Issue 86 JANUARY 2021
Broker COMMERCIAL
The award-winning magazine for the National Association of Commercial Finance Brokers
16 INTRODUCING OPPORTUNITY Why brokers should be formalising all their introductions
34 THE TIME IS NOW This year will bring with it a beacon of business optimism
Hindsight is 20/20 Results from the NACFB broker survey
40 A SHOT IN THE ARM Political progress and a COVID recovery will boost markets
54 REFRAMING THREATS Considered planning eases the fear of continued uncertainty
Contents
In this January issue NACFB News
Special Features
4 6 8
20-21 23-32
10-11 12-14
Note from Norman Chambers Updates from the Association Note from headline sponsor, Lloyds Bank Industry news round-up Patron news
34-36 38
40-42 44-45
Landbay: Looks like we made it NACFB: Broker Survey 2020 – results Time Finance: The time is now Shawbrook: The ties that bind us Bibby Financial Services: A shot in the arm NatWest: In times of rapid change
Industry Insight 46-47 48
Mackman: Greater connectivity Adrian Coles: Anatomy of a crisis
Opinion & Commentary 50-51 52
54-55
56
58
Arc & Co. : Above and beyond Jackson Cohen Associates: Known unknowns Just Cashflow: Reframing threats Listicle: 5 ways to use data effectively Five minutes with: Benjamin Davis, Chief Executive Officer, Octopus Real Estate
56 Further Information KIERAN JONES Editor & Feature Writer
33 Eastcheap | London | EC3M 1DT Kieran.Jones@nacfb.org.uk JENNY BARRETT Communications Consultant
33 Eastcheap | London | EC3M 1DT Jenny.Barrett@nacfb.org.uk LAURA MILLS Graphic Designer
34
33 Eastcheap | London | EC3M 1DT Laura.Mills@nacfb.org.uk
Compliance Update
MAGAZINE ADVERTISING T 02071 010359
16
Magazine@nacfb.org.uk
NACFB: Introducing opportunity
Ask the Expert 18-19 Shiona Davies: SME
Finance Monitor
44
MACKMAN Design & Production T 01787 388038
mackman.co.uk
NACFB | 3
Welcome
Norman’s Note
W
e all worked hard last year. Our entire lending community dug deep to ensure SMEs received critical business funding, enabling Britain to move forward. No one wants a repeat of the last twelve months, so it is vital that this year we work smarter, not harder. One way of working smarter is through the proper application of data. The use of analytics is no longer limited to big companies with deep pockets. It is now widespread, with 59% of enterprises using data in some capacity. According to a survey from Deloitte, 49% of respondents said that analytics helped them make better decisions, 16% said that they better enabled key strategic initiatives, and 10% said they helped them improve relationships with both customers and business partners. To take full advantage, you need to know how to get the most value from your data.
Norman Chambers Managing Director | NACFB
Many NACFB Patrons revolve their entire market strategy around the insights pulled from new data, and we are increasingly seeing this from Member brokers too. This issue of Commercial Broker features insights and data from across the lending spectrum. At the very heart of which are the findings from the 2020 NACFB Broker Survey. Late last year, the Association approached all Member firms seeking to capture lending activity through NACFB commercial intermediaries. The high-level results (see p. 23) reveal just how much our community stepped-up to the challenge. Your trade body will continue to push for meaningful changes that benefit all commercial brokers and their clients. Such vital data not only provides a snapshot of activity in 2020, but also enables the NACFB to raise its voice and speak confidently on behalf of all Members. Together we shall seek a more prosperous year, one where both hard and smart work are rewarded.
4 | NACFB
Commercial Mortgages
Property Development
Asset Finance
Invoice Finance
Business Savings
For Small But Mighty businesses that never stop. We’re here to help you and your customers find the right funding solutions so businesses can adapt, innovate or transform and thrive in these challenging times. Find out more about our range of business finance products and support: aldermore.co.uk/businessfinance
Business Finance For intermediary use only Subject to status. Security may be required. Any property or asset used as security may be at risk if you do not repay any debt secured on it. Aldermore Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 204503). Registered Office: Apex Plaza, Forbury Road, Reading, RG1 1AX. Registered in England. Company No. 947662. Invoice Finance, Commercial Mortgages, Property Development, Buy-To-Let Mortgages and Asset Finance lending to limited companies are not regulated by the Financial Conduct Authority or Prudential Regulation Authority. Asset Finance lending where an exemption within the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 applies, is exempt from regulation by the Financial Conduct Authority or Prudential Regulation Authority. ABF0307
NACFB News
Association updates for January 2021
NACFB News NACFB Members helped back £27.3bn in 2020
Funding Future Growth in the property sector
NACFB Members helped originate £27.3 billion of lending last year, including £6.1 billion worth of CBILS facilities.
The Property Investment Finance Forum is the first event in the NACFBʼs ‘Funding Future Growth’ series. It will take place virtually on Tuesday 9th February 2021 and is free for all NACFB Members to attend.
Results from the NACFB’s 2020 Broker Survey (see p. 23) reveal that the Association’s Members continued to service SMEs with record-breaking levels of business finance throughout the early stages of the COVID pandemic. The roll out of the government’s business loan schemes saw the Association’s Members quickly adapt to facilitate critical business funding. The average size of a CBILS deal was £249,644, and in total, Members enabled £6.1 billion worth of CBILS in 2020 alone. NACFB Members facilitated 24,538 CBILS deals, representing 13% of the total number of loans introduced by Members. The latest British Business Bank data reveals a total of 77,909 facilities had been approved by November 2020. “The renewed certainty, clarity and clout with which we can engage with our stakeholders, means that this year, when the NACFB starts a conversation, others will sit-up and listen,” Norman Chambers, managing director of the NACFB, said. “Our Members played a key role in Moving Britain Forward, and we will utilise the survey data throughout 2021 when engaging with key policy, regulatory and industry stakeholders.” 6 | NACFB
Mortgage? Bridging? Development? Refurbishment? Ground-up? Part-complete? Successfully securing the right type of finance for investment property takes tenacity and expertise. Brokers need to understand their clients’ business models and be able to identify quickly what lenders are active in which sectors. This forum examines market dynamics, the different types of finance available to property investors and identifies what brokers need to know to get deals over the line. Headline sponsor Avamore Capital will be among a host of lender Patrons on hand to quiz regarding criteria, rates, and terms, and an industry expert will share insights on market developments and how the sector operates. Members can register for this forum on the events page of the NACFB’s website, where they will also find more information on the other sector forums in this series, including finance for professional services, manufacturing, transport, technology, retail, hospitality, construction, and the private rented sector (PRS). Visit nacfb.org/events
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Note from our Sponsor
We shall prosper New year, new normal, new opportunities
Andy Bishop UK Director, Commercial Broker Development Lloyds Banking Group
W
elcome to 2021 – with some reasons for cautious optimism following the roll-out of vaccines in the last few days (as I write this). I think we are all looking to a more stable year ahead even though what we previously called a ‘new normal’ may well develop into an ongoing normal. Over recent months the market has shown an incredible ability to adapt quickly to rapidly changing external circumstances given the unprecedented and enormous scale of support which has been provided to SME businesses. From a business perspective, as an industry, brokers have shown amazing agility and adaptability, overcoming the many challenges that have been thrown at them whilst at the same time providing great support to thousands of businesses, not just financially but also with wider advice. This has built real resilience and should leave us feeling confident that we will be able to face whatever the economic future holds. In the near term, there will be opportunities for refinancing and restructuring to create solid foundations for regrowth. There will be a need to manage some of the shorter term repayment commitments which may have been entered into, particularly as government schemes in the Winter Economic Plan start to run down and repayments commence on the various government supported lending schemes. Equally businesses will continue to adapt and invest in diversification of their models, extending their digital reach 8 | NACFB
as well as taking the opportunity to expand by acquisition. Some will now recommence investment in equipment and plant having deferred decisions previously and many, some of whom may not have borrowed historically or may have supported themselves through their credit balances during the crisis, will need to look at their working capital requirement. 2021 therefore will be a year of opportunity for commercial brokers. We know from previous experience that historically the industry has recovered quickly from economic shocks or downturns. There will undoubtedly be bumps in the road, but the experiences of 2020 should stand brokers and funders alike in good stead with a shared purpose to support SME businesses to recover. We remain committed to supporting both commercial finance brokers and the NACFB as we have done in the past. I absolutely recognise the value that brokers bring to their clients and funders supported by a strong trade association with a significant and credible voice with key government stakeholders. The last nine months have been a difficult period for us all, and we will work hard to support you in finding the ideal solutions for your clients’ unique pandemic-recovery needs. Working together we can make 2021 a year of mutual success for brokers, funders and most importantly SME businesses. For more information visit lloydsbank.com/businessintermediaries
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 119278.
Industry News
Industry News 4. Insurers in the firing line over cancelled events
1 1. SMCR effectiveness questioned Questions have been raised over the effectiveness of the Senior Managers and Certification Regime (SMCR) after a Freedom of Information request by regulatory consultant Bovill found the Financial Conduct Authority (FCA) had opened 34 investigations since the SMCR was first introduced to the banking industry in 2016, with 11 of these closed without action and a fine enforced on one occasion.
Tensions are brewing between the Government and the insurance industry as the coronavirus crisis threatens the future of major 2021 events. Ministers, insurers, and event company bosses are locked in talks over how to break a deadlock which could see events from the London Marathon to Glastonbury cancelled. Event organisers usually take out contingency insurance, to cover their losses if they cancel their plans. However, such is the level of uncertainty this year, amid concerns of Tier 4 extensions and bans on mass gatherings, insurers are refusing to provide cover.
6. Pandemic drives record spike in redundancies
2. COVID loan schemes extended to 31st March 2021 The Chancellor of the Exchequer has further extended the government’s three coronavirus business interruption loan schemes. The extension means that the schemes will now have an end date of 31st March 2021, enabling further support for businesses who may need it. More businesses will now be able to benefit from the CBIL, CLBIL, and BBL schemes.
3. Homes England simplifies public land disposal scheme Homes England, the government’s housing accelerator, is simplifying how it engages with developers and housebuilders to bring public land to market, with the aim of opening public sector sites more widely to SMEs as well as the large housebuilders. SMEs bidding to deliver smaller sites will benefit from simpler entry criteria than those applying to deliver larger strategic sites where there will be more testing. 10 | NACFB
6
4 5. Premium hikes threaten small businesses Research by the consultant Mactavish shows that some insurance premiums for SMEs have risen by 800% leading to fears that some businesses will not be able to afford to renew their policies. Chief executive Bruce Hepburn warned: “The timing couldn’t be worse for firms still being battered by the economic fall-out from the pandemic. For some SMEs, these unexpected cost increases could be the final nail in the coffin.”
The Office for National Statistics’ (ONS) figures show that redundancies rose by an all-time high as 370,000 jobs were lost in the three months to October. The losses mean the jobless rate has hit 4.9%, up from 4.8% in September to the highest level since 2016. The number of UK workers on payrolls has fallen by 819,000 between last February and November due to the impact of the coronavirus pandemic. On top of this, the ONS estimates that around 4.5 million workers are currently on furlough.
7. BBLS losses could total £26bn The Public Accounts Committee says Government plans for recouping taxpayer losses on fraudulent COVID-19 loans are “woefully underdeveloped.” MPs on the committee say ministers failed to “strike the right balance” between rescuing companies and protecting the public purse. They added that the Government did not have the data to “assess the levels of fraud within the scheme, or its actual economic benefits” nor a counter-fraud strategy. Analysis suggests losses from the BBLS could reach £26 billion.
8. Business chiefs call for gradual post-Brexit trading regime
10. Capital Economics issues optimistic prediction
Business chiefs in the UK and EU have called for a gradual switch to a post-Brexit trading regime in a bid to avoid chaos at the borders. The Federation of Small Businesses (FSB), Institute of Directors and Confederation of British Industry have all called for some form of implementation period for the most complex changes facing firms as the UK and EU introduce new rules.
Economists at Capital Economics have predicted that the coronavirus vaccine will see the UK economy recover more quickly than most analysts expect. While the Government’s official forecaster has predicted growth of 5.5% in 2021 and 6.6% in 2022 following a decline of 11.3% in 2020, Capital Economics believes that following a record decline of 11.5% last year, the economy will grow by 7.5% this year and by the same rate the year after.
8
9 9. Government-backed loans soar past £68bn Figures published last month by HM Treasury show that over 1.5 million businesses across the country have been supported with a total of over £68 billion in lending through government-backed coronavirus lending schemes. Over 82,000 businesses have now secured facilities through CBILS, while the Coronavirus Large Business Interruption Loan Scheme (CLBILS) has allowed 675 larger firms to access almost £5 billion worth of support.
10
Patron News
Patron News Masthaven: Despite coronavirus, broker confidence remains high
MarketFinance shares insights on lending through COVID-19
71% of brokers are confident about this year, a fall of just 6% from January 2020, Masthaven’s latest Broker Beat has revealed.
More loans, larger businesses, and a regional shift – these are some of the trends and insights that MarketFinance observed during 2020. This 2020 business snapshot is summarised in the ‘MarketFinance Business Insights Lending Through COVID-19’ report.
The NACFB Patron’s survey of 265 intermediaries also found that 87% of participants felt confident about their company’s prospects this year, down only 3% from the bank’s last survey in January. Nearly two-thirds of surveyed intermediaries (63%) expect to see revenues rise in the coming year, with 36% predicting growth to be in double figures. When asked about the challenges they face, almost one in three brokers (30%) said that economic uncertainty was the biggest obstacle their business faced in the next six months. Despite the difficulties, 12% of brokers stated that specialist mortgages were experiencing the most growth, compared to 21% for first charge mortgages for home movers, and 14% for remortgages. Rob Barnard, director of intermediaries at Masthaven, said that confidence among brokers was testament to the “…strong, collaborative effort between brokers and lenders in an unprecedented time. The industry has demonstrated that it can continue to operate in extraordinary circumstances and provide the support customers need.” 12 | NACFB
The NACFB Patron lent a total of £342.4 million across all solutions, over the first 11 months of 2020. Representing a 3.4% increase in total lending over the same period in 2019 (£331.1 million). Those businesses using invoice financing were both larger than usual (an average turnover of £2.1 million, compared to £1.3 million in 2019, a 60% increase) and received 83% more financing on average than they did in 2019. Demand for business loans soared with a 13-fold increase in loans between Q2 and Q3 2020. Most loans (60%) were made to businesses in administrative and support services, wholesale and retail trade, manufacturing, and construction. Anil Stocker, CEO of MarketFinance, commented: “Small businesses will play the pivotal role in the UK’s economic recovery as we emerge from the pandemic, and we are confident that the bounce back will, with the right support, be swift.”
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Patron News
Patron News 40% of construction SMEs made no Brexit plan
Shawbrook acquires development finance team
Research from Aldermore reveals that the main reason for the lack of Brexit preparations by UK small and medium-sized enterprises (SMEs) in the construction sector was because of their continued focus on managing the impact of the COVID-19 pandemic.
Shawbrook Bank has enhanced its market position with the strategic acquisition of RateSetter’s peer-to-peer funded development finance business. The NACFB Patron confirmed the completion of the deal which includes the purchase of a development finance loan portfolio with facilities totalling £167 million.
The NACFB Patron shared that the apparent lack of Brexit preparation among many UK construction SMEs is particularly concerning as on average, 28% of SME's monthly business income is dependent on business with customers in the EU. Of those UK construction SMEs that started to prepare for Brexit nearly one in five (19%) have diversified into new markets in preparation for a potential decrease in income and one in ten (10%) have started to offer more tailored services and products to suit individual clients. Andrew Dixon, commercial director for specialist finance at Aldermore, said: “Businesses who are confused about where to find information on how to prepare should consult the Government’s guidance for SMEs post-Brexit transition. “This will help them work out how any regulatory changes could impact them and their business. Aldermore has also created a Brexit hub with key information for businesses to help them best prepare for the transition and the challenges and opportunities that lie ahead.”
14 | NACFB
After continuing to fund new projects throughout 2020, despite the logistical challenges associated with COVID-19 measures, this acquisition of the team and portfolio from RateSetter increases both the scale and capacity of Shawbrook’s existing development finance business whilst signposting the Bank’s continued commitment to this important market. Terry Woodley, managing director of the development finance business at Shawbrook, said: “This is a fantastic acquisition and one that complements our existing development finance operations. “The RateSetter business has been built by serving the needs of property developers in a key part of the market that remains underserved by traditional lenders. Naturally, this expands the market opportunity for the Bank, and we are thrilled to welcome the RateSetter development finance team and new customers to Shawbrook.” Peter Behrens, RateSetter’s chief commercial officer, said: “I am pleased that our property finance team can go to a new home where they will complement the Shawbrook team and continue to grow the franchise they have built.”
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Barclays Bank UK PLC. Authorised by the Prudential Regulation Authority, and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No 759676). Registered in England. Registered no 9740322. Registered Office 1 Churchill Place, London E14 5HP. Barclays Bank UK PLC adheres to Standards of Lending Practice monitored and enforced by The Lending Standards Board. Further details are available at www.lendingstandardsboard.org.uk Item Ref. 9917163_UK. July 2020.
Compliance
Introducing opportunity Why brokers should be formalising their introductions Erica Meredith Compliance Consultant NACFB
T
he NACFB undertakes a number of Minimum Standards Reviews (MSRs) each month. In previous years, I would travel the length and breadth of the country to meet face-to-face with the Association’s Members, now of course, the compliance team and I conduct these remotely. These reviews have been very well received and have proved to be an excellent use of Members’ time. Indeed, the most common piece of feedback I receive is just how valuable the meetings are; helping Members to assess their compliance processes and develop their understanding of the regulatory perimeter. One of the most common areas of improvement I have identified is both the use and understanding of introducer agreements. Here, our recommendation is clear. Members should be implementing an introducer agreement when a professional service provider (accountant, solicitor, residential mortgage broker, IFA) refers clients or signposts the client to you regardless of a financial inducement or benefit by way of business. Allow me to explain why. The introducer agreement evidences a business relationship between two firms and the permissible transfer of client data, (three pieces of data constitutes as being able to identify an individual; first name, surname, and contact number). As the introducer is recommending the use of your services in their professional capacity, they must formalise their responsibilities so as not to inappropriately advise 16 | NACFB
customers, for which they are not authorised to do. When referring regulated clients, the introducer must hold, at a minimum, limited credit broking permissions. However, with an accountant for example, would they know what constitutes a regulated or unregulated client? What should happen with the client then? Again, our recommendation is to ensure that all introducers hold a minimum of limited credit broking permissions. There are, of course, exemptions: • Accountants who are members of the ACCA or the ICAEW hold limited credit broking permissions through their respective membership body; • Solicitors hold limited credit broking permissions through The Law Society; • The Royal Institute of Chartered Surveyors also holds limited credit broking permissions from the FCA; • IFAs and residential mortgage brokers (including ARs) hold their own FCA permissions, and therefore are permitted to refer both regulated and unregulated clients. An introducer can also become an Introducer Appointed Representative (IAR) within your FCA permissions. If you are considering adding an IAR to your existing FCA licence, please do not hesitate to contact the NACFB compliance team, and we can assist you in this matter. An introducer agreement suitable for both IARs and standard introducers is available in the compliance pages of the NACFB website for you to download and amend accordingly.
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Ask the Expert
SMEs and their response to COVID-19
Q Shiona Davies Director BVA BDRC
T
he SME Finance Monitor is the largest study of its kind in the UK. It provides robust and reliable data on SMEs and their access to finance. We talked to Shiona Davies, director at BVA BDRC and author of the Monitor to share some insights from the Q3 results as businesses emerged from the first lockdown. It should be noted that the data was gathered just as the R number started to increase and a curfew was introduced but before tiers and additional lockdowns.
How did the first lockdown affect SME’s access to finance?
In broad terms, Q2 was bad. SME sentiment was quite negative with half (51%) thinking that the “worst was still to come”.
The proportion rating the economic climate as a major barrier to their business more than doubled from 21% in 2019 to 47%. The use of finance declined to 30%, driven by lower use of overdrafts and credit cards. There was also an increase in the proportion of SMEs using finance who were concerned about their ability to repay existing debt which increased from 14% in Q1 to 29% 18 | NACFB
&
in Q2. The proportion of SMEs planning to grow halved to 24%, and 60% were expecting their turnover to be below 50% or non-existent in the coming months.
evidence, the increase in use of finance in Q3 was led by an increase in the use of loans which suggests government-backed funding was playing a significant part.
Did the situation improve in Q3?
Did SMEs borrow to survive or grow?
A
Overall, metrics did not worsen and in some instances the situation improved, although COVID hit some sectors, such as hospitality, very hard. The proportion rating the economic climate as a major barrier to their business dropped back a little to 41%. Use of finance was back to 40%, more in line with previous years and there was no further concern about ability to repay (21%).
The proportion of SMEs planning to grow crept back up to 38% and those expecting their turnover to be below 50% or non-existent in the coming months fell to 30%. Perhaps surprisingly, concern about political uncertainty/future government policy remained unchanged.
How has the introduction of government-backed loan schemes affected SMEs?
A quarter of SMEs have applied for, or are considering, COVID-related funding, primarily with one of the government-backed loan schemes, with nine in ten of those who applied being successful. As further
There was an increase in the proportion of SMEs who said they borrowed for cashflow purposes. This could indicate borrowing to survive, especially given the low growth figures (Fig. 1). Of the three heavier users of COVID-related finance, two were in struggling sectors – transport and hospitality.
What does the future hold?
COVID has impacted on growth and growth prospects and more SMEs see threats (32%) than opportunities (19%) ahead. When asked where their focus was regarding the pandemic 25% said they were still very much firefighting the current conditions, but also, as many as 22% said they were focussed much more on the future (Fig. 2). With the exception of the economic climate, overall, the barriers to future performance have remained fairly stable. In October, there were some signs of an increase in those seeing political instability as a barrier, so we await further data and developments.
“
A quarter of SMEs have applied for, or are considering, COVID-related funding, primarily with one of the government-backed loan schemes, with nine in ten of those who applied being successful
1 As growth aspirations increased somewhat in Q3, so too did the proportion happy to borrow to grow, now back in line with 2017 Annual time series: Happy to borrow to grow 50-249 emps 10-49 emps 1-9 emps 0 emps
57% 56% 49% 39%
51% 50% 44% 27%
All SMEs
2 Are SMEs focussed on the crisis or planning for the future?
Further, does the future pose opportunities or threats?
NACFB | 19
Special Feature
Advertising Feature
Looks like we made it What 2021 has in store for mortgage brokers Paul Brett Managing Director – Intermediaries Landbay
F
or many people, 2020 was an ‘annus horribilis’, but it is finally behind us and now is the time to look ahead. With positive news about a vaccine, all being well, we should hopefully be able to resume something like normality by the middle of the year.
On the mortgage front, the focus for the start of the year will continue to be the rush towards the end of the Stamp Duty holiday. The calls for some sort of extension, will inevitably grow in intensity as we approach the cliff edge of March 31st. With backlogs already seen at conveyancing solicitors, valuers and local authority searches as well as with some lenders, there have been growing clamours for the Stamp Duty holiday to be extended for an additional six months. While that will certainly help all those desperate to buy now, it is highly likely that we will face the same issue again – only in September rather than in March. In the meantime, for those going up to the wire, it will be more important than ever for brokers to guide their clients in the direction of lenders – and other suppliers – who continue to perform within their stated service levels, to at least provide some certainty. The demand for residential property has been well publicised but the same has also been seen in buy-to-let. Much of the demand that we have seen at Landbay has come from professional landlords 20 | NACFB
looking to expand their portfolios. With the opportunity to save up to £15,000 in Stamp Duty – more for those buying multiple properties – it makes perfect sense. But it’s not only the short-term gain that makes sense, the buy-to-let market stands to remain buoyant well into the medium-term, particularly for those with multiple properties. It is an unfortunate consequence of the pandemic that rising unemployment and reduced job security is making it much harder for people to get a mortgage. The well-known challenges facing first-time buyers, as well as rising divorce levels, are increasing the demand for good quality private rental property. The pandemic has also seen appeal grow for houses in multiple occupation (HMOs), both from investors and from tenants. Young people increasingly decided they preferred to spend lockdowns in a shared house with their friends rather than trapped with parents or in a one-bed flat. Those strapped for cash are also finding shared accommodation more affordable.
“
Much of the demand that we have seen at Landbay has come from professional landlords looking to extend their portfolios
“
The positive for the housing market is that the supply and demand factors generally remain the same: there are still more people in Britain wanting to buy than there are houses for them to live in
The appeal of HMOs to investors is also clear: the yields are noticeably higher than on single family accommodation. There are also typically fewer or smaller void periods, as if only one room is vacant in a shared house, then the landlord still receives income from the remainder. Some landlords even make tenants joint and severally liable so that risk disappears altogether. For brokers advising clients on HMOs, there are additional rules and regulations your clients need to be aware of however, from licensing to alarms and fire doors to room sizes, as well as the fact that not every lender will lend on student lets. For those with a portfolio of single-family properties the risk return ratio remains similar to that of an HMO: a landlord with multiple properties in their portfolio will better be able to weather the storm of one or two people not paying. Resultingly, expanding portfolios in the year ahead also makes sense from a risk point of view. The rewards for brokers who deal with HMOs, and with portfolio landlord clients, are also higher, with higher proc fees and clients that are likely to return again and again as they grow their portfolios. So, what will the rest of the year hold? If the government does end the Stamp Duty holiday on 31st March then we may be in for a quiet Q2; in fact new purchases are likely to tail off fairly soon into January
as people realise their purchase won’t complete in time for the deadline. All else being equal, we will get through the lull; however, people will get accustomed to the fact they need to pay Stamp Duty again and volumes should pick up for the second half of the year. In the meantime, lenders will be competing for remortgage business in order to hit their Q1 and Q2 volumes, so for brokers, this will be the time to contact and service those existing customers. There are of course the effects of Brexit looming. We have now left the European Union, although at the time of writing, any deal is an unknown and looks likely to go down to the wire. How financial services will be affected is something that will unravel over several years. The positive for the housing market is that the supply and demand factors generally remain the same: there are still more people in Britain wanting to buy than there are houses for them to live in. Longer term, buy-to-let will stay in demand. Despite the Prime Minister declaring he wants to create ‘generation buy’, the fact is, even when high LTV mortgages make a return, buying is just not right for a growing number of people. This is particularly the case for millennials who increasingly appear to want ‘experiences’ over ‘things’, and for whom the prospect of being tied to bricks and mortar is not appealing. NACFB | 21
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Broker Survey 2020
Hindsight is 20/20 Results from the NACFB Broker Survey
W
hen the NACFB starts a conversation, others sit up and listen. That is because we strive to accurately reflect the views and circumstances of our Members, and the NACFB annual survey supports this agenda. The survey seeks to develop a clear picture of the intermediary-led lending industry. It looks at how commercial finance brokers have fared over the previous 12 months and attempts to gauge how the market is shaping up at the start of 2021. There are currently 1,111 individual Member firms operating under the NACFB logo, with 131 lender Patrons on the NACFB lender panel. In 2020, the most challenging of years, the response we have had from NACFB Members has been very strong, with well over a third of our brokerages submitting a response. Such a considerable sample size provides us with a robust dataset, which enables us to approach lenders, the regulators, and the government with a clear and evidence-backed agenda.
commercial finance market, brushing aside any thoughts of Brexit as a mere head cold. The data contained in the next few pages tells a story of just how vital the Association’s Members were to recovery efforts and points to how similarly vital they will be as the UK enters the post-pandemic phase.
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Such a considerable sample size provides us with a robust dataset, which enables us to approach lenders, the regulators, and the government with a clear and evidence-backed agenda
Only a crystal ball could have predicted the speed and severity with which the coronavirus pandemic swept through the UK NACFB | 23
2
2020 data In 2020, NACFB Members demonstrated much longevity, with the average broker having worked in the industry for ten or more years, (Fig. 1). This level of experience is reflected in the average age of Members – 50 years old, an increase of two years compared to 2019.
Primary areas of business activity
As might be expected in such a turbulent year, starting a career in broking wasn’t easy and the proportion of new entrants fell to 7% from 8% the year before. On average, NACFB Members have been in the industry a little over ten years. Members operating in commercial mortgages and leasing and asset spaces tend to have the most industry experience. Primary area
1
Commercial Mortgages Leasing & Asset Finance Buy-to-Let Finance
Length of time NACFB Members have been in the industry
Development Finance Unsecured Finance Short-term & Bridging Loans Factor & Invoice Finance Cashflow Other
20+ years
19%
13-19 years
19%
Length of time
9-12 years
23%
1-3 years
Less than one year
19%
% 2019
29%
34%
28%
24%
14%
15%
13%
10%
5%
4%
4%
5%
3%
4%
3%
1%
3%
4%
The top three positions for the primary areas of business activity amongst brokers remained the same year-on-year. At 29%, commercial mortgages retained the title even though its market share fell back 5% points from 34% in 2019. Pipped to the post, at 28% leasing and asset finance made gains on the previous year, up from 24%.
13%
4-8 years
% 2020
Buy-to-let finance came a valiant third at 14%, down from 15%. The remaining activities jostled for position, achieving neither serious gains nor losses in market share. However, the slight up and downs do show that businesses requiring property finance lost out. This is likely due to the lockdown when construction activity, surveying, and the like ground to a halt. On the flipside, requests for non-property related finance grew as organisations sought ways to maintain operations and cashflow. The results show that brokers also tend to fall into one of these two camps, either offering property-backed finance or non-property related finance, but rarely mixing the two (Fig. 3).
7% Percentage
3 Most popular secondary areas of business activity for NACFB Members
Commercial Mortgages
Development Finance
Factor & Invoice Finance
Leasing & Asset Finance
Short-term & Bridging Loans
Commercial Mortgages
Development Finance
Commercial Mortgages
Leasing & Asset Finance
Unsecured Finance
Development Finance
Cashflow
Short-term & Bridging Loans
Leasing & Asset Finance
Short-term & Bridging Loans
Buy-to-Let Finance
Commercial Mortgages
Factor & Invoice Finance
Buy-to-Let Finance
Factor & Invoice Finance
Development Finance
Unsecured Finance
Buy-to-Let Finance
Short-term & Bridging Loans
Cashflow
Cashflow
Commercial Mortgages
Leasing & Asset Finance
Primary area
Buy-to-Let Finance
Cashflow
1st
Commercial Mortgages
22nd 3rd
4 Areas with highest number of sector transactions
Cashflow
Commercial Mortgages
Development Finance
Factor & Invoice Finance
Leasing & Asset Finance
Short-term & Bridging Loans
Unsecured Finance
Greater London
South East
Greater London
Greater London
East of England
South East
South East
South East
South East
North West
South East
South East
West Midlands
South West
North East
Greater London
East Midlands
South West
South West
South West
North West
East Midlands
Greater London
East Midlands
North West
Greater London
West Midlands
East of England
Wales
North West
South West
East of England
South West
East of England
North West
East Midlands
Greater London
Yorkshire and the Humber
North West
North East
Buy-to-Let Finance
From a regional perspective, most brokers dealing in property-backed finance were based in Greater London and the South East, whilst non-property related brokers were more widely spread throughout the country.
Unsecured Finance
5 The total number of deals introduced across the NACFB Membership 50-99: 21%
Despite the pandemic, or more likely because of it, NACFB Members introduced a staggering 190,825 deals to lenders in 2020 (Fig. 5) – a figure that is 12% down on 2019. As might be expected, because most brokerages are SMEs themselves, 70% of these brokers submitted fewer than 100 deals each. The monetary value of all deals facilitated by NACFB Members totalled at least £27,382,937,500 (£27.3 billion) in 2020 (Fig. 8).
20-49: 23%
100-149: 11% 0-19: 26% 150-249: 8%
250-499: 5% 500-999: 3% 1,000-1,999: 1.4% 2,000-3,499: 1.1% 3,500-4,999: 0.6% 5,000+: 0.9%
6 In terms of deal numbers, NACFB Members specialising in property-backed finance suffered compared to their non-property counterparts. The number of property-backed deals fell 38% year-on-year (Fig. 6), whilst the number of non-property related deals increased by 40%; again indicating that the property market was effectively on hold during lockdown, but SMEs in general were seeking finance to survive or grow. This theme is mostly reflected in the average size of deals in 2020 compared to the previous year (Fig. 7). Average loan amounts on non-property related deals grew, and average loan amounts on property-backed finance fell, except for commercial mortgage deals which increased by just over £100,000.
Total number of deals per finance type
Type of finance
Projected 2020 number 2019 number number of deals of deals per firm of deals per firm
Buy-to-Let Finance
3,350
70
132
Cashflow
4,610
512
148
Commercial Mortgages
8,735
86
119
Development Finance
2,235
49
58
Factor & Invoice Finance
975
108
168
Leasing & Asset Finance
52,325
534
468
Short-term & Bridging Loans
730
56
95
Unsecured Finance
1,650
97
107
7 Average size of deal introduced per finance sector £1,570,774
£1,291,739
£
£
Commercial Mortgages 2020
Development Finance 2019
Short-term & bridging loans 2020
Commercial Mortgages 2019
Factor & Invoice Finance 2020
Short-term & Bridging Loans 2019
Cashflow 2020
Factor & Invoice Finance 2019
Buy-to-Let Finance 2020
Cashflow 2019
Unsecured Finance 2020
Buy-to-Let Finance 2019
£
£
Unsecured Finance 2019
Cashflow and leasing and asset finance deals made the most headway. The size of a cashflow finance deal increased almost nine-fold from an average of just £50,000 to a staggering £445,556. Not quite so spectacular but impressive nonetheless, the average loan size of a leasing and asset finance deal almost trebled from £51,091 to £130,434. The largest single deal averages also reveal an overall increase on last year’s figures (Fig. 9).
Total introduced to lenders by NACFB Members
Type of finance
2020 total (£)
Leasing & Asset Finance
£7,502,812,500
Commercial Mortgages
£7,169,437,500
Development Finance
£5,504,937,500
Buy-to-Let Finance
£2,316,625,000
Short-term & Bridging Loans
£1,913,750,000
Factor & Invoice Finance
£1,096,250,000
Unsecured Finance
£672,375,000
Cashflow
£600,000,000
£
Leasing & Asset Finance 2020
Type of finance
8
£51,091
Development Finance 2020
£130,434
£
£
£139,737
£
£50,000
£
£149,853
£
£
£355,599
£
£318,750
£445,556
£
£
£371,667
£
£477,778
£544,318
£479,808
£519,029
£619,534
£
Leasing & Asset Finance 2019
9 Largest average single deal introduced by NACFB Members
Type of finance
2020 (£)
2019 (£)
Factor & Invoice Finance
£19,319,444
£5,688,889
Short-term & Bridging Loans
£12,444,231
£6,463,636
Development Finance
£11,248,370
£9,704,762
Leasing & Asset Finance
£9,579,082
£1,295,227
Commercial Mortgages
£5,103,431
£4,940,359
Buy-to-Let Finance
£3,728,125
£2,304,225
Cashflow
£3,527,778
£800,000
Unsecured Finance
£2,460,294
£2,705,263
NACFB Members introduced 190,825 deals to lenders in 2020 – 12% less than 2019’s total of 217,903
The total amount introduced by NACFB Members in 2020 was £27.3 billion
10 Refinancing deals introduced by NACFB Members in 2020
Leasing & Asset Finance: 24% Buy-to-Let Finance: 55%
Short-term & Bridging Loans: 34%
Factor & Invoice Finance: 37%
Cashflow: 48%
Unsecured Finance: 40%
Commercial Mortgages: 42%
55% of all buy-to-let deals introduced to lenders by NACFB Members were for refinance purposes. For all other finance types, more than half were new deals.
Development Finance: 45%
11 Proportion of finance enquiries relating to government-backed loan schemes
64%
57%
27%
26%
24%
19% 16%
15%
Buy-to-Let Finance
Cashflow
Commercial Mortgages
Development Finance
Factor & Invoice Finance
Leasing & Asset Finance
Short-term & Bridging Loans
Unsecured Finance
Government-backed loan schemes (BBLS, CBILS and CLBILS) played a crucial role in keeping businesses funded in 2020. Our survey found that the number of enquiries to NACFB Members in this regard varied depending on the type of finance required. Enquiries relating to cashflow and unsecured finance were the most numerous, although these did not necessarily manifest into these types of loan.
12 Average number of CBILS deals per sector Finance sector
Percentage of CBILS loans per finance sector
Number of CBILS loans per finance sector
Leasing & Asset Finance Commercial Mortgages Cashflow Development Finance Unsecured Finance Buy-to-Let Finance Factor & Invoice Finance Short-term & Bridging Loans
52% 15% 9% 7% 6% 6% 3% 1%
12,838 3,800 2,138 1,625 1,488 1,363 675 325
In total, NACFB Members facilitated 24,538 CBILS deals, which represented approximately 13% of the total number of loans introduced by Members. Only 9% of cashflow finance and 6% of unsecured finance loans introduced by NACFB Members were backed by CBILS, whereas 52% of all leasing and asset finance loans introduced by NACFB Members were backed by CBILS. The survey data was segmented by a broker’s primary area of business activity, whilst asset and leasing brokers introduced the majority of the CBILS deals, this does not mean those deals were exclusively asset or leasing facilities. The clients of asset and leasing brokers are more likely to operate in the sectors that were most impacted by COVID and explains this data spike.
13 Average size of CBILS deal per sector
£618,478 Factor & Invoice Finance Other
£114,583
Cashflow
£157,398
Unsecured Finance
£163,889
Short-term & Bridging Loans
£195,833
Commercial Mortgages
£197,059
£243,056
£250,368
£302,885
Average size of CBILS loan per finance sector
Development Finance
Average size of CBILS deal facilitated by NACFB Members in 2020 is £249,644
Buy-to-Let Finance
Leasing & Asset Finance
Finance sector
In total, NACFB Members were projected to facilitate £6.1 billion worth of CBILS in 2020
The average loan size across all finance types was £249,644 (Fig. 13). These deals contributed to the facilitation by NACFB Members of at least £6.1 billion just through the CBIL scheme. The latest British Business Bank data reveals a total of 77,909 facilities had been approved by November 2020.
14 Professional services (i.e. lawyers, accountants, and estate agents): 21% Direct enquiries: 45%
NACFB Members’ lead sources
Marketing initiatives: 9% Referrals from other brokers: 9% Referrals from existing customers: 5% Sector suppliers: 5% Referrals from lenders: 4%
15 Half of survey respondents also said that the main reason their clients were declined finance in 2020 was because the sector in which the client operated was deemed too risky. Presumably, many of these clients were in either the hospitality or retail sectors, both of which have suffered enormously as a result of the pandemic. Members certainly said that they had seen a slowdown in enquiries from these sectors in 2020 (Fig. 19).
Average number of lenders on an NACFB Member’s panel
Finance sector
Average number of lenders on panel
Short-term & Bridging Loans
172
Development Finance
140
Factor & Invoice Finance
137
Cashflow
131
Buy-to-Let Finance
130
Commercial Mortgages
116
Unsecured Finance
94
Leasing & Asset Finance
56
17 Most common reasons a lender turned away deals in 2020
On average, NACFB Members had 106 lenders on their panel, five more than in 2019. Short-term and bridging lenders were the most common (172) and at the other end of the scale were the leasing and asset finance providers (56).
50%
% of membership
16 Most common reasons for lender selection
13% 13%
% of membership
8%
30% Selection type Lowest rate Certainty of funding Previous positive experiences Speed of initial decision Speed to completion Other Ease of application submission Best fit for customer Term flexibility
8% 7%
21%
1%
19%
>1%
6% 6% 6%
Reason for denial
5%
Sector deemed too risky: 50%
4%
Poor credit history: 13%
3%
Lack of strong cashflow: 13% Amount too high: 8% Debt utilisation too high: 8%
When selecting lenders, Members said that those offering the lowest rates (30%) was of primary importance, followed by certainty of funding (21%). Having a positive previous experience also ranked well at 19%. In a year when finance was more important than ever, it’s not hard to understand why these three remain the top choices.
Not enough collateral: 7% Incomplete application/paperwork: 1% Inadequate business plan: >1%
18
19 Business sectors in which NACFB Members saw a slowdown in 2020
Regulatory changes NACFB Members would like most in 2021
% of membership 49%
Changes Simplification of compliance processes
23%
New government-backed loan schemes Greater clarity of the FCAʼs perimeter
13%
Other
5%
More regulatory protection for SMEs 5%
Greater SME coverage from FOS Expansion of FCAʼs perimeter
3% 3%
Business sector
% of membership
Hospitality
36%
Retail
22%
Manufacturing
7%
Property investment
6%
Automotive
5%
Construction
5%
Healthcare
5%
Other
5%
Trade finance
3%
Professional services
3%
Residential
2%
Technology
1%
When asked what regulatory changes NACFB Members would most like to see in 2021, nearly half (49%) said they would like compliance processes to be simplified. Almost a quarter (23%) said they wanted new government-backed loan schemes to be introduced, clearly indicating that the fallout from the pandemic was far from over and may yet be compounded by Brexit, which for the most part had slipped down the agenda.
20 Professional services: 2% Automotive: 3%
Trade finance: 1% Agriculture: 1%
Retail: 3% Residential: 3%
Property Investment: 25%
Other: 5% Technology: 6% £
Healthcare: 6%
Hospitality: 9%
Construction: 25%
Manufacturing: 13%
The results of this survey are accurate at the 95% confidence level plus or minus 4.3 percentage points
Sectors NACFB Members predicted would grow in 2021
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Special Feature
The time is now 2021 brings a beacon of business optimism Ian Smith Chief Executive Officer Time Finance
A
t the end of a turbulent year, our team set out to gauge the mood of the nation’s business owners and despite ongoing economic uncertainty, we found clear signs of hope and optimism. 2020 was a year full of business predictions and projections – and not all of them good. We know many sectors have been decimated by the crisis but anecdotally we hear of businesses who have seemed busier than ever and continue to make ambitious plans for the future. So, what’s been going on? Here at Time Finance (formerly 1pm plc), we decided to go straight to the horse’s mouth to find out. Before the curtain closed on 2020, we asked our customers how they responded to the crisis brought on by COVID-19, as well as how they now feel about the future and the specific challenges that lie ahead. I hope the findings will bring a pleasant degree of reassurance to the industry. Through our research at the end of 2020, we discovered that one in five businesses have innovated their offering in response to the crisis and that 45% are currently considering investments in new or improved products and/or services. This matters not only to brokers and our industry, but to the wider economy and its future. The even bigger news is that at least 70% of businesses stated that they remained stable or flourished in 2020 and, when asked to comment on their current outlook, the vast majority answered with a reassuring level of optimism; “The future is bright as we are ready for growth and attacking opportunities that come our way”; “Optimistic 34 | NACFB
outlook for 2021 and increased profitability from investments”; “Business has grown in the past few months and continues to do so.”
Lessons of lockdown Business owners have shown incredible strength and resilience over the last 12 months, with many demonstrating an ability to adapt and seize the opportunities that have arisen; turning obstacles into something constructive. Time Finance’s research reflects this as 71% flourished or remained stable. Although a fifth made significant cutbacks and a third temporarily ceased trading, one in five innovated their offering and one in three were able to continue trading as normal. The first lockdown resulted in a halting effect for some, not aided by the constant stream of negative news. As a result, some businesses held back and took stock of their situation before moving forward with planned investments.
“
Before the curtain closed on 2020, we asked our customers how they responded to the crisis brought on by COVID-19, as well as how they now feel about the future and the specific challenges that lie ahead
Second time around with lockdown 2.0, businesses revealed that they weren’t prepared to delay their plans any longer and felt more equipped (from every respect) to tackle the challenge in front of them. Our survey shows one in three believed the impact would be less detrimental than the first lockdown, and 81% reported they felt better prepared.
Cautious optimism? Despite the challenges – and some degree of uncertainty – business leaders remain hopeful and positive about their futures; with 45% stating they currently have plans to make investments in new products or services. Some of those most sought after areas for investment referenced included new equipment (13%), marketing (13%) and in operational and technological advancements (11%).
Surviving: 66% of those surveyed by Time Finance said their business would survive economic uncertainty, with only 4% believing they may not. Investing: 61% feel now is a good time to invest, with only 15% believing the opposite. Additionally, 45% state they’re considering investments in new, improved products or services. Borrowing: 58% of those surveyed are using existing cashflow to remain buoyant, while 39% are using BBLS or CBILS. 23% are using an existing alternative finance provider or looking for one, and just 6% are receiving funding through banks.
“
70% of UK businesses have either remained stable or flourished in 2020 and two in three are optimistic about the future
While there is a clear trend of cautious optimism, those who are less certain remain hopeful. Some of the answers to the survey included responses such as: “Challenging, but ready to grow”; and “Cautiously optimistic.”
Brexit speculation Brexit continues to cast a cloud of uncertainty over the future and its implications are yet to be fully understood. It was – unsurprisingly – on the minds of business owners towards the end of 2020, with 63% stating they were unsure about its impact: “Positive but worried about Brexit effects on the economy generally” and “Feeling positive but a little nervous with the unknown effects of Brexit.”
Making time for finance With innovation and future growth in mind, we know we can help business owners to find the funding they need to grow and prosper. We supported a fashion and textile manufacturer with a £400,000 invoice finance facility as they used the funds to manufacture essential personal protective equipment (PPE) for the NHS. In a bid to support frontline staff as they battled against the COVID-19 health crisis compounded by a PPE shortage, the team at LS Manufacturing UK Ltd temporarily switched their operations to focus on helping Britain’s healthcare sector. In a warehouse that NACFB | 35
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Second time around with lockdown 2.0, businesses revealed that they weren’t prepared to delay their plans any longer and felt more equipped (from every respect) to tackle the challenge in front of them
normally designs and produces luxury clothing for high street retailers, the firm has switched its operations to solely manufacturing textiles for the NHS; from non-surgical gowns and protective headwear for frontline staff to cubicle curtains for local NHS trusts. Daljit Mehat, director at LS Manufacturing, commented: “In the face of this global pandemic, we’re proud to have a dedicated team on board who can produce urgently required protective equipment and help safeguard medical professionals. We want to do everything we can to support this national effort and make a real difference. Our funding facility with Time Finance has been fundamental in supporting the ongoing cashflow requirements to produce these garments. As we continue to stay open for business and work through these challenging times, their support and flexibility have ensured we can deliver this project.”
The time is now Last year, we helped thousands of businesses who had identified growth opportunities and ways to innovate but, at the end of 2020, the business went through an innovative period of evolution itself: rebranding from 1pm plc to Time Finance. The decision to relaunch 1pm as Time Finance formed part of a wider strategic plan to consolidate our portfolio into a single market offering and to become a recognisable force in the industry. Having enjoyed a period of growth through a series of successful acquisitions, it was the right time for the group of companies to come together and unite as one business under one brand. The new name pays homage to the company’s ancestry name of 1pm 36 | NACFB
and plays on the fact that both time and finance are two of the most valuable assets to a successful business. This rebrand absolutely forms part of a strategic plan for us – to propel our business further forward in our marketplace. Having pursued a successful buy and build strategy, Time Finance has seen a period of sustained growth and, now more than ever, we can relate to our customers who see the opportunities ready to be grasped in front of them. Over the last few years we have acquired several individual companies and our rebrand means that Academy Leasing, OnePm Finance, Bradgate Business Finance, Positive Cashflow Finance, Gener8 Finance and Intelligent Loans will now all sit under the new brand of Time Finance. Our expansion to date has resulted in nearly £150 million-worth of funding being provided or arranged annually for more than 20,000 businesses across the UK – all seeking expertise, flexibility, and a tailored solution required for growth. Rebranding the business to consolidate and strengthen our offering was the next step for us. Time Finance reflects who we are as a business today, as well as our ambition to be the primary choice for UK businesses and their advisors looking for a trusted finance partner with a comprehensive funding solution. From asset finance and invoice finance to loans and vehicle finance, our broad offering ensures a tailored approach can be taken to support business growth plans. At a time when access to financial support from mainstream institutions might not always be available, the ability to maintain a healthy cashflow, safeguard jobs, and continue with projected growth plans, is more important than ever.
We’re open for business. The experts you know. Flexible and reliable. But smarter and faster. And maybe, like you, having to do things a little differently – for the time being, at least. But make no mistake; We’re still using our common sense. Still focused on delivering for borrowers. With simpler products than before, All through a select panel of packagers. And that’s about the long and short of it.
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Special Feature
The ties that bind us Intermediary and lender relationships have only grown stronger Chris Richold Managing Director, Asset Finance Shawbrook Bank
T
here were collective cheers and sighs of relief at the news recently that scientists had successfully developed a vaccine to spark the fight back against coronavirus.
According to Professor Stephen Powis, NHS England’s medical director, the emergence of the vaccine in November signalled the ‘beginning of the end’ of the pandemic – but he still reiterated that the COVID-19 battle would be a marathon and not a sprint. Uncertainty has plagued us all since the outbreak of the pandemic and that intensified in the weeks following the first national lockdown in March. Indeed, the only thing certain in 2020 was the uncertainty surrounding the impact of COVID-19. However, as I write this, the first vaccines are being distributed in the UK and there is a light at the end of the tunnel, but what is becoming crystal clear is that certainty and reassurance coupled by strong and constant communication will be key as lenders and their intermediaries cement relationships in the months and years to come. Having plans and processes in place is one thing but creating the right framework and culture to deal with an unknown – such as COVID-19 – is by far the bigger challenge. With so many businesses operating remotely now, as well as potentially in the ‘new normal’, communication will be key. We are hopefully turning into the home straight in the battle against the 38 | NACFB
virus, but as we do it is clear that communication will be the most powerful tool of all – with multiple means of keeping in touch, whether it’s via Zoom, Slack or Skype. For the last few months, we have been looking closely at how we work alongside our intermediary and broker partners and how communication will play a huge part in our collective success. Strong and consistent communication will enable lenders and their intermediaries to deliver quicker decisions, greater certainty, and better outcomes for the end client. At Shawbrook, we have worked hard to clarify the asset classes and sectors we are best placed to fund and now it is down to having a great service model, data, and technology with communication at the heart of the process. Everything I have witnessed since that first lockdown simply serves to show me that Shawbrook is on the right track and that we’re absolutely aligned with our key partners. We will weather this storm together and by doing the right thing at the right time for our customers, we will come out the other side with our reputations and credibility stronger than ever before.
“
As I write this, the first vaccines are being distributed in the UK and there is a light at the end of the tunnel
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Special Feature
A shot in the arm, not the dark A clear path to recovery, or too soon to tell? Jonathan Andrew Global Chief Executive Bibby Financial Services
M
ost years have moments that define them, but few have historic events that are (almost) simultaneously felt around the world. 2020 was defined by just this, and according to the International Monetary Fund, coronavirus has plunged the world into “a crisis like no other.” In addition to the serious health implications and human tragedy, the impact on small- and medium-sized businesses has been monumental. In Europe, Brexit has continued to create uncertainty for SMEs on both sides of the Channel, while in the US a heated election campaign has left the country divided. In a normal year, these challenges would be enough to cause economic headwinds, but the curveball of COVID-19 brought widespread changes to the way we live, work and trade. However, we have entered a new year – a fresh start – and there are reasons to be hopeful for a different outlook over the coming twelve months. With the possibility of a shift away from protectionist policies, Joe Biden’s election win has been received warmly by global markets; a sign that confidence is returning to the world’s largest economy.
Even the smallest businesses have complex networks of suppliers, staff and clients which span the globe. A more outward looking America, engaged with global institutions like the World Trade Organisation, helping to promote free trade, will have an impact far beyond US borders. Joe Biden has already indicated that the US will be re-joining the Paris Climate Agreement; a positive first step in reintegrating America into the global community. There are also early signs that the impacts of the pandemic may soon begin to subside, with milestone announcements firstly from Pfizer and BioNTech, and subsequently Moderna signalling hope that an effective vaccination may be in sight.
“
The heady mix of political progress and a potential recovery from the pandemic could see a boost in the global markets as early as the second half of this year
NACFB | 41
“
Recent changes in the US administration, coupled with the hope of effective vaccines have given markets the shot in the arm they needed
While the Bank of England estimates an uptick in growth in 2022, I believe the heady mix of political progress and a potential recovery from the pandemic could see a boost in the global markets as early as the second half of this year. The question is, will businesses be able to flick the switch to growth once the economy opens up again? I believe the answer is yes, but only if they start planning for growth today, and this involves considering stock and inventory, staffing levels, supply chains, and – importantly – cashflow. For businesses in Europe, it also means looking ahead to how the final stages of Brexit could impact them.
Back to Brexit Boris Johnson sought to negotiate the UK’s terms at last month’s EU summit, which had been marked as ‘the final deadline for a draft Brexit deal’. But there’s still much for businesses to consider, irrespective of which industry sector they operate within. While accounting for just 0.12% of UK GDP, a good example of the complexities of the UK’s economic disentanglement can be found in fishing. A Scottish fishery, for example, would need to understand the potential changes to tariffs, quotas, and markets, and be well-versed in the required paperwork, if they are to continue to trade successfully with the likes of Spain and other European markets. The end of free movement for EU workers will also impact many businesses. The government’s post-Brexit immigration system 42 | NACFB
implemented last year has already hit the UK’s fruit and vegetable producers who are struggling to replace the migrant workers who filled up to 60% of jobs in the industry. These issues combined with border delays and additional red tape are the last thing needed by UK and European businesses when attempting to focus on an economic recovery of this magnitude. Whether or not the calls from some corners for an extension to the transition period are realised, Brexit will happen, and businesses must be prepared. While it’s impossible to plan for every Brexit scenario, SMEs can take charge of their own operations by managing their cashflow, evaluating supply chains and getting guidance on the tariffs, legislation and standards that will directly affect their specific markets. While we all acknowledge last year was a tough year, SMEs around the world have once again shown that they have the ambition, resilience, and resourcefulness to overcome unprecedented challenges. To truly thrive, SMEs now need to recognise that this is a turning point and plan ahead for a return to business, whatever the future looks like. Furthermore, while recent changes in the US administration, coupled with the hope of effective vaccines have given markets the shot in the arm they needed, only time will tell as to whether these events will have the lasting effects required to kick-start economic recovery.
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In a time of rapid change Standing still is not an option Julie Ashmore Dann Chief Executive Officer Rapid Cash - NatWest
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ith 2021 shaping up as the year of the COVID vaccine, it will mean a year of rebuilding and adjusting as businesses face the realities of a post-pandemic world.
One of the first challenges for small- and medium-sized enterprises is to find a way to fund their survival amid supply chain disruptions and reduced demand, without being locked into inflexible loan repayments. A flexible working capital option such as NatWest’s Rapid Cash facility could be an efficient solution. Headwinds such as Brexit, the possibility of more COVID-19 restrictions and uncertainty around government support efforts will increase the pressure on even the smallest businesses to find ways to maintain their cashflow stream and confront working capital challenges. The International Monetary Fund has predicted an economic downturn at least as bad as the global financial crisis of 2008, and Chancellor Rishi Sunak has conceded that unemployment will continue to rise into the summer. Spring looks to be the tipping point, with the end of the tax year and the furlough scheme ending in March. Meanwhile, for firms that took early advantage of the BBL and CBIL schemes, their 12-month interest-free repayment holidays will also be coming to an end. Cumulatively, the BBL and CBIL schemes have already provided more than £60.6 billion of credit to 1.5 million businesses in the UK. 44 | NACFB
Brokers are aware that almost all their SME clients face working capital challenges, whether they are fighting to survive or are fortunate enough to be rebuilding and moving ahead with new growth plans. Dr. Lee Hopley, deputy director for research partnerships at the Enterprise Research Centre, says smaller firms have borne much of the financial impact of COVID. This means their pre-pandemic approaches to managing cashflow might not be robust enough for the trials of 2021. Many firms are grappling not just with operational changes like working from home, but also higher debt, new mixes of product lines, greater uncertainty about the ability of customers to pay, and a changed cast of suppliers and customers who may have unfamiliar schedules for when they buy, pay and demand payment. Brokers will be advising their SME clients to focus on their working capital, with a review of their balance sheet, profit and loss and cashflow. If a business fails to link all aspects of its financial liquidity and allows a cash-positive position to be eroded by further losses,
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Pre-pandemic approaches to managing cashflow might not be robust enough for the trials of 2021
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If a business fails to link all aspects of its financial liquidity and allows a cash-positive position to be eroded by further losses, it will lose the ability to use its remaining working capital to get back on to a growth path
it will lose the ability to use its remaining working capital to get back on to a growth path, even if it pumps in extra cash. SMEs should be proactive about chasing more cash sales and wary about the weaker credit profiles of their customers, many of whom will be seeking credit extensions. That may mean collecting more promptly on credit and accelerating escalation points such as stopping supply, reclaiming stock, or engaging a collection agency where terms are breached. Brokers will want to provide their clients with as much choice as possible. One way to avoid the fixed repayment costs of a term loan, the monthly service fees of traditional invoice finance or the borrowing caps of an overdraft is by borrowing against invoices to meet short-term needs and support long-term growth. NatWest Rapid Cash is a modern line of credit that unlocks the cash tied up in outstanding invoices. It is fully confidential and offers more automation and flexibility than traditional cashflow management tools.
It is a cost-effective working capital solution because it has no monthly service fees. Businesses only borrow what they need, when they need it, and it gets paid back directly from their customers. NatWest Rapid Cash syncs with the client’s accountancy platform and generates a real-time credit limit based on the value of eligible invoices. The business chooses which customers to borrow against and only pays for the funds it draws on. Unlike traditional invoice finance facilities, which usually pay commission in arrears, NatWest Rapid Cash offers brokers an upfront commission when the facility is drawn down. Facilities between £25,000 and £1 million can be organised in under 48 hours, subject to approval, with fewer security requirements than a term loan or overdraft. With working capital being such an important factor for SMEs in 2021, Rapid Cash could be the right solution for a growing number of businesses. To learn more about the benefits of Rapid Cash, please contact our team at rapidcashbrokers@natwest.com NACFB | 45
Industry Insight
Connecting with more clients Raising your visibility on Google for free Paul Mackman FCIM Managing Director Mackman Group
F
igures from the Office of National Statistics show that online shopping as a proportion of all retail reached a record high of 32.8% in May 2020, and a quarter of purchases continue to be made online as of last September. These figures suggest that one of the knock-on effects of COVID-19 has been to accelerate the move to digital. This will have lasting consequences for businesses and means that it has never been more important for SMEs to improve their presence online. But competing with the bigger players can be problematic and expensive, so smaller businesses must be canny when it comes to assessing budgets and implementing a digital marketing strategy. Fortunately, there are several free solutions for small businesses on limited budgets to boost their local online presence and make the most of the possibilities for an online shop window. Chief among these tools is Google My Business (GMB) which is a free and easy-touse tool for organisations to manage their online presence across Google, including Search and Maps. Crucially, GMB helps customers find you and is a great way of telling them about your products and services. For SMEs, it is a particularly good way of helping local customers to find you. For example, if you are a mortgage broker in Tunbridge Wells, with a GMB listing you can appear in the search results map for the term “mortgage broker tunbridge wells”. To add or claim your business you’ll need to sign into or create a Google Account, then a simple Google search “Add or claim your 46 | NACFB
business on Google My Business” will return the page with all the instructions you’ll need. By claiming your listing and taking ownership of your profile, Google will have more of your business information on record. When determining which search results to display, the Google search algorithm takes into account the quality of information and activity, so the more you utilise and update your listing, the more likely you are to appear higher up in the list of local results. Your listing will appear on Google Maps and sometimes on Google Search and you can control what information is shown. Begin by adding basic details such as your business address, contact number and opening hours. Make sure that your business name is identical to the one used on your signage and letterheads as this will maintain consistency of branding. It will also optimise your listing for the correct name.
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The Google search algorithm takes into account the quality of information and activity, so the more you utilise and update your listing, the more likely you are to appear higher up in the list of local results
Aspects of the profile which may take more time to complete are your products and services, and elements such as owner generated FAQs and your ‘From the Business’ description. These are worth spending the time on to get right. Google provides step-by-step instructions and explanations so you should find the process straightforward; however, my top tip would be to make sure any key information is contained in the first 250 characters. Images are an important component of your profile. Adding new ones regularly shows your profile is up-to-date, and Google statistics report that customers are a third more likely to click on a business website if the profile contains imagery. The posts facility also allows you to write social media style posts that show up prominently in mobile searches. You can even turn
on messaging through Google My Business to allow Google users to ask questions about your business through the listing itself. With approximately 80% of smartphone users taking advantage of local searches, this is a way of allowing yet another channel of communication with your potential customers. Once you have a listing, you should encourage your customers to share positive feedback by leaving Google reviews of your business. These should be checked and responded to regularly – the negative ones as well as the positive ones – so that prospective customers can see that you are responsive and care. In summary, take advantage of Google My Business and make sure it is an integral part of your marketing strategy. Remember, it is both free and effective.
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Industry Insight
Anatomy of a crisis A glance backwards, before we move forward Adrian Coles Vice-Chair NACFB
H
ow far can you walk into the woods? The answer, of course, is only ever halfway. Because once you reach the halfway point, you begin to walk out of them.
Last year, NACFB Members shepherded thousands of SMEs on an unforeseen journey into the centre of the forest, this year – although it may not yet feel like it – I believe we have now passed the halfway point.
Enter, the Red Team Early in the coronavirus crisis, the Association’s leadership team established what is known as a Red Team. ‘Red teaming’ is the practice of rigorously challenging plans, policies, systems, and assumptions by adopting an adversarial approach. The idea was introduced by fellow board director, and British Army Major, Russ Lewis. Our small band of ‘Red Teamers’ convene virtually twice a week, enabling an operational agility that cannot be achieved via monthly board meetings. Now, as you might expect, Russ is no stranger to an historical military analogy, but there is one I have learned of that feels the most pertinent to the experiences of the last year, and I wish to share it with you now.
Testament to resolve On the eve of the Second World War, London faced an existential 48 | NACFB
threat. The German war machine knew that if the British population broke under a bombing campaign, it would spell the end of the nation. British generals estimated three to four million hysterical citizens would flee the capital, basing their plans on the findings of influential French scholar Gustave Le Bon, who had published detailed analysis of how people respond to a crisis. “Man descends several rungs in the ladder of civilisation. Panic and violence erupt, and we humans reveal our true nature,” Gustave wrote. A last-ditch plan to dig a network of underground tunnels was scrapped over fears a terrified populace would simply never emerge and psychiatric field hospitals were hastily constructed outside of the city to tend to the first wave of fleeing victims. But what happened when bombing reigned down for months on end? Did people get hysterical and behave like beasts? Of course, there was fury and devastation, but the psychiatric hospitals remained empty, not only that but public mental health actually improved. When put to the test the theories of Gustave Le Bon were spectacularly exposed, crisis brought out not the worst, but the very best in people. Today, many are convinced that such displays of wartime resilience is something singularly British. But it is not, it is something universally human, and no more evidenced than in the way the NACFB membership stoically stepped up to provide critical business funding last year. There was no panic, no fleeing from servicing clients; conversely a steadfast resolve ensured the facilitation of over £27 billion. We are not out of the woods yet, but we have exited the darkest part. Together we are Moving Britain Forward, and we shall emerge only stronger.
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Broker Voice
Above and beyond The dynamic between broker and lender is evolving
Matthew Yassin Director Arc & Co.
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elationships are the driving force behind any successful industry. One of the most important within the world of commercial finance is the ever-evolving dynamic between broker and lender. The relationship between broker and lender is based on mutual trust and respect. The two must work together in unison to achieve the best outcome for everyone involved and be aware of the constraints faced by each other. For example, the broker must always remain impartial and work within the best interests of their client. That isn’t to say that the lender doesn’t put the client first, but the due diligence carried out by the broker will go above and beyond one lender’s proposition, taking into account the whole lending market and all the variables – therein lies their value to the client. Additionally, the lender needs to have confidence that the broker is knowledgeable about the market, as well as being competent enough to understand and accurately convey the right details to the client. Brokers add value to the lender by communicating effectively with all parties, but also further enhance their relationship by only presenting opportunities which meet certain suitability criteria specific to the lender. Transparency and disclosure of full details is key from both sides. Neither party wants to spend time on a deal only to uncover something that should have been taken into consideration from the start. To really understand this relationship, one needs to look closely at how the dynamics between the lender and the broker are changing. The specialist finance market has seen rapid expansion both in terms of lenders and liquidity in the market recently. As the industry evolves, lenders and brokers expect much more from each other. Consequently, they now work much more closely together than a decade ago. Adoption of technology has had a huge part to play in this evolution and this comes with both advantages and disadvantages. For example, technology has made it much easier for lenders to communicate changes to their lending criteria and made it easier for the broker to understand what information is required. The growth and development of the NACFB, industry specific media, websites, digital marketing, and social media offer multiple channels for companies and individuals to communicate quickly and efficiently. This works in the broker’s favour as well, because they too can effectively communicate their client’s needs to a wider audience and proactively consider a wide range of lending options.
understanding required. Specialist advice within commercial finance is a bespoke process and a solid comprehension of the bigger picture is required. In recent years, the lending industry has become more professional and structured which is a welcome change. When giving advice, that human interaction is essential to make sure that the client’s best interests are put first. The events of this year have highlighted the need for exceptional relationship building and communications for both broker and lender. No one was unaffected by the huge disruption to our usual working patterns and while the industry has rapidly adjusted, the changes are not without their disadvantages. Speed and rapid response have always been an important factor within the dynamic and while Zoom or Teams calls offer us the ability to remotely meet face-to-face, their frequency has affected response times as it is not always possible to reach people. Availability of individuals across the industry has been a significant factor in allowing the relationship between broker and lender to develop and transparent communications between the two are more important than ever. That being said, the rapid shift to online forums has allowed everyone to correspond with their industry colleagues and continue to trade with clients throughout the year. As a separate note, people starting their careers within the commercial finance world are being put at a disadvantage as the lack of face-to-face interaction is creating barriers for their growth. There has been a shift towards relationships being purely transactional and we must now work to overcome this. The commercial finance industry is an especially close-knit community and the events of 2020 have only strengthened this bond. The use of technology has been vital in ensuring that the relationship between lender and broker remains as strong as ever – if not improved – after coming through a pandemic. If anything, we can look ahead in complete confidence knowing that lender and broker are stronger together, supporting each other more than ever both in 2021 and beyond.
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The due diligence carried out by the broker will go above and beyond one lender’s proposition, considering the whole lending market and all the variables – therein lies their value to the client
On the other hand, technology is not able to replace the need for strong industry relationships as it is not able to replicate the complex NACFB | 51
Opinion
Known unknowns Are we sitting on a CBILS timebomb? Ray Cohen Owner Jackson Cohen Associates Limited
T
here is no doubt that the government-backed CBIL and BBL schemes have helped a lot of firms in this difficult period of time.
There are several bridging lenders who have become CBILS accredited, and with the government backing the lending this has no doubt helped ease concerns about lending to businesses in these difficult times. Like any lending though, loans need to be paid back and I am sure that many of these loans will work as intended and redeem as expected. As a lender, it may seem attractive to pump out CBILS loans with the government picking up the cost during the first year. But what happens at the end of the first year? Have lenders applied the same strength of underwriting to the quality of exit that they would have without the government picking up the tab? Advertising interest-free loans with no fees for a year is an attractive proposition. From a borrower’s perspective it seems like a no brainer. Free money for a year, why not? Especially in the current circumstances. As we approach the first year of CBILS, the interest rate recipients would then need to cover will be significantly higher than had they borrowed from a high street bank. Have they factored that in? Have they actually thought through the reality of needing to repay the loan in full and have a plan that will work or were they just hoping everything would be back to normal by then and they could pay it off, maybe by getting a bank loan? What will the chances be of getting a bank loan to redeem the bridge – will the banks really want to lend? How many borrowers might find they will not be able to repay and have to sell their property or get repossessed? Will lenders be happy to kick people out of their homes if that 52 | NACFB
was the security provided for the bridging loan along with the accompanying negative PR that may come with it? Because there is no doubt anyone in this boat will be making a big song and dance about it. The lender may be thinking that they are going to be alright whatever happens, the government will pick up the tab if things go wrong after all. Will that be the case? Might the government actually ask questions when a high interest rate bridging loan goes wrong, and is asked to pay up for the default? Could they challenge whether the lender actually underwrote the loan properly with a realistic exit before advancing the funds if they see they are on the wrong end of having to write off a lot of debt? And what about the broker? If a broker was involved, will the consumer have any challenge about the advice given – was this a suitable loan for the borrower in all the circumstances and were the rates and risks clearly explained? These are all unknowns of course, and obviously it would be great if none of these concerns came to fruition. Let’s hope that this is one of those things that doesn’t have an unhappy ending.
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Will lenders be happy to kick people out of their homes if that was the security provided for the bridging loan along with the accompanying negative PR that may come with it?
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Opinion
Reframing threats as opportunities Whilst far from ideal, there is hope amidst the despair John Davies Executive Chairman Just CashFlow
I
am writing this article with at least two very old hats on. The first is as an entrepreneur with over 40 years’ experience of creating and running a diverse range of SMEs, and still doing so. I am also executive chairman of non-bank lender Just Cash Flow PLC that provides a range of flexible finance facilities for UK SMEs looking to invest and grow. One of the most commonly used phrases of last year was ‘we are living in unprecedented times’, referencing of course the dramatic worldwide impact COVID-19 has had. If you add all things Brexit into the mix you certainly have a rich cocktail of uncertainty. In my opinion ‘uncertainty’ and its shadow ‘hesitancy’ are the biggest enemies of business owners as it causes us to doubt our own capabilities. It is extremely important for business owners to consider if all things COVID and Brexit are indeed a threat or a possible hidden opportunity – only if we ask the question with conviction will the answers begin to appear. However, having managed businesses through various recessions and more than one global financial crisis, I believe I am able to 54 | NACFB
proffer guidance and advice on how business owners could be responding to all this uncertainty. I believe I can also help them improve their chances of securing the flexible finance facilities they will need to rebuild their businesses and make a major contribution to the UK economic recovery. So here is one piece of wisdom I’ve learnt along the journey – quoting Heraclitus: “The only constant in life is change.” Uncertainty equates to change but if you plan for it then, logically, the fear of uncertainty becomes less so.
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It is extremely important for business owners to consider if all things COVID and Brexit are indeed a threat or a possible hidden opportunity
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Uncertainty equates to change but if you plan for it then, logically, the fear of uncertainty becomes less so
Okay let us start removing some uncertainty by assuming some of these points (you don’t have to agree with them – just plan for them): • COVID and the dramatic impact on our lives is going to be with us for at least another 12 months; • Brexit will impact how we do business with Europe and it won’t be as plain sailing as before; •
In my view, traditional banks won’t be doing much lending in Q1/Q2 this year especially to the S in SME due to the way they are structured and the legacy of dealing with government support schemes;
businesses have been destroyed by COVID, even though they have the flexibility, enthusiasm, and adaptability to change direction or start new businesses. These entrepreneurs will probably not be able to meet policy requirements to provide the last three years’ accounts/balance sheet and can explain the crushing damage COVID inflicted on their businesses. This is not a criticism – it is just the way big banks work. I think we will see a lot of “computer says no” or worse the kicking of applications into the long grass. Over the years, I have seen many thousands of business finance applications, so I end this article with some guidance on how to maximise your clients’ chances of success.
• Credit lines with suppliers will dry up; • No one in government is going to save you or your business – it’s down to you; • Someone else will steal your customers if you don’t find a way to serve them. None of the above is good news, but the uncertainty has been removed and the challenge is now to plan how you are going to do business in this environment. To be successful, and I can’t stress this enough, you need to have a flexible and adaptable mindset (along with your team) and the energy to execute the plan you have devised and then be willing to change direction if the wind changes. I have already shared my view that I do not expect traditional banks to be lending significantly in Q1/Q2 this year. Additionally, they are not really set up to support those entrepreneurs whose
Firstly, your clients should avoid any adverse credit event. By this I mean CCJs, winding-up petitions or returned items (bounced cheques) – both at a personal and business level. Of course, this is easier said than done but a business owner must focus on protecting their financial reputation and display positive behaviours. Key to this is communicating with all creditors about what your client’s plans are. Sticking their heads in the sand isn’t an option and the last thing creditors want to hear is that they are waiting for things to return to ‘normal’ – they want to see evidence of a plan. Secondly, ensure your clients: have a well thought out business plan that shows flexibility and adaptability, know their numbers, and ensure they come across as someone in control of their own destiny. Real entrepreneurs are creative, driven and passionate about post-COVID and Brexit opportunities. Non-bank lenders are equally passionate about providing these entrepreneurs with the financial support they need. NACFB | 55
Listicle
ways to use data effectively
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4. Analyse the data
ata can help improve customer service and increase profitability. But when business leaders are asked why they’re not harnessing the power of data, many will say it’s too expensive. But is that really the case?
Spreadsheets – most people are familiar with Excel – contain all sorts of functions such as graphs, pie charts and pivot tables. These will help you sort through and understand what the data means. If you’re unsure, there are lots of instructional videos on YouTube.
The data is there. The technology we use every day is already capturing it for us. And it’s likely to be more accurate and insightful than acting on our gut feelings. Think CRM databases, accounts packages, spreadsheets, websites, social media, emails, phone calls; the list goes on. New year, new start. Block out an hour in your diary every week and get cracking with our five tips to help you use the data you already have more effectively.
2. Decide how you will measure the answers Ask yourself what data you need to answer the question and under what parameters? You’ll need to find out how many customers you’ve got and define your services. For the parameters, it might be useful to establish a time period, say, what proportion of my customers have used my services only once in the last five years?
3. Choose your data sources
1. Ask the right questions Consider what you want to find out and why. Make a list and then try to come up with some questions that are clear, concise, and measurable. For example, a commercial broker might ask: What proportion of my customers have only used my services once? We’ll use this question to demonstrate the next four tips. 56 | NACFB
Most brokers keep a record of their customers and services in a CRM database or spreadsheet. Use these to extract the number of customers, the services and the timeframe. You might also need your accountancy software or email records. Once you’ve chosen which data sources, decide how to record the results, i.e. in a spreadsheet. Make a note of the sources and how you extracted the information so that you take a consistent approach each time you collect the data. This will help to validate your findings over time.
5. Interpret and act upon the results Do the results answer your original question? If not, you may have to ask a different question, use different data sources or manipulate the data differently. If they do answer the question, what does it tell you about your customers, your services and the way you operate? How can you use the information to increase the number of customers who use your services more than once? How do your customers contact you? Which lenders do you use most often? Which lender has provided the fastest service to your customers? How many people visit your website? Which website pages do users visit most often? What is the average completed loan size of your customers? In which sectors do your customers operate?
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Modern Merchant Banking
Five Minutes With
ive F Minutes with: Benjamin Davis Benjamin Davis Chief Executive Officer Octopus Real Estate Describe your role in ten words or less?
What is your favourite SME success story?
What is your favourite piece of management/leadership advice?
Setting our vision, steering the ship, and developing great people.
The creation of Octopus is pretty good; three guys meeting on a graduate recruitment scheme 20 years ago, then quitting their jobs to set-up a start-up in one of their sitting rooms. It is now a £9 billion+ fund manager with a leading challenger energy supply business, selling its products around the world.
First, listen. We’re all naturally wired to jump in with the answer; listening first is always the right place to start.
In your view what are the key elements to a successful deal? Trust, straight communication, empathy, a win/win approach and pace (time kills all deals).
What’s the most common reason for turning away a deal? As a lender we need to act responsibly, and so if a borrower doesn’t have a clear exit strategy, or if we don’t feel confident in their ability to pay back a loan, then we will turn the deal away. We do not want to set up our borrowers to fail.
If you were to start your own small business, what would it sell? A range of natural, biodegradable alternatives to plastics, suitable for all applications. The human race has really got itself into a pickle with our reliance on plastics. 58 | NACFB
What recent professional accomplishment are you most proud of? Becoming the CEO of the newly created business, Octopus Real Estate, through merging two great businesses together. 18 months into the role now I have learnt so much and have been presented with some interesting challenges!
What are the key elements to maintaining a strong lender/broker dynamic? Straight lines of communication, a desire to make deals work, and quick response times both ways.
What has been your lockdown essential? My trail running shoes; I’m fortunate to live near lots of tracks, and running is the perfect antidote to hours of back-to-back video calls!
What changes do you hope to see in the ‘new normal’? I think lockdown has forced people to take their wellbeing – both physical and mental health – more seriously, and take responsibility for both. I’ve seen a real frankness in wellbeing discussions that I hope to see remain in the ‘new normal’.
Where is your favourite place in the world? On the top of a mountain, on a snowboard, first thing in the morning after 30cm of fresh powder.
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