalise the new rules. This is important for all brokers dealing with consumers, including regulated small SME business. In its consultation, the FCA said it was aware that DiC and similar commission models exist in other markets (for example, asset finance and premium finance). It said it didn’t currently have evidence to justify consulting on banning commission models in those markets but would intervene if evidence emerged. That will be taken by many lenders as a signal to move away from DiC across all sectors. What I want to show in this article is that DiC, with appropriate controls, usually works well and helps customers, whether they are individual consumers or small businesses. It’s entirely normal in business sectors across the economy for firms that act as intermediaries to set the final price and, therefore, their own profit margin. Equipment dealers do it, travel agents do it, any retailer does it. It works for consumers because it promotes competition. Regulators get concerned when firms take advantage of a lack of competition to exploit customers by charging high prices. This can 44 | NACFB
happen at Point of Sale (PoS) where there’s only one product offered, in effect creating a temporary monopoly. There are many examples of regulators intervening in such cases, including for extended warranties sold in electrical stores, or add-on GAP insurance sold by car dealers. In motor finance, it’s probably true that some car dealers have overcharged customers, adding very high margins to the rates quoted by finance companies, taking advantage of their PoS pricing power. Larger lenders have stopped this happening. But some lenders still allow it, so maybe some form of regulatory intervention is justified. Where I believe the FCA has erred here is that it treats all firms carrying out the regulated activity of credit broking the same. The FCA’s analysis showed that where DiC is used, prices are higher. The problem is that this analysis bundled together two very different sets of firms – around 8,000 car dealers that have FCA limited permissions; and around 1,000 motor or asset finance brokers that usually have FCA full permissions. Unlike dealers, brokers do not have PoS advantage. If brokers try to charge non-competitive rates, they are likely to lose the deal. Regulating brokers in this way will also harm consumers. It will shift pricing power from a large number of brokers to a small (and in motor finance, falling) number of lenders, taking competition further away from consumers. It will also make it less viable for brokers to invest more time to help non-prime consumers of businesses to find a good deal in the market. Fortunately, the solution is straightforward. Whatever new rules on commissions the FCA decides to implement, they should be applied only to firms authorised by the FCA with ʻlimited permissionsʼ (e.g. car dealers) and not firms that are authorised by the FCA with ʻfull
permissionsʼ (professional credit brokers). When I suggested this solution in a blog in December, it was generally welcomed by brokers, but two lenders were unconvinced. One said that my assertion that brokers look for the best deal for customers is “very wide of the mark”. If that was the case, he said, “lenders offering unlimited commission and other broker orientated perks to drive volumes wouldn’t be prevalent”. Another pointed to a particular broker who, he suggested, consistently overcharges customers. I don’t think either of these situations – lenders offering unlimited commissions, or brokers overcharging customers – is remotely
representative of the conduct of the broking market, but equally we can’t ignore them. If we are to convince the FCA to exclude full permission credit brokers from the ban on DiC, all lenders should be prepared to cap maximum commissions under DiC (other than in individually reviewed cases) to remove any risk of a small minority of brokers overcharging customers. In summary, I believe the FCA should consider different remedies for professional broking firms with full FCA authorisation, as compared to PoS dealers with limited FCA permission, with the safeguard built in of lenders capping commission levels. Compared to the FCA’s original proposals, this would be a far better outcome for consumers and small businesses.
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NACFB | 45
Broker Voice
Scaling new heights The continued importance of cranes in the construction industry
Ray Wells Director Chenalfame Ltd/AFS (UK) Ltd
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ince I was a boy I have always been fascinated by cranes and their capabilities to lift heavy objects. This interest followed me throughout my career in commercial finance and I have been fortunate to be involved in financing cranes of some sort or another ever since. I remember my first financing deal I secured as a junior representative for Lloyds & Scottish in Guildford was for a medium-sized mobile crane for a hire company in Surrey. Later, promotion led me to managerial positions at Staines, Chiswick and Watford. At each branch I became involved with local crane hire companies. Even when a new opportunity arose, and I moved abroad to Scandinavia working for an international merchant bank we financed a major tower crane manufacturer in Denmark. History tells us the ancient Greeks invented the first cranes late in the 6th Century BC. Much later in the 19th Century, the rise of ironworks and industrialisation meant that cranes finally made the big switch from wood to iron. The first cast iron crane was constructed in 1834, which was also the year that wire rope was invented. Mobile cranes over the years have developed and evolved to lift heavier and heavier loads. The biggest crane in the world is the Belgium-owned Big Carl which is able to lift loads up to a staggering 3,000 tonnes – it is currently working on the Hinkley Point Power Station in Somerset. As new construction methods evolve to more modular methods, mobile cranes are adapting accordingly, and environmental concerns are now moving the manufactures into a new era of hybrid powered mobile cranes. A visitor to London might expect to see a skyline dominated by The Shard, St. Paul’s Cathedral, the Houses of Parliament and other famous landmarks. Yet it’s the numerous construction tower cranes that really stand out. They are seen as a bellwether for the UK economy. Deloitte publishes an aptly named quarterly London Office Crane Survey and now that the Brexit uncertainty which has been daunting the UK for the past three and a half years has been decided, hopefully construction confidence will return. Tower crane safety regulations coupled with job desirability are now focussing towards technological improvements and making life better and less stressful for crane operators. The digital readouts in the cab minimise the need to make manual calculations on weight, swing speed and counter swing. Other technological improvements include cameras, electronic grease guns for maintenance and limit switches. Seeing on screen the actual load on the hook is a great improvement. I once heard a story about a banksman on a large building site –
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Cranes are seen as the bellwether for the UK economy
he’s the guy on the blind-side at ground level with a walkie-talkie connection to the crane operator advising them on where exactly to place the hook. Upon seeing no hook movement, this chap started shouting at the top of his voice at the operator to lower the hook as quickly as possible, only to hear an almighty crash behind him as a crane hook dropped onto a nearby van. It then dawned on him he picked up the wrong two-way radio which belonged to another crane on the same site. It sounds like something out of a black and white Laurel and Hardy film, fortunately no one was hurt. Financing cranes over the years has not always been as easy as it may seem. Having lived through two major recessions in the UK it’s interesting to see how the various funders have reacted over this period. Mobile cranes are seen as hard assets with strong residual values which can be resold on the second-hand market anywhere in the world. Tower cranes on the other hand are seen as much more difficult assets to move, mainly due to their complexities of dismantling and identification of all the different sections relating to one crane. Some funders have had bad experiences in the past and incurred heavy losses when they have been repossessed for one reason or another and those with long memories are still not keen on funding them today. In previous recessions, crane owners have reacted to a fall in demand by downsizing inventory and selling surplus machines abroad. For tower cranes, this has usually meant the Middle East or Southeast Asia. After the last recession in 2008 it was different for several reasons. This time the downturn was global and not only was there no boom area to sell to, but there was a global over-supply. Therefore even if a hire firm could find a buyer for its surplus cranes, the price was so low as to take any shine off the deal. For many, the only option was to batten down the hatches, negotiate with their funders and wait for the storm to pass. My experience over the years has been to obtain and gather as much in depth knowledge and understanding of each client as one is able, in order to present a sound, well-balanced and focussed proposal to present for underwriting. Although cranes are capable of working up to as much as 30 years if well maintained, we are currently seeing the larger construction clients demanding cranes no older than ten years to work on their sites, thereby necessitating the hire companies to update their inventories on a regular basis. For us, the future for cranes is looking very uplifting. NACFB | 47
Opinion
P2P remains a viable option for brokers in 2020 Having embraced the new regulatory environment P2P platforms can still thrive Max Lehrain Chief Operating Officer Relendex
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2P platforms that have passed FCA audits and have adapted to the new regulatory environment will remain an important part of the financial services market, continuing to provide a much-needed alternative in sectors that are still underfunded by mainstream banks. P2P funding has been around since 2005 and started to take off after the financial crisis of 2008. The apparent simplicity of the model, the lack of returns on retail deposits available to investors and the fact that it is investors rather than the platforms themselves that take the hit in any event of default led to an increase in the number of providers entering the industry. As we have seen more recently, a reassessment of the industry is taking place; some platforms have been closed, some are winding down their activities and others have closed their books to the retail investor market as the retail and regulatory environment changes. The fact that regulation was needed to protect unsophisticated investors as well as the failures of some high profile platforms has led to new FCA rules, which were implemented on 9th December 2019. These are designed to prevent harm to investors and help the industry grow in a more sustainable manner. The new rules are likely to change the make-up of platforms’ funding with a greater incidence of higher value investments from qualifying sophisticated investors and institutional funders. Relendex, for example, funded over 40% of its loans in the UK with money from institutional investors, rather than retail investors last year. We have 48 | NACFB
signed up two European and one UK fund to finance loans alongside institutional investors and our retail investor base. In addition, brokers should understand the underwriting process and criteria that platforms employ. The best will have a robust credit assessment undertaken by skilled, experienced professionals able to understand the risks involved in a transaction and able to put forward a sensible proposition to lenders, always aware of whose money is at risk and the potential liability of the borrower should projects not work out. This is the time for the industry to come of age. Whilst some of the recent P2P shortcomings highlight the need for continuous development on standards in underwriting and lender protection, there are likely to be further changes as these rules are embedded and there is greater awareness and understanding of the sector. We firmly believe that the remaining platforms, who have passed FCA audits and have embraced the new regulatory environment will thrive and continue to provide a real alternative to commercial finance brokers and their clients.
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The new rules are likely to change the make-up of platforms’ funding with a greater incidence of higher value investments from qualifying sophisticated investors and institutional funders
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Opinion
Collaboration will always underpin success The era of disruption and displacement is drawing to a close Stephen Pegge Managing Director, Commercial Finance UK Finance
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t was a busy and uncertain 2019, with a rapidly shifting political landscape. Yet looking at the picture for business activity in 2020, 2019 reflected a continuation of trends seen since the referendum on membership of the European Union.
Investment by businesses rose only modestly, trading was subdued in most markets, cash flow tightened a little as margins came under pressure but, for finance providers, credit quality remained strong for the most part. 2019 saw mildly positive lending by SMEs as well as steady increases in deposits, meanwhile the independent SME Finance Monitor survey shows that the proportion of firms using finance has also increased. With both established, traditional and larger lenders continuing to lend and specialist and new providers seeking growth in this relatively slow market, competition intensified over the year. This was the case throughout the UK and across industry sectors. The choice available to firms in terms of type of finance and range of provider has never been wider but, for many businesses, it remains confusing. It is no surprise therefore to see businesses turning to intermediaries and financial advisers for guidance. 50 | NACFB
The NACFB has a wide network of local and specialist brokers but it also helps businesses to navigate the market online. This trend
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Investment in sustainability and planning for a transition to a zero-carbon economy is now a mainstream issue and SMEs will have an important role to play both in enabling this and ensuring that such a transition does not leave communities behind
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The human touch is still valued by many businesspeople at moments of truth and the challenge now is to provide for and ensure a seamless integration of channels
towards platforms and digital navigation is powered by greater transparency in price, proposition and service quality, better access to credit data and Open Banking tools that should give customers confidence in the security of their data. But the human touch is still valued by many businesspeople at moments of truth and the challenge now is to provide for and ensure a seamless integration of channels. Crowdfunding is one of the types of finance accessible online and take up has been growing fast, however there remains an issue over understanding of and confidence with less familiar forms of finance. Loans, overdrafts and hire purchase remain the default options for smaller businesses, and the use of credit cards – not just for transacting but for short-term working capital – has increased. For larger SMEs, growth has continued in use of invoice finance and asset-based lending. Equity finance has also grown though it remains a relatively niche area of investment. Overall there is no doubt that uncertainty may be constraining the take up of the full range of finance for many firms, which is where a trusted adviser can potentially really help. There have been some failures in the peer-to-peer sector, but the market has been positively influenced by the challenge they have brought to traditional providers in terms of customer experience and slick systems. Most providers would now regard themselves as multichannel and some have teamed up with fintech providers to present their customers with a better range of options and slicker delivery. Where a couple of years ago there was much talk about disruption,
displacement and disintermediation, now the watchwords are collaboration, co-creation and cross-referral. This year will be a critical year for those trading internationally following our exit from the EU. UK Finance’s Let’s Talk Business campaign, created with the support of a wide range of trade associations, provides links to a wealth of useful information. Further areas of focus for firms include the transition from LIBOR to other risk-free reference rates, which is a big change for the industry and customers whose facilities have been linked to it. UK Finance’s guide to the discontinuity of LIBOR for SMEs provides more information on what customers can expect this year and next. Investment in sustainability and planning for a transition to a zerocarbon economy is now a mainstream issue and SMEs will have an important role to play both in enabling this and ensuring that such a transition does not leave communities behind. We have been working with the Grantham Institute at the LSE and Leeds University on a major project which we will report on later in the year. There is a vital role for the industry, including challenger banks, to support that and we expect to see more propositions and focus as we launch COP26, the global conference in Glasgow. In short, 2020 will see lots on the agenda for commercial finance and banking and for SMEs the support of professional guidance will be crucial. The banking and finance industry remains committed to working hand-in-hand with commercial finance brokers and advisers to meet the challenges and opportunities the year will bring. NACFB | 51
Opinion
Bucking the trend of rising insolvencies Brokers are uniquely positioned to assist in tackling the rise of insolvencies Josh Levy Chief Executive Officer Ultimate Finance
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ast year was a year of high-profile insolvencies, with the current economic climate largely to blame. As the landscape looks unlikely to stabilise and with Brexit uncertainty continuing to plague the business community, research from Atradius forecasts the rise in insolvencies is set to continue throughout 2020. Atradius’ global report highlights that not only are insolvency rates increasing for the first time since the financial crisis of 2008, but that the UK is set to be the worst hit – with forecasts seeing a 10% rise by the end of last year. Compare this to the 2.8% average increase across the world’s developed markets and the scale of the issue becomes clear. Industry leaders such as British Steel and Thomas Cook proved that no business is infallible. Their collapse raises awareness that no business is too big to fail. The collapse of Thomas Cook has been associated with the economic climate, an inability to adapt to industry changes and pressure from competitors who did. One factor attributed is the question of why the company did not accept the recommendations of advisors to sell its debt when it had the opportunity. When a company is in a position of having to take stock and make changes to protect its future, there might be an abundance of advice on offer; getting advice from the right people is crucial. If the rate of UK insolvencies is to be stemmed in 2020, business advisors and brokers could be instrumental in bucking this trend. 52 | NACFB
Understanding business ambitions Brokers are uniquely positioned to assist in tackling the rise of insolvencies. A broker’s distinctive ability to get under the skin of a business and to have an acute understanding of its needs and ambitions is critical to ensuring business owners have the tools they need to thrive, or in the current climate, adapt. For a business trying to navigate these turbulent times, and crucially to emerge unscathed, having access to reliable advice and tailored funding solutions can be the difference between a good decision in the direction of growth, or an uninformed one risking failure. This is especially significant as startling new research from Xero outlines that a quarter of small business owners believe their company is at high risk of folding within the next five years.
Connecting businesses with the right advice For many of our clients, their first hurdle was simply not knowing where to start in order to secure business funding; what is the right product for me? What is the process for securing it? As a funding provider, we see first-hand the vital role that brokers play in ensuring businesses have the right advice and support when making these decisions. Whether it be through invoice finance, asset finance, bridging finance or a structured combination, lenders work to ensure the right tailored solution is found. Business owners quite often inject their own money back into their company to keep afloat, indeed, for 26%, their business is leaving them out of pocket. Brokers have an opportunity to bridge this gap, put the correct funding solutions in place, and ultimately assist those in danger against the rising threat of insolvency.
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When a company is in a position of having to take stock and make changes to protect its future, there might be an abundance of advice on offer; getting advice from the right people is crucial
Supporting businesses with solutions to succeed Brokers and lenders understand that no two businesses are the same, arguably more acutely than the big banks. By understanding exactly what makes a business tick, what they want to achieve, and how they can be assisted to support these ambitions, brokers can connect businesses with the right solution to succeed.
Working with a partner that is able to provide a flexible funding solution catered specifically to the business’ ambitions and challenges is crucial. At Ultimate Finance we are strong believers that brokers and lenders working together can go a long way to help stem the tide of insolvencies and create a healthier environment for British business in 2020.
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NACFB | 53
Opinion
The future starts now After a year to forget, our industry is amidst a revolution Matt Tooth Chief Commercial Officer LendInvest
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t’s undeniable that 2019 was an eventful year, and at LendInvest we were lucky enough to enjoy a number of business milestones.
From completing our first securitisation of £259 million Buy-to-Let loans in the summer, to securing new funding partnerships with HSBC and the National Australia Bank ensuring the products we deliver to our borrowers remain competitive, the team have a lot to be proud of. But a new year means new opportunities, a new market, and hopefully the continuation of a selection of core, positive themes we saw gather momentum in 2019.
Education taking centre stage Last year, we saw an increasing awareness throughout the industry that there’s a need for more education, particularly in the specialist finance sector. The market is in constant flux, with new products and new players entering the industry each month, staying abreast of the offerings available has become a necessity. We can only see this theme becoming more prevalent in 2020, with BDMs and brokers working together to stay proactive when it comes to education. Ongoing professional development and raising standards is a 54 | NACFB
subject that we actively promote at LendInvest. As a lender, it’s vital that we do our part to help brokers keep on top of what expectations are when it comes to submitting cases, and ensuring they fully understand our products, and who they’re most suitable for.
Further adoption of Open Banking throughout the industry Last year we also began to see an uptick in the mortgage industry integrating Open Banking into their processes and workflow. LendInvest has championed this technology, adopting it last year to further streamline the mortgage application process. Since then, our underwriters have seen first-hand how it can help make their job of assessing a borrower’s financial position much more straightforward. No longer do borrowers (or their brokers) have to go through the arduous process of finding relevant information that sometimes stretches back several years, then sending it to us, whether digitally or even in paper form. The more information we have about a borrower, the more informed we are to lend at speed. It is therefore likely that we will see more lenders begin to explore the benefits Open Banking can bring to their teams, and customers.
Political headwinds clearing It’s no secret that the recent turbulent political landscape has left developers in particular hesitant when it comes to kicking off their next project. Despite economic uncertainty, the fundamentals of what makes a quality development project remain unchanged. After another year of many borrowers adopting a ‘wait and see’ approach to their property projects, I’m sure the whole industry will be joining me in hoping for a clearer, more confident 2020 to allow everyone to thoroughly get back to business.
Listicle
Five future growth industries
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n late 2019, we approached NACFB brokers seeking an accurate indicator of business activity. The high-level results from our survey were published in last month’s (January 2020) edition of Commercial Broker. These findings have helped the Association gauge how best to position itself in 2020. Commercial brokers act as something of a barometer, and as such their views on key growth areas in 2020 carry some considerable weight. We’ve outlined below the top five growth areas as predicted by NACFB brokers, and the Association has used this data to feed directly into the planning of this year’s Funding Future Growth series of regional events, open to all commercial brokers.
2. Construction Construction contracts saw national contraction in 2019, but as the fog of uncertainty lifts it’s widely anticipated that we will see some growth in 2020. The main bright spots include private and affordable housing, education, health and civil engineering work. Brokers with clients in the construction sector – be they asset or development intermediaries – are welcome at the NACFB’s Construction Finance Forum held at the Imperial War Museum in Manchester on the morning of Tuesday 3rd March.
1. Property Investment The outcome of last year’s general election should instil confidence in property investors, as well as buyers and sellers looking to make moves in 2020. Mortgage rates should remain low and, despite several changes to legislation, Buy-to-Let remains a solid investment path for many. Brokers have a vital role to play in helping property investors, and the NACFB will be hosting a Property Investment Finance Forum at the Imperial War Museum in Manchester on the afternoon of Tuesday 3rd March.
56 | NACFB
4. Healthcare An aging and growing population, a greater prevalence of chronic diseases, as well as exponential advances in innovative, but costly, digital technologies continue to increase healthcare demand and expenditures. The UK healthcare sector shows no signs of slowing in 2020. The NACFB will be hosting a Healthcare Finance Forum at the Academy of Medical Science in London on the afternoon of Wednesday 13th May.
3 3. Manufacturing Britain is the birthplace of the industrial revolution – and remains a leading manufacturing nation today, as well as a world leader in emerging hi-tech sectors. There are 2.6 million people directly employed in manufacturing in the UK, with British manufacturers seeing product sales of £364.7 billion in 2018.
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The NACFB will be hosting a Manufacturing & International Trade Finance Forum at the Manufacturing Technology Centre in Coventry on the morning of Wednesday 18th March.
5. Professional Services Professional service firms, such as marketers, accountants and lawyers are investing more heavily in technology, process automation, and original research to help them stand out in a crowded marketplace. This is coupled with a growing need to maintain and reward top talent in 2020. The NACFB will be hosting a Professional Services Finance Forum at the Academy of Medical Science in London on the morning of Wednesday 13th May.
Spaces for all NACFB events are strictly limited – secure your place today via: nacfb.org/events
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Five Minutes With
ive F Minutes with: Dean Williams Dean Williams Compliance Officer NACFB Describe your role in ten words or less? Maintaining and improving the regulatory standards for commercial finance brokers.
How do you make a difference? In this role I will make a difference by utilising my years of experience across multiple financial sectors, bringing best practices into the commercial world.
In your view what are the key elements to a successful deal? Identifying a client’s needs clearly from the outset. This full understanding of your customer enables you to confidently match them with the right funding solution.
What recent professional accomplishment are you most proud of? I was a key player in the implementation of the Senior Managers & Certification Regime framework within a subsidiary of a high street bank. Having this signed off by the bank was a great achievement. 58 | NACFB
What advice do you have for the modern commercial finance broker?
Where is your favourite place in the world? The Cayman Islands.
Know your market and do your research. This insight makes the day-to-day challenge of securing finance for your clients much easier.
What is your favourite piece of management/leadership advice? My first boss would often say, a penny saved is a penny earned and it has always stuck with me.
What was the last great book you read? Fiction wise, Ready Player One was a great read but I tend to read more non-fiction and recently The Secret Barrister has really lifted the lid on our ineffective justice system.
What law would you pass if you were Prime Minister for the day? A fairer and simpler tax system.
What was the last show you binge-watched? I don’t watch too much TV but I started watching The Wire again – it’s the greatest show ever made.
If there was an Olympics for everyday activities, what activity would you have a good chance at winning a medal in? Running up the escalator on the underground.
What’s happening now, that in 20 years people will look back on and laugh about? Our willingness to give away our personal data – it is worth more than oil.
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Kerry Bradley understands that you are looking to work with an approachable, adaptable and dependable partner who will look for reasons to say 'Yes' to your proposals. That’s why in uncertain times our book stays open. • Responsive decisions at attractive rates • Flexible funding tailored to individual needs • Loans from the everyday to the extraordinary Kerry is one of UTB's Business Development Managers - just one of our growing team of Bridging specialists working closely with broker partners across the UK to help them deliver flexible short term loans. T: 020 3862 1002 E: bridging@utbank.co.uk
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