Commercial Broker (NACFB Magazine) October 2021 by NACFB

Issue 94 OCTOBER 2021

Broker COMMERCIAL

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

18 GOING WITH THE FLOW

20 A LIGHTBULB MOMENT

Enhancing the client sales journey

The link between credit ratings and funding

Worth the wait NACFB Expo returns stronger than ever

40 TO SUIT ALL TASTES A menu for recovery in the hospitality sector

42 THE RISE AND RISE OF BTL 25 years of buy-to-let mortgages

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Contents

In this October issue NACFB News

Special Features

4 6 8

22-23

10 12-14

Note from Norman Chambers Updates from the Association Note from headline sponsor, Lloyds Bank Industry news round-up Membership news

24-30 32 34-35

Together: An investment in time NACFB: Worth the wait Just Cashflow: Could do better? Lloyds Bank: More meaningful contact Nucleus Commercial Finance: ABL and the liquidity crisis

Industry Insight 40

Federation of Small Businesses (FSB): To suit all tastes 42-43 Paragon Bank: The rise and rise of BTL 44 Aldermore: Go your own way 46 Greenhalgh Kerr: Unravelling ‘secret commissions’

Opinion & Commentary 48-49

50-51

Patron Profile

54 56

16-17

Monument: Backing up words with action

Wharf Financial: Underpinning client success Recognise Bank: A new way of thinking Haydock Finance: Hailing a new approach Swishfund: Green for growth NACFB Commercial Broker Awards 2021: Winning streak Five minutes with: Linda Martin, Regional Director (South), Unity Trust Bank

Compliance Update

Lightbulb Credit: The link between credit ratings and funding

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

33 Eastcheap | London | EC3M 1DT Laura.Mills@nacfb.org.uk

Magazine@nacfb.org.uk

Ask the Expert

Further Information

MAGAZINE ADVERTISING T 02071 010359

18-19 NACFB: Go with the flow

MACKMAN Design & Production T 01787 388038

mackman.co.uk

NACFB | 3

Welcome

Norman’s Note

indy gusts, torrential downpours, leaves on the line; autumn is well and truly here, and it would be hard to pinpoint exactly when it arrived. Whilst we weren’t blessed with an Indian summer, harvest-time has certainly been a fruitful one for the Association this year. I refer, of course, to the NACFB Commercial Broker Awards and Commercial Finance Expo, two packed-out, in-person, back-to-back events that saw a joyful reunion of Members and Patrons.

Norman Chambers Managing Director | NACFB

Both experiences reminded me how lucky we are to be part of this great Association. Even COVID safety hoops and a fuel supply crisis couldn’t stop us meeting en masse to catch-up with industry colleagues, make new connections, and celebrate the very best in commercial finance broking. In this issue, you’ll find a selection of key takeaways from the NACFB Expo alongside details of the winners and those who received a commendation at the Commercial Broker Awards ceremony. If that leaves you wanting more, do head on over to commercialfinanceexpo.co.uk and commercialbrokerawards.co.uk where you’ll find an array of photos from each event. And the get-togethers don’t stop there. The team is now beavering away preparing for the NACFB Gala Dinner and Patron Awards which take place on Thursday 25th November at the Westminster Park Plaza. A limited number of tickets are available to buy at nacfbgaladinner.co.uk. I look forward to seeing many of you whilst recognising lending excellence there.

4 | NACFB

Property Finance

Introducing

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NACFB News

Association updates for October 2021

NACFB News Shortlist for NACFB Patron Awards 2021 revealed

NACFB Associate Patrons list continues to grow

The shortlist for this year’s NACFB Patron Awards has been revealed. The list features more than 60 organisations across 15 categories, all vying for a coveted award that seeks to recognise the very best in lending industry excellence. All shortlisted organisations are automatically placed into an additional NACFB Patron of the Year category.

Chosen for their ability to support Members in their day-to-day business activities, the list of NACFB Associate Patrons continues to grow. Many of these Patrons offer their services to Members at preferential or discounted rates.

To see the shortlist, visit the news section on the NACFB website.

An up-to-date list and more detailed information on the features and benefits of each provider can be found under the Partners section on the NACFB website, whilst an overview can be found below.

The winners will be determined based on votes from NACFB Members and the feedback of a broker judging panel. Voting closed on Wednesday 6th October.

Broker Protect – Offers Members exclusive access to a broad range of business support including HR, health and safety, legal and tax advice over the phone.

The winners will be revealed at the annual NACFB Gala Dinner which returns to the Westminster Park Plaza on Thursday 25th November. Last year, COVID put pay to the physical award ceremony and the event was held successfully online.

FRP Advisory – Specialists in corporate finance, restructuring, pensions, debt, and forensics, FRP Advisory provides the advice needed to guide businesses through the corporate lifecycle.

Norman Chambers, managing director of the NACFB, said: “I am delighted that the ceremony will be held in person this year. We know, from our recent experience of both the NACFBʼs Commercial Broker Awards and Commercial Finance Expo, that our Members and Patrons prefer to get together face-to-face if possible.” In addition to the awards presentations, the evening includes a drinks reception, a three-course meal, lots of entertainment and, of course, dancing after dinner. Tickets to this flagship event are selling fast and the early bird window has already closed. If you’ve yet to purchase your ticket, please go to nacfbgaladinner.co.uk We look forward to seeing you there and wish all the shortlisted Patrons the very best of luck.

6 | NACFB

LDS – LDS provides guaranteed sales for SME housing developers and their lenders, removing pricing and demand risk, opening up access to finance on improved terms and with increased leverage. Lightbulb Credit – The UK’s only whole market credit rating review, repair, and monitoring service for businesses, working directly with brokers to help fund more deals for their clients. Phelan Independent – Providing independent legal advice enabling deals to complete quickly and efficiently – resulting in happy clients and faster payment for Members. Purbeck Personal Guarantee Insurance – Cover designed for business owners who are required to sign a Personal Guarantee to support a finance facility. RedFlag Alert – Providing anti-money laundering services, UBO searches and credit reports helping Members conduct enhanced due-diligence searches on prospective clients.

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Note from our Sponsor

A gateway to opportunity Adding new tools to your arsenal

Alexandra Bignell Strategic Commercial Relationship Manager, Commercial Banking Intermediaries, Lloyds Bank Cardnet Emma Pearce Strategic Commercial Relationship Manager, Commercial Banking Intermediaries, Lloyds Bank Cardnet

he pandemic has caused many businesses to re-evaluate what they do and how they do it. Short-term tactics have evolved to enable businesses to keep working and trading. Now, as the recovery gains hold, businesses and brokers are looking to the future to see where potential growth lies.

New opportunities A key focus of our new Commercial Banking Intermediaries team is to help brokers suggest intelligent and complementary solutions to their clients’ problems. Part of our product suite is Cardnet, the card acceptance arm of Lloyds Bank – which can add another tool to enable retail, hospitality, and entertainment businesses to: • • • • • •

Take card payments face-to-face, over the phone, or via a website; Improve cash flow by speeding up payments; Open new avenues for revenue streams through online stores, mobile, and phone payments; Create efficiencies through pre-ordering and prepayment; Help manage inventory, employee scheduling, and customer loyalty programmes; Provide management information and analytics.

Making card acceptance simple Card acceptance solutions can seem intimidating, with jargon like 8 | NACFB

payment gateways and issuing banks. Having to work with developers on apps and websites for digital payments feels potentially daunting. But for brokers there’s no need to worry. You can get to grips with as much or as little as you feel comfortable with, and we’ll do the rest. We can talk to your clients to understand their business needs. Many solutions are out of the box approaches, from terminals or smart Point of Sale to apps or websites. Our experienced team is ready to help with technical advice if developers need help. From omni-channel services, which combines a business’ ecommerce transactions (from their website, app or QR codes) with face-to-face channels to provide their customers with a seamless experience for multinational high street names, to mobile devices for pop-ups for small businesses, we can help make payments simple and straightforward.

Why Cardnet? There’s a multiplicity of payment providers, but with payments, clients are seeking reassurance about reliability, security, and efficiency. Cardnet’s fees are clear and transparent, so there are no nasty surprises. There’s a wealth of experience and expertise to support end users – from online guides to hands-on help where necessary. And our banking background of handling millions of payments daily doesn’t hurt either.

New revenue streams One of the benefits to brokers of recommending card payment acceptance services is that it can provide new and continuing revenue streams as your clients use the service. This can grow to be invaluable as your clients expand. If you’re interested in finding out more about adding card payment acceptance to your portfolio please email cardnetstrategicrelationships@lloydsbanking.com

Cardnet® is a registered trademark of Lloyds Bank plc. Please note that any data sent via e-mail is not secure and could be read by others. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 119278.

A personal touch... Every business has their own challenges and opportunities. That’s why our expert local relationship managers and underwriters look individually at every application to find the right solution for your client.

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OF BROKERS SAID THEIR EXPERIENCE OF ALLICA BANK WAS GOOD, VERY GOOD OR EXCELLENT. Source: Allica Bank’s Q1 2021 Broker Survey of 131 brokers

Allica Bank Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN: 821851). Registered office: First Floor, Eldon House, 2-3 Eldon Street, London EC2M 7LS. Registered in England and Wales with company number 7706156.

Industry News

Industry News 1. UK business savings market grows £23bn year-on-year

4. Business confidence soars in East and West Midlands

6. Businesses warned they must innovate amid pandemic

The UK business savings market increased month-on-month by £1.6 billion in August to £378 billion, a year-on-year expansion of £23 billion, as UK businesses show renewed focus on building up financial buffers and preparing for future investment, according to analysis by NACFB Patron Aldermore Bank of data released by the Bank of England. Easy Access grew by 104%, while the fixed rate market declined slightly by 4%.

The latest Business Barometer from Lloyds Bank Commercial Banking has revealed that business confidence in the Midlands surged in September. Confidence in the East Midlands rose by 19 points during September to 47%. A net balance of 39% of firms expect to increase staff levels over the next year, up 37 points on August. Confidence in the West Midlands also rose during September to 46%, its highest reading since July 2018.

The International Innovation Barometer (IIB) research published by Ayming Group, has warned that businesses must take care to keep up with changes in the market as the pandemic has prevented 31% of businesses from innovating. However, most businesses are proud of how they have reacted to the pandemic, with 36% saying they have successfully innovated to make minor adjustments to their business and 25% saying they have adapted to seize COVID-19 related opportunities.

2. SME leaders to spend £85k on tech over next 12 months SME leaders plan to invest £85,000 on average in new digital technologies and systems over the next 12 months, indicating COVID-19 has sparked a longer-term shift to digital among UK businesses, according to new research by Nucleus Commercial Finance. CEO Chirag Shah said: “... the Government and the lending industry needs to continue to provide support for SMEs and help them bounce back stronger.” 3. Chancellor Rishi Sunak may extend Recovery Loan Scheme Chancellor Rishi Sunak looks set to extend the Recovery Loan Scheme to 31st December in a bid to support businesses as cost pressures and worker shortages threaten the post-pandemic economic recovery. The Treasury is said to be in talks with banks and financial institutions with it possible that businesses would be offered watered down terms and the Government backing a lower proportion of loans to limit potential losses to taxpayers. 10 | NACFB

7. Confidence hit by fears for UK housing market

5 5. Bank of England: SMEs repay the most in August Figures from the Bank of England (BoE) show that in August, SMEs made the largest loan repayment to banks on record while the consumer credit market remained weak and mortgage approvals fell. Net repayments by SMEs to banks reached £1 billion, the largest on record, equal with March 2014. It is the fifth consecutive month of repayments by SMEs and follows average net borrowing of £3.2 billion per month between March 2020 and April 2021.

UK household confidence dipped in August as the housing market lost momentum, according to a report by the Centre for Economics and Business Research and YouGov which found that consumer confidence in Britain had fallen by 0.3 points to 112.9 in August, although that was still above the 100 mark that indicates optimism. Even though the housing market grew at a robust pace, there are signs that demand is cooling.

Invoice Finance

Membership News

Membership News Roma Finance launches fast new processing channel

Allica Bank enters underserved care home market

Roma Finance has launched a fast new channel for straightforward cases. RomaFLOW will significantly speed up the application to completion process and make submissions easier for brokers.

Allica Bank has launched new specialist commercial mortgages for care homes run by independent or small group operators.

The new streamlined processing channel has fewer stages, reduced documentation, and enhanced technology to help move cases smoothly to offer and completion. Standard bridging cases submitted to the NACFB Patron will now automatically go into the RomaFLOW process unless the broker or borrower highlights any complex circumstances or challenges at the outset. Complex cases and heavy development applications will remain in a separate stream, where Roma’s underwriters will spend longer gathering more evidence and getting under the skin of the case before making a lending decision. Roma requires just three things from brokers on submission and will use technology to do the rest, while maintaining the expectations of a dedicated underwriter and case processor. On straightforward cases, solicitors will be instructed within 24 hours. Michael Allison, head of transformational change at Roma Finance, said: “Speed is back with RomaFLOW. We’ve worked really hard to create this improved, smoother process for straightforward cases so we can give brokers and customers the fast service they demand.” 12 | NACFB

The NACFB Patron says that the SME care home market is drastically underserved, with smaller firms often struggling to get finance compared to larger operators with multiple locations. Allica Bank will focus specifically on those operators, such as those looking to acquire their first care home, single home operators looking to expand into second or third homes, or those acquiring other operators to grow their portfolio. To spearhead this expansion, Allica Bank has hired two healthcare lending specialists, Anthony Newman and Adam Breakspear who will provide tailored expertise to brokers and their clients on issues unique to their sector, such as ethics and regulatory compliance, staffing challenges, and occupancy levels. Nick Baker, managing director of intermediaries at Allica, said: “The SME care market was underserved long before COVID-19, with many lenders having pulled out of the space in recent years. There is a real opportunity for Allica to support these underserved businesses by offering the level of tailoring and understanding needed to properly support their growth ambitions in what is an increasingly in-demand market.”

Go on. Make their day. Our competitive range of regulated and unregulated Bridging loans have become renowned for their speed, ease and flexibility. With thousands of them under our belts over the years, there’s practically nothing we haven’t seen before.

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Membership News

Membership News Shawbrook issues formal mortgage offers within three hours

Together commits to new lease for its Manchester HQ

Shawbrook Bank has worked with strategic partner, Watts Commercial Finance to provide formal mortgage offers to two customers within just three working hours of receiving the applications, using its pioneering new digital portal, MyShawbrook Buy-to-Let.

Together has signed a new 25-year lease on its £39 million headquarters as it plans for future growth.

Both cases, in which speed was critical, received instant indicative mortgage offers (IMOs), followed by successful automatic property valuations (AVMs) – two key benefits of the new application journey. Upon receiving the full applications, the formal offers were issued in three working hours and the customers then made use of Shawbrook’s e-signature technology, allowing them to quickly e-sign and return their offers within 15 minutes of receiving them, speeding up the process further. Emma Cox, sales director of the NACFB Patron’s property finance division, commented: “These cases demonstrate exactly the type of effortless and efficient journey we’re aiming for, and there will be plenty more examples of this over the coming weeks and months. “We’ve made significant enhancements to our buy-to-let offering with the introduction of a slick new portal and a complementary new product, so I am delighted to see our customers and brokers benefiting in this way already, and we have some more exciting improvements to announce soon.” 14 | NACFB

The NACFB Patron moved into its current offices in Lake View, Cheadle Royal Business Park, in 2012 – later expanding into a neighbouring building, 1 Lakeside. It has now agreed with the owner to extend the lease of both buildings – which incorporate 93,900 sq ft of office space and associated car parking – for the next quarter of a century. Together has also revived previous plans to create a new link to join the two buildings, creating a new reception area and foyer. Detailed designs will be submitted to planning chiefs at Stockport Council in the next few months. Marc Goldberg, commercial CEO at the lender, said: “This new lease and our expansion plans underline our commitment to Cheadle Royal Business Park and the wider, thriving commercial property market in Manchester. It also signals our loyalty to our 750 colleagues, in providing a modern and accessible workspace for them.” In June Together announced that it was hiring more than 100 new staff to join its commercial and personal finance, IT, marketing, and group finance operations.

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Patron Profile

Backing up words with action Serving better together Conor McDermott Head of Lending Monument

lenders make consolidation prohibitively costly.

Taking a fresh approach

It doesn’t need to be like this though. We believe that we can provide a better and more cost-efficient experience for portfolio landlords, delivering a more personal and slick service than they currently enjoy, which allows them to bring together their various property investors with a single lender. This is based on incorporating cutting-edge technology where it is most appropriate and combining it with a common-sense approach provided by our experienced relationship managers.

It is an extremely exciting time for everyone at Monument, as we gear up for our launch into the lending market. In early 2021, we completed one of the largest Series A funding rounds within the banking sector, attracting a mix of new and existing investors, with the intention of scaling up lending and operating as a fully-fledged bank later this year.

There is no need for a ‘tick-box’ approach, where borrowers are judged against their ability to meet a host of overly prescriptive conditions. Instead, we want to take a step back and assess those applications from a practical perspective. Our portfolio landlord borrowers are individuals, with their own unique business strategies and investments. If we want to develop the mortgage products they will truly benefit from, and which will mean they get the maximum from their portfolio, then we must understand those strategies and investments, understand them as individual landlords. It means a more borrower-focused mindset.

onument was formed because we believe there is a community of high-net-worth people who are poorly served by the existing banking set-up. These people work hard for their success, and let’s be clear, banks make a lot of money from them. Yet these customers get precious little return from their loyalty, which is something we want to change, particularly in the lending market.

After all, a lot of individuals in this bracket are experienced property investors, who are known as portfolio landlords, with significant property portfolios. These investors recognise that consolidating their portfolios together with a single lender would make managing their investments easier – after all, a single repayment date is easier to remember than 10 different ones. However, all too often landlords and their brokers are forced to jump through a multitude of hoops to do so by lenders who make consolidation far too complicated. It would be one thing if those complications then led to the expected financial savings, yet there’s a sting in the tail here too, as some 16 | NACFB

There’s no question that compared to other areas of financial services the mortgage market has been a little slow to appreciate the benefits that technology can bring to the way lenders operate and the service standards they provide. While we believe that technology, utilised in the right ways, can bring enormous improvements to the lending experience, at Monument there will always be the option of access to a more traditional relationship manager service whenever it’s required or simply preferred by the broker and their client.

“

... the mortgage market has been a little slow to appreciate the benefits that technology can bring to the way lenders operate and the service standards they provide

Pedigree is crucial It can’t be underestimated how important brokers are in this market, and so we are putting a real focus on onboarding brokers from the outset, helping them understand how Monument can support their portfolio landlord clients. These borrowers are often time poor and rely on their advisers to identify and secure lenders who can not only provide the required funds, but who deliver the highest possible service levels. In effect, brokers do far more than simply provide product advice; they are trusted allies. By recognising that role, we believe we can better serve this borrower cohort. Of course, it’s easy for any new lender to talk about understanding a particular segment of the market and how they want to address lending gaps but backing those words up with action is another matter entirely. Brokers want to know that they are dealing with a lender who they can trust, and who really does have experienced individuals in senior

positions. The CCO and COO, John Saunders and Steve Britain respectively, have a combined 50 year plus track record in banking. Steve has built and led teams at HSBC, having been heavily involved in the establishment of HSBC Premier, as well as having worked in fintech with 10x Future Technologies. A qualified solicitor, John has over 20 years’ experience in private banking having held senior roles at Coutts, Barclays Wealth, v, and UBS. I head up the lending team. Previously I led the specialist lending team at the private banking firm Arbuthnot Latham. Ultimately, portfolio landlords benefit from working with partners who really understand their business and can help them get the most from their investments. That starts with the mortgage brokers and tax advisers who can help them arrange the most efficient funding for their portfolio, ensuring that the sums always add up and yields are maximised. But that also extends to the lenders they use too. There is no substitute for experience and expertise and working with lenders who truly understand the needs of this area ensures not only those landlords enjoy a more efficient process, but also benefit from products designed specifically for investors in their position. NACFB | 17

Compliance

Go with the flow Improving compliance in the sales process Nina Morgan Compliance Officer NACFB

s you are no doubt aware, the NACFB compliance team regularly carries out minimum standards reviews (MSRs) of both current and prospective Members. These reviews are a useful measuring tool to gauge how well our Members’ businesses are performing from a compliance perspective. Importantly, they provide us with an opportunity to make suggestions and solutions to resolve any issues or weak points. Recently, through the MSR process a number of inconsistencies have come to light in the way that Member firms manage the risks relating to the onboarding and assessment of clients seeking access to financial products. Consequently, we have created a flow chart to help Members understand and carry out our view of best practice in relation to this issue. If Members follow the flow chart, it should help them to comply with the NACFB’s Code of Practice. For clients, this outlined sales approach demonstrates consistency whilst maintaining levels of professionalism. The flow chart itself, is a high-level example of how a compliant sales process could look for a commercial finance brokerage. It is not a ‘one-size-fits-all’ template as methodologies will vary from brokerage to brokerage, but the process is designed to ensure the right documentation is sent to the client at the correct stage of the sales journey. The documents highlighted in red text are critical to the process because they demonstrate that Members are communicating clearly. These documents are also evidence that Members are providing 18 | NACFB

clients with a service which is transparent and show that any finance products presented are suitable for their clients’ identified needs and circumstances. This approach is designed to protect Members’ interests and enables them to provide evidence to the Association, the regulator or any other party who may wish to assess compliance, or the service provided. This is especially important in view of the fact that there remains an increasing risk that commercial finance brokers may be involved in claims or complaints linked to areas such as the disclosure of commission arrangements or the failure to provide access to an appropriate funding solution. Included in the membership package, on the NACFB website, Members have access to a suite of template documents and guidance linked to each part of the flow chart and we encourage you to review and if necessary, update your processes in this regard. For your information, the documents referred to in the flow chart and available online are Status Disclosure, Privacy Policy, Initial Disclosure Document, Terms Of Business, Statement of Suitability Letter, and Fact Find. In a similar vein, we can also help with: • The effective management of introducers • Key information and disclosure requirements for client-facing websites and other client-related documentation • Access to online services to enable effective client due diligence on parties involved in the transaction • Specific e-learning training courses to support Members’ knowledge and competency in delivering a fair and transparent service in all cases. Should you need any additional support or guidance do contact the team at compliance@nacfb.org.uk

NACFB | 19

Ask the Expert

The link between credit ratings and funding

Q James Piper Founder Lightbulb Credit

ACFB Associate Patron, Lightbulb Credit, is a consultancy that helps businesses review, improve, and monitor their trade credit ratings. We talked to company founder James Piper about the key financial issues for businesses and brokers alike as we come out of the pandemic, and how trade credit ratings are impacted by this.

What impact has COVID-19 had on trade credit ratings and why is this significant for businesses and brokers?

The government-backed funding support throughout the pandemic reduced, if not removed most of the traditional funding transactions for businesses and brokers. In addition, COVID-19 has left many companies in a less stable position financially, and as a result many have seen their credit ratings downgraded.

As the perceived risk is higher this can make sourcing finance challenging and can impact the rates that SMEs pay. These downgrades can also cause other issues such as reduced trade credit and payment terms, restricted cashflow, and rejection from new project tenders. 20 | NACFB

What have you seen happening to credit ratings over the last 18 months?

declined as companies hoarded cash reserves, and it’s these delays in supplier payments that will negatively impact credit ratings.

We’ve seen continued fluctuation in ratings across the main credit rating agencies. Certain sectors have been hit harder, such as construction, hospitality, travel and tourism, retail, and leisure. In many instances in these sectors, the pandemic has reduced trading activity and caused a decline in sales which has negatively impacted their trade credit ratings. Unfortunately, many companies won’t realise this until it prevents them from doing something in their business, like securing funding or winning a new contract.

How will a change in ratings impact those businesses wanting to secure commercial funding?

What do you think is coming next for businesses?

How can brokers help their clients?

We expect to see more issues arising over the coming 6-18 months as businesses start to re-group and return to their normal working/trading environment. The end of government support such as furlough and the various loan schemes could prompt re-structures and buy-outs, and we will also see a rise in insolvencies as businesses struggle to balance their costs and revenue once more.

Current payment data shows that despite the significant increase in liquidity for businesses during the government support period, adherence to payment terms actually

Business credit ratings are a key indicator for any type of funding, which is why businesses (and brokers) both benefit from becoming more aware of the direct connection between ratings and funding. A higher credit rating enables access to more funding deals and more favourable terms, and for brokers it can also be a defining factor in turning around funding declines.

There is a bit of a myth that credit ratings only matter when a business wants to do something big, like borrow money or submit a large tender bid. The truth is that ratings influence day-to-day operations and the supply chain just as much. Knowing and understanding the range of ratings on a company is vital. Businesses can gain significant advantage by improving their credit ratings, but many are unaware that they can even challenge their ratings, never mind improve them! Brokers are perfectly placed to support their clients by educating them and signposting them to solution providers such as ourselves. It’s a win-win all round.

Special Feature

Advertising Feature

An investment in time To sustain longevity, you must evolve Sundeep Patel Director of Sales Together

ver the last year, we’ve all become used to the idea of plans and circumstances changing at a moment’s notice. That’s fine when those plans are to go out for dinner, but when it comes to a big-budget property investment, things are more serious.

Maximising your business Our relationship with brokers remains an incredibly important part of our business. The bridging sector is one driven by customer service, and one that will continue to require a broker for a long period of time to come. Individuals looking for a residential mortgage can often apply for one online, but generally bridging still requires that all-important human touch.

Lockdowns and social distancing have made some aspects of a project more complicated, expensive, and time-consuming – from refurbishments to viewings. So something which may previously have taken eight weeks, could instead stretch to eight months.

There are benefits to being in a position to check in with customers during the lifetime of their loan. For one, its good customer service and demonstrates your interest in their success; but it also gives you the opportunity to build your relationship with them as someone who can help both in sourcing a bridging loan, and solving a problem should the project timeline slip. That way, you can learn if their exit strategy has become unachievable for any reason, and introduce the idea of a longer-term facility.

With the typical bridging loan being 12 months long, many facilities will have reached term since the first lockdown hit. And we’ve spoken to many investors who’ve been unable to exit because their plans have been delayed, if not changed entirely.

All this could help to maximise the life expectancy of the customer relationship; if you can establish yourself as the broker of choice with a frequent investor who regularly flips or buys at auction, for instance, you could complete 20-30 transactions a year.

We make a point of speaking with borrowers throughout the life of the loan, in the interests of ensuring it doesn’t go past term if it can be avoided; we call them on the day of funding, and at key milestones to see how things are going, so we can find out sooner if things aren't going to plan. If their exit strategy needs to change, we’re often able to offer a long-term product as a refinance option. Our common-sense underwriting means customers eligible for bridging products may also qualify for one of our long-term facilities, like a buy-to-let mortgage; the fact we’re not a dedicated ‘bridging’ lender and have a range of products means we can support our customers in a much broader set of circumstances. 22 | NACFB

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The bridging sector is one driven by customer service, and one that will continue to require a broker for a long period of time to come

So whether your client’s been left in the lurch by another lender or just needs to move quickly on their next investment, we'll work with you and apply our common sense approach to make it happen.

Find out more

togethermoney.com/maketheirday NACFB | 23

For professional intermediary use only.

COMMERCIAL FINANCE

Worth the wait NACFB Expo returns stronger than ever

ast year, the NACFB held two virtual Expos. Whilst engagement was high for both, all exhibitors and delegates participated remotely. Last month though, formal attire was dusted off, as the Association’s ever-growing finance community met under the same roof for the first time in two years. The NACFB Expo was back.

This year the Expo was held in Hall 8. Larger than Hall 3a, it housed 128 exhibitors spanning the asset and leasing, buy-to-let, bridging, development, commercial mortgages, unsecured, invoice and factoring, and cashflow sectors as well as a wide selection of service providers.

Back was the journey to Birmingham, the excitement, the exhibitors. Back were the familiar faces, the free gifts, and the building rumble of hundreds of conversations. It’s incredibly difficult to bottle the day into one article, each person that was there had a unique experience, and took something different away from the day, so instead we’ve collated a selection of highlights from across the flagship event that you may have missed.

The event’s mobile app, sponsored by Keystone Property Finance, received over one thousand page hits on the day.

Although the date had to be moved several times, we never gave up and were able to make the show a successful autumn event – the eleventh Expo the NACFB has hosted.

Thirty commercial brokerages expressed an interest in becoming Members of the NACFB – the UK’s largest independent and not-for-profit trade body for commercial finance professionals.

More than 1,700 delegates passed through the registration desk on Thursday 30th September, despite COVID and the fuel crisis. At its peak, 2,500 finance professionals were in the room.

LinkedIn was all aflutter both in the lead up to the show and on the day with 153 posts, 3,623 reactions, and 294 comments relating to the event.

Exhibitors and attendees alike shared 321 Twitter posts on the day using the event hashtags #CFE2021 and #NACFB.

Special Feature

Chatting backstage, BBC Breakfast presenter Naga Munchetty revealed to the NACFB’s Jenny Barrett that she enjoys hosting conferences and always gets a lot out of them, saying: “I’m like a small child who needs constant attention; as long as I’m learning I’m happy.”

“We have met lots of brokers who have never used us before. They have come to us because they are diversifying after their experience of CBILS, which has made them want to fill any spare capacity.” Kevin Flowerday, head of technology finance at Shawbrook, on reaching more brokers.

MFS Coffee Club barista on Stand J10 said that he had served hundreds of coffees during the day – too many to count but that the most popular by far was a flat white.

Shawbrook celebrated their tenth anniversary in style with a spin the wheel giveaway.

Ashley Ilsen, CEO of NACFB Patron Magnet Capital, said: “This is my ninth Expo and it’s definitely the best one yet!”

26 | NACFB

Asset Finance Solutions on Stand F12 encouraged visitors to have their photo taken sitting in the famous ASF chair – based upon Star Trek’s Captain Kirk’s command seat.

On Stand A29, Fleximize hosted a game testing participants’ reaction time. The winner, Priscilla, scored an impressive 79 in 30 seconds – winning herself a luxury hamper.

“It’s been a fantastic event with lots of cases on the way for us.” Charlotte Rutter, head of marketing, Roma Finance on what drives Patrons to return.

West One Loans said the largest deal discussed on the day was with a broker looking for £9 million on a residential build and sell development worth £15 million.

The Glenhawk stand featured a mini golf hole which attracted lots of brokers eager to demonstrate their putting skills. The lowest and best result of the day was a hole in 2; the highest was a hole in 14, and the worst was when someone missed the green entirely…

The Signature Property Finance stand drew a crowd with its plethora of traditional arcade games including Mario Kart, Donkey Kong, Pac-Man, and pinball. Andy Neo, relationship manager (London and South), said: “The games were a great crowd pleaser, and we even had a pinball wizard who scored an incredible 13 million points.” Speaking of cars, the fastest lap on Ultimate Finance’s racing simulator was clocked at 1:45.874 by Pratik Shah.

One of the most useful promotional items could be found on the Together stand – an all-in-one mobile phone screen cleaner tube and microfibre cloth. Although not everyone was quite sure what it was…

David Grant of Greenfield Mortgages said: “Without doubt this has been the busiest we’ve seen the Expo and it’s been great to see so many familiar faces and make lots of new contacts.”

Only one item was handed into lost property – a door key. If it’s yours, do get in touch at events@nacfb.org.uk

Praetura had a game called PONG! where delegates were invited to bounce ping pong balls into cups. Those who managed the most were in the running to win Praetura branded bottles of beer or even a car…

On the day, the show’s videographers shot 60 GBs of film footage – the highlight package can now be watched on the event website.

“There has been a real willingness to bridge the gap that the last 18 months has created, renewing acquaintances and making new ones.” – David Winter, commercial lending manager at Aldermore on restarting face-to-face practices at Expo.

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Only 36 doughnuts remained at the end of the day on the Nucleus stand which meant hundreds were eaten. The Patron also opened a bar at midday, with the most popular drink being the Porn Star Martini. Fruity.

Goldentree had an electronic golf game. Delegates swung an actual golf club at a digital image of a green with a greenhouse behind. Prizes were available for those nearest the pin and for whoever smashed the most windows.

“There is nothing else like it. We’ve received so much live feedback from brokers seeking to embrace technology.” – Ciaran Burke COO and co-founder from Swoop was thrilled with the day.

“The Expo has unlocked a lot of deals for us, clearing the pipeline.” Victoria Addy, partnerships manager at Reliance Bank on the value of the event.

LendInvest introduced a ‘Wall of Feedback’ at this year’s Expo. Chief commercial officer, Matthew Tooth, shared that most of the Patron’s feedback centred around the areas of service and personalisation.

“I know everyone is saying it but being face-to-face with so many likeminded people makes life so much easier. It’s been great to be reminded just how respected the NatWest brand is by brokers.” – NatWest BDM, Neil Southern. One of the most prolific promotional items were water bottles which were being given away by many exhibitors. Busy Bee Commercial Finance lived up to their name with quite the impressive haul.

At it’s peak the room noise reached 101 decibels. Buzzing.

Shelton Capital welcomed 15 people into their cash grabber machine. Katrina from TAB caught 24 notes in 30 seconds. NACFB | 29

Special Feature

One of the cutest promotional give-aways was a cuddly octopus from Octopus Real Estate stand.

“We want to leverage technology to make life easier for the broker, so they can get back to doing what they do best – building relationships.” – Katrin Herrling, CEO and co-founder of Funding Xchange (FXE) shares how platforms can complement and not replace the broker.

20 experts participated in the conference sessions to discuss topics ranging from government loan schemes and technology platforms for brokers, to SME housing developments and sustainable finance.

This was the first time that the NACFB provided pin badges exclusively to NACFB Members to wear on the day.

It took eight members of staff six hours to fill 2,000 bags.

It’s only 251 days until CFE 2022 which takes place on 15th June again at the NEC Birmingham.

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Special Feature

Could do better? Timely progress reports improve lender-broker relationships Martine Catton Deputy CEO Just Cashflow

ood communication is the bridge between confusion and clarity.” This famous and often-used quotation is attributed to Nat Turner, an enslaved man who lived on a Virginian plantation in the early 1800s. I can’t find the specific circumstances in which he used it, but I think it’s fair to say that the sentiment applies to all situations where humans are required to communicate with each other. At Just Cashflow, we are increasingly conscious of how we communicate, not just internally, but with intermediaries and customers. In this regard, following some uncomfortable feedback from both our broker team and our business development staff, we recently conducted a survey to gauge how our broker partners rate the service we provide, including how we communicate with them. Unsurprisingly, 85% of those surveyed identified poor communication and lack of sufficient information on how deals are progressing as their top irritations. This feedback and the survey results show how important it is to not employ a ‘one size fits all’ communication approach. Those lenders who do, could be missing out on promoting financial solutions to a wide range of brokers. We have longstanding broker relationships where we know the preference is to simply pick up the phone and have a conversation. We also see an increasing trend in brokers that are happy to deal exclusively through our dedicated broker portal. These are just two examples of differing communication preferences and it’s vital that 32 | NACFB

we remember and accommodate them both if we are to improve our service and retain those relationships. I know brokers value hugely prompt and decisive communication and there are occasions when the second-best answer we can give is a quick ‘No’. For the broker, this means valuable time isn’t lost and the focus can switch immediately to finding a lender that can make the deal work. Essex-based commercial finance broker Elite Business Funding has been working with Just Cashflow since 2018 and their director, Charles Groves, says good and timely communications has been key to a growing and highly effective working relationship with us. He said: “We appreciate Just Cashflow’s open approach to their underwriting criteria which is accessible and straight forward. Being able to speak to their underwriters directly, if this is called for, is also highly valued.” As an example, Charles told me that Elite had a client that had been a sole trader for four years who had just incorporated his business. As he had only been trading for a month using the limited company, lenders were reluctant to provide funding; however, being able to fully explain the situation to Just Cashflow had paid dividends. We looked at the client’s full trading history as a sole trader and were happy to provide him with a £20,000 revolving credit facility. This funding supported his business development and within a month he landed a £260,000 contract. It’s great to hear that when we get it right, there is a ripple effect. But we are not complacent. The upshot of our survey findings is that we are putting greater emphasis on improving our communications with brokers. We are investing in both technology and our people. Whether it’s the phone, an email, the website, web chat, portal, face-to-face – whatever – we want to ensure that we are accessible in a way that works best for each broker partner. In other words, we’ll invest in as many bridges as necessary to take that step away from confusion and cross over to clarity.

Real world lending. We’ve been helping small businesses get the finance they need since 2013, and we’re now also offering loans through the Government-backed Recovery Loan Scheme. Give us a call to find out more about our industry-leading products and how we can assist your SME clients.

Oliver Ward, Head of Operations & Change

Real world lending 0800 470 0430 www.assetzcapital.co.uk/introduce/rls Assetz SME Capital Limited is a company registered in England and Wales with company number 08007287. Assetz SME Capital Ltd is authorised and regulated by the Financial Conduct Authority in respect of its peer-to-peer lending platform only. ’Assetz Capital’ is a trading name of Assetz SME Capital Ltd. Assetz SME Capital is registered with the Office of the Information Commissioner (Reg No: Z3338899) for data protection purposes. Assetz Capital also offers Recovery Loan Scheme (“RLS”) loans to corporate borrowers through Assetz Capital Lending Limited. Assetz Capital Lending Limited is a company registered in England and Wales with company number 12632494. Assetz Capital Lending Limited is not authorised or regulated by the Financial Conduct Authority. Assetz Capital Lending Limited is registered with the Office of the Information Commissioner (Reg No: ZA759694) for data protection purposes.

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Advertising Feature

More meaningful contact Diversifying a broker’s income stream Alexandra Bignell Strategic Commercial Relationship Manager, Commercial Banking Intermediaries, Lloyds Bank Cardnet Emma Pearce Strategic Commercial Relationship Manager, Commercial Banking Intermediaries, Lloyds Bank Cardnet

he pandemic created many challenges for businesses. They’ve had to rapidly adapt to changing customer behaviours and needs and pivot to make the most of opportunities to keep afloat and thrive. What is clear is that those businesses who were close to their customers and understood their needs were able to adapt and carry on serving them.

Expanding horizons Brokers haven’t been immune to these effects either. Those who work closely alongside their customers have been able to understand their changing needs and help them face challenges as they arise. For many this involves embracing a wider portfolio of products, such as accepting card payments – as they too pivot their businesses to meet customer needs. Likewise, brokers who see their client needs in an holistic way can help suggest the most suitable solutions to solve their problems – and here is where Lloyds Bank Cardnet can help. While accepting card payments may feel outside the typical suite of broker products, they can provide complementary solutions. The added bonus for brokers is that instead of one-off commission as with most 34 | NACFB

traditional products and services, acting as an introducer for Cardnet can instead provide an ongoing income stream from transactions.

Cash flow benefits Cash flow has been high on the agenda for businesses. Accepting card payments can help money get into accounts faster than sending an invoice or waiting for a bank transfer or a cheque. An easy way for businesses to do this is via Cardnet’s Pay by URL solution. They simply have to send customers a link to a virtual terminal webpage where they can make fast direct payments using their preferred method.

E-commerce websites During lockdown, many businesses found they needed a website with a shopping cart and payment mechanism to carry on trading. Cardnet can help your clients create a new income stream quickly. Small businesses can choose our website in a box solution – or we can help larger businesses integrate payments into their existing website. It was clear that some high street names relied solely on their shops and had no online retail, so found themselves lagging behind rivals that had been selling online for years. We can help establish an

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While accepting card payments may feel outside the typical suite of broker products, they can provide complementary solutions

omni-channel approach, which combines a business’ ecommerce transactions (from their website, app or QR codes) with face-to-face channels to provide their customers with a seamless experience.

Innovations and efficiency Many businesses have creatively leapt ahead in recent years with new ways of helping customers. Busy people may want to order their coffee or takeaway ahead so it’s ready when they pick it up. Cardnet’s pre-ordering solution makes this simple – helping your clients increase their revenue and operational efficiency with their own bespoke app. They’ll also benefit from data that helps inform business strategy. Many people have got used to checking in to places with QR codes. Businesses can use this new familiarity as an order and payment mechanism. In addition, Cardnet’s mobile Point of Sale (mPOS) offers the flexibility to take card payments from anywhere – from pop-ups to events. As customers return to retail premises, restaurants, and venues, businesses will need good management information from sales to help plan their recovery or expansion. Cardnet’s innovative point of sale card solution, Clover, can help automate time-consuming tasks, such as inventory management, employee scheduling, and provide analytics to improve profitability and productivity.

Support for brokers and their clients From the outside, getting involved with recommending card payment acceptance can seem complicated, however working with Cardnet can be straightforward. You don’t have to understand the technicalities – our experts do that for you. Diversifying your portfolio further can add new income streams, while offering your clients a more complete package of services enhancing your proposition. Cardnet provides a wide variety of support to brokers and directly to your clients. For example, we hold regular briefings on new products and services, giving you the opportunity to suggest ways you can help clients move their business forward. We also keep your clients happy. During the pandemic, some

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As customers return to retail premises, restaurants, and venues, businesses will need good management information from sales to help plan their recovery or expansion

end users were finding it tricky to add “customer not present” transactions for business being done over the phone and Cardnet teams were able to talk them through what was needed. If a business needs to integrate Cardnet into their website, there is a team of people who can support, and lots of available guides to help website developers with the technicalities. You’ll also have the reassurance of working with a trusted provider with a long history of expertise in payments, and clear and transparent fees. We’ve got solutions that can work for small companies to multi-million multinationals. From ways that might help improve cash flow or speed up payments to the technical implementation on a website. Whatever the size of your clients, we can help with an end-to-end card acceptance payments service. If you’re interested in finding out more about adding card payment acceptance to your portfolio, please email cardnetstrategicrelationships@lloydsbanking.com

Cardnet® is a registered trademark of Lloyds Bank plc. ©The Clover trademark and logo are owned by Clover Network, Inc. a First Data company. All Rights Reserved. All trademarks, service marks, and trade names referenced in this material are the property of their respective owners. Please note that any data sent via e-mail is not secure and could be read by others. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 119278. NACFB | 35

Special Feature

ABL and the liquidity crisis Lining the road to a post-pandemic recovery Ian Bath Corporate Sales Director Nucleus Commercial Finance

or many businesses, the last 18 months have presented a series of challenges. Not only have they had to deal with the immediate effects of COVID-19, but they are now facing staff shortages, inflation fears and supply chain issues. No company has been immune to these challenges as businesses both large and small have had to deal with some, if not all these factors. As a result, it has never been more important for businesses to take a hard look at their liquidity. But how will liquidity impact businesses now and in the future, and what role can asset-based lending play? Looking at where we currently stand, ongoing government support has meant that administrations have remained at very low levels, with only 55 in August 2021, which is 50% lower than August 2020 and 69% lower than August 2019. Further, appetite from high street banks for new lending seems to be limited, even under the RLS scheme, as they brace themselves for the fallout of all the CBILS loans they have provided. This, combined with trading levels returning to pre-pandemic levels across several sectors, and increased inflationary pressure, means more SMEs will need external finance. This is where asset-based lending (ABL) will come to the fore, more so than ever before. While activity over the last 18 months has been quiet within the ABL market, due to the initial impact of the pandemic and associated lockdowns which led to trading volumes falling significantly, we anticipate a surge in ABL activity over the coming months. As businesses recover from the pandemic, many will face a surge in activity due to pent-up demand. To take full advantage of this, 36 | NACFB

businesses will need access to funding that is flexible and allows them to scale quickly. ABL can be used to provide both immediate cash and ongoing financial headroom to support a business’ goals, while having the ability to grow with the business. For businesses looking towards the future, liquidity is key. Traditional senior debt lenders will struggle with assessing serviceability and what this should be based on. But with asset values being more predictable than cash flows, ABL has a key role to play as part of the recovery. This is particularly the case for lenders like Nucleus, that are prepared to consider the asset base rather than have pre-defined rules around what the mix of assets should look like. While traditionally invoice finance and inventory facilities tend to be revolving, with plant and machinery (P&M) and property on a term basis, there is no reason why fixed assets cannot be funded on an interest-only basis as well as to reduce debt service costs. The stability and certainty ABL provide makes it an attractive option for businesses during these turbulent times. In the coming months, we can expect to see ABL continuing to work alongside private equity as businesses look to rebuild their balance sheets and acquire complementary businesses that may have fared less well throughout COVID-19.

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Traditional senior debt lenders will struggle with assessing serviceability and what this should be based on

Helping small businesses get the finance they need We’ve helped over 100,000 businesses borrow £11 billion over the past 10 years, and now we’re also offering the Government’s Recovery Loan Scheme. Find out more about our market-leading commission for introducers, and how we can help your SME clients today.

Contact us at broker@fundingcircle.com or on 020 3667 2208 fundingcircle.com/introducers The Recovery Loan Scheme is managed by the British Business Bank on behalf of, and with the financial backing of, the Secretary of State for Business, Energy & Industrial Strategy. British Business Bank plc is a development bank wholly owned by HM Government. It is not authorised or regulated by the PRA or the FCA. Visit https://www.british-business-bank.co.uk/recovery-loan-scheme

Industry Insight

To suit all tastes A menu for recovery Martin McTague National Vice Chair Federation of Small Businesses (FSB)

s they enter the festive season, hospitality and tourism businesses need more from Government. The in-person nature of these businesses has meant they have been especially hard-hit during lockdowns. That’s why in the summer of last year we consulted with members and launched ‘A Menu For Recovery’, a report setting out recommendations for how policymakers can help hotels, bars, restaurants, pubs and clubs, and the wider hospitality supply chain thrive as our economy evolves. The study had an immediate impact, with suggestions regarding pavement licences taken forward shortly afterwards during a summer where renewed appetite for al fresco dining kept many bars and eateries afloat. After listening to FSB’s concerns, the Health and Care Bill will exempt small businesses from a blanket ban on online advertising for foods high in fat, salt and sugar, recognising that banning a pub from posting a photo of a homemade sticky toffee pudding on Instagram would have been far from the intentions of the Bill’s authors. With the economy unlocked, we should start looking beyond the immediate future. The question now is: how do we help our hospitality and tourism sector do what it does best, in supporting communities, when COVID is here to stay and with the added challenge of the general shift online? Safety has to come first. As we learn to live with COVID, a ventilation grant scheme to assist small businesses looking to make their premises secure is a must. To complement this, we have to stop punishing firms with higher business rates bills when they make their premises more conducive to good health and sustainability. More broadly, targeted, tailored interventions are critical. That’s why we would like to see the creation of Hospitality Enterprise 40 | NACFB

Zones: locally defined areas in which small businesses can receive incentives to take over vacant spaces, to revitalise high streets. Equally, inflation is already rising – by more than 3% in August, way above the Government’s 2% target – so policymakers should reconsider bringing back full VAT rates for hospitality firms, after last year’s cut did so much to help firms get back on their feet. Staffing issues come up time and again in this sector. The Government could help by extending both incentive payments for employers to deliver industry placements for T-Level candidates beyond July 2022, and the Kickstart scheme beyond 2021. Clearly, the Government’s hike to Employer National Insurance contributions – the jobs tax – will be exceptionally damaging. An increase to the Employment Allowance should be installed immediately to help shore up hiring intentions as furlough ends. For many hospitality and tourism businesses, the final three months of the year are just as important as the summer holidays. There’s Halloween to look forward to, before a swathe of festive celebrations and the New Year. In that context, our report contains far more food for thought. Policymakers should take note – after a torrid 18 months, further moves from the Government to help tourism and hospitality would be welcomed with a raised glass, or two.

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We would like to see the creation of Hospitality Enterprise Zones: locally defined areas in which small businesses can receive incentives to take over vacant spaces, to revitalise high streets

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Industry Insight

The rise and rise of BTL Twenty-five years of buy-to-let Richard Rowntree Managing Director of Mortgages Paragon Bank

eptember 24th 1996, marks a key milestone in the history of the UK’s private rented sector (PRS). This was the date the term ‘buy-to-let’ was officially launched by the Association of Residential Lettings Agents at an event held in the RAC Club on London’s Pall Mall. Although mortgage products for landlords were available prior to this date – Paragon launched its first products the previous year – it was the first time that they were marketed under a consumer-friendly banner. Buy-to-let encouraged fresh investment into a tired PRS, broadening the availability of stock and helping to drive standards of property. The PRS is now home to 4.4 million households in England alone and buy-to-let now accounts for 18% of total outstanding mortgage balances in the UK. As we mark this milestone, we must also look to the future and ask what is next for buy-to-let and the PRS? Here are just a few of the key themes I feel will have an influence on the market in the coming years.

Tenant demand The pandemic has significantly impacted all areas of the housing market and will continue to do so. The ‘race for space’ is not confined to owner-occupiers, it has been a trend in the rental market as people look for larger homes and greener spaces. Landlords have been responding by buying different types of property – we have seen more applications for semi-detached and detached properties – and in different areas of the country. I don’t see tenant demand slowing anytime soon, whilst the demand 42 | NACFB

for different types of property will also persist.

The energy efficiency drive Housing accounts for just under a quarter of emissions and current Government proposals suggest all rental stock will require a minimum EPC of C by 2028. What the final legislation looks like is yet to be seen, but the direction of travel is clear and has huge implications for the PRS. The sector has made significant strides in the past decade and the proportion of PRS homes at EPC C or above is higher than the owner-occupied market. However, six in ten rented homes are still below that level and the PRS has more of the type of homes that can be difficult to upgrade. This is an area to keep close to as policy develops because it could impact on several areas, including what type of property landlords target in future.

Build to Rent (BTR) The growth of BTR is accelerating. The British Property Federation’s Q1 2021 figures show there were 188,456 BTR homes completed, under construction or in planning, up 21% on the same period in 2020. BTR is

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The term ‘buy-to-let’ was officially launched by the Association of Residential Lettings Agents at an event held in the RAC Club on London’s Pall Mall

here to stay, but I’m confident it will complement the existing landlord investor for many reasons. BTR comes at a cost – an 11% premium on average local market rents according to the property consultancy JLL. Many tenants won’t or can’t pay for that premium. Meanwhile, individual landlords have the agility to react quicker to changing tenant demand and meet local needs. That was evidenced by the increase in buy-to-let activity in the wider South East this year as landlords responded to Londoners leaving the Capital.

Growth of portfolio landlords The Government abandoned its housing tenure neutral policy

when it introduced a range of measures aimed at encouraging more first-time buyers and quelling demand for buy-to-let. A 3% Stamp Duty surcharge for buy-to-let purchases was introduced in 2016 and mortgage tax relief was replaced by less generous tax credits in a phased approach from 2017. The policy clearly worked. The number of buy-to-let mortgages for house purchase fell from 102,200 in 2016 to 80,200 in 2017 and has fallen in subsequent years since. We believe the policy changes made buy-to-let less attractive for those smaller landlords who may hold one or two properties, rather than larger, portfolio landlords. It’s a trend I believe will continue in the long-term, with portfolio landlords becoming dominant.

We hope you enjoyed the NACFB Commercial Finance Expo as much as we did! Thank you to everyone that visited us on the day. Wesleyan Bank is a partner you can trust. X Choose from a variety of finance solutions to suit your clients’ needs X Funding for a wide range of commercial sectors X Easy to understand deal submission and credit policies X Dedicated team of account managers X Direct access to our credit experts For more information on Wesleyan Bank please call us on 0808 123 0111 (Mon-Fri 8:30am-5:30pm) or email bank.broker@wesleyan.co.uk Asset finance for brokers Transportation  Construction  Recycling  Materials handling  Manufacturing  Print  Broadcast TV & sound production Depending on the circumstances and where required by law, loans will be regulated by the Financial Conduct Authority and the Consumer Credit Act. Wesleyan Bank Ltd (Registered in England and Wales No.2839202) is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services register No.165116). Registered office: PO Box 3420, Colmore Circus, Birmingham, B4 6AE. Tel: 0800 358 1122. www.wesleyanbank.co.uk . Calls may be recorded to help us provide, monitor and improve our services to you.

xxxxxx 09/21

Industry Insight

Go your own way What next for the self-employed? Jon Cooper Head of Mortgage Distribution Aldermore

he UK is an entrepreneurial nation, and the self-employed sector is the breeding ground for innovation and advancement in many industries, but multiple lockdowns and restrictions have hit the sector hard in the past 18 months. Research conducted by Aldermore bank reveals that, of the more than five million self-employed workers in the UK, over half (51%) have seen their financial situation worsen over the last year. In response to the difficult conditions, over a third (34%) of self-employed businesses applied for government support and one quarter of self-employed homeowners requested a mortgage holiday.

With the country beginning to open after the vaccination rollout, focus moves to recovery and rebuilding, but forecasts suggest this will take time. Two in five (38%) are now less confident about their business’s future and many remain vulnerable to future shocks, with one third (33%) not having enough savings to last three months if they were out of work. Indeed, conditions are so challenging that one in four (23%) say they are considering stopping being self-employed altogether. However, during this time, we’ve also seen great resilience and ingenuity by the self-employed. Nearly half (46%) have adapted their business and over one in ten (13%) have utilised the time to overhaul their business model completely. This trend was particularly evident amongst the younger generation, with a quarter (23%) of 18- to 35-year-olds changing their business model entirely and, within this age group, encouragingly a third (34%) are now more confident about the future of their business. With 44 | NACFB

difficult circumstances slowly turning around, a return to optimism is steadily growing but this must be nurtured and supported. Financial assistance for the self-employed is vital as we go forward. Only one in nine (14%) have consistent income month-to-month, which provides challenges, however specialist lenders are really stepping up to help. They take time to listen to an applicant’s story, dig into the detail to understand their finances and business, and will be open to working with those affected by the pandemic and IR35 changes. Specialist lenders are opening pathways so that financial difficulties and seeking financial aid through SEISS grants, Bounce Back Loans or payment holidays aren’t barriers to borrowing and gaining future funding for investment. The self-employed are often fulfilling a life’s dream in creating their business, and some of the biggest companies in the world like Amazon and Facebook started as small start-ups, so it is crucial this entrepreneurial spirit is continually supported by government and lenders through these tough times and for whatever future life plans they have.

“

Over a third (34%) of self-employed businesses applied for government support and one quarter of self-employed homeowners requested a mortgage holiday

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Industry Insight

Unravelling ‘secret commissions’ Avoiding unnecessary litigation Alex Worthington Barrister Greenhalgh Kerr

ithin the finance industry, whether broker or lender, if you haven’t already received one of the letters of claim from claims management companies springing up to capitalise on the issue, you’ll certainly be aware of it. In the months that have passed since Judgment was given in Wood v Commercial First Business Ltd [2021] EWCA Civ 471 we’ve had time to reflect on the industry impact and refine response techniques to ‘secret commission’ claims. The starting point is that the English jurisdiction rarely affords windfalls even to claimants with perfectly good cases. Where customers are being sold windfall payments, refunds of their finance payments and a free asset at the end of it, the finance industry would be right to think this unfair and in our experience the law rarely, if ever, delivers that result. What a customer is entitled to claim depends on the secrecy of the commission. In very simple terms, the categories are fully secret, half secret, and not secret. Unsurprisingly, the latter results in no claim. Both fully and half secret result in payment of an amount equal to the commission. The remedy of rescission of the agreement is discretionary in half secret cases but available as of right in fully secret cases. There may also be claims for damages, interest, and legal costs. The first step when met with a claim or when preparing your business for an influx of claims is to determine whether the claims can be avoided entirely. Finance companies and brokers should work collaboratively to identify the written and oral communications with the customer and ask; “Did the customer give their fully informed 46 | NACFB

consent to the commission payment?” If yes, in most cases, the claim is capable of being defended. If not, the second question is; “Was the existence of a commission communicated to the customer?” If so, even without the precise amount and fully informed consent you’re likely to be able to argue the commission was only half secret, avoiding automatic rescission. Whether in the fully or half secret category, repayment of the commission will almost inevitably follow. Acknowledging that and making an offer to repay it prior to the issue of any proceedings affords good costs protection or mitigation. Beyond that, the windfall for customers is limited. When met with letters demanding rescission of agreements, the industry should be prepared to stand its ground as the remedy is subject to counter-restitution. The use and benefit that the customer has had from the asset, as well as any financial windfall from its sale on a concluded agreement or its return on a live agreement, are to be weighed against the sums paid. Identifying this and seeking proposed quantification will in many cases stop a rescission claim dead in its tracks, particularly on live deals where asset return is requested. Similarly, damages claims must be backed by some actual loss. Enquiring as to what (if any) better deal the customer could or would have received elsewhere had the commission not been paid is a question which if unanswered will cause difficulty for any claim. The industry therefore needn’t roll over just yet but should acknowledge that this is likely to be a problem for some years to come. Lenders and brokers should develop formulas based on their levels of commission disclosure to allow prompt and appropriate offers to be made, avoiding unnecessary litigation and costs. The NACFB is recommending both regulated and unregulated firms, working in all sectors, should be transparent about their commissions and fully disclose the amount of commission received.

Broker Voice

Underpinning client success Retaining confidence and pride in our process

Marc Champ Managing Director Wharf Financial

hroughout my days in the banking industry, it was often suggested that brokers didn’t justify their fees and the work they put into any transaction did not warrant the ‘astronomical’ payments they would receive for completing a transaction. I think the general conception of being a broker was one of a lavish lifestyle, sipping champagne on a yacht in the Bahamas whilst everybody else picked up the slack. A few large deals each year and the broker could sit back on their sun lounger, check the bank balance with one hand whilst holding a piña colada in the other. This stereotype is wrong. Let me tell you. As I sit here writing this piece at nine in the evening, having done much more than your typical nine to five, I know I have so much more to do. The main reason for this is that I care. I want the best for my customers. I want the best for the stakeholders in my business. And I want the best for the industry as a whole. Brokers throughout the land, led by the NACFB, invariably want the same. They often put all those around them first and strive to provide the best possible service. This often comes with personal sacrifices but anything other than a satisfied customer is not enough. I am sure if you asked any broker what is more important to them, a little extra fee, or a happy customer, they would undoubtedly opt for the latter.

Standing tall So, what extra value do brokers add and why should they take pride in the commission model? Like anything in life there usually is a way of doing things for yourself and saving a few quid. However, if one has a tooth ache you would go to a dentist rather than removing the tooth yourself. You would actively seek a professional to do the job for you. And that is exactly what a broker is, a professional in financial transactions.

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Brokers spend years and even decades honing their skill set,

Brokers spend years and even decades honing their skill set, exploring the market, and picking up on nuances each lender has

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Brokers are the glue that holds the industry together and the fees they earn are most definitely justified

exploring the market, and picking up on nuances each lender has. The hours and hours assessing transactions and working out a way forward put brokers in the ideal position to pass their knowledge on to their customers meaning the customer not only has access to information that they usually wouldn’t but also saving the customer the time and effort of conducting their own due diligence. In today’s age of instant gratification, it is imperative customers have quick results. A customer running their own transaction will probably not be able to achieve this in the same way a broker can. A broker knows which buttons to press and who to go to when a crisis occurs. Many have previously worked in lending institutions so understanding the background processes gives them the inside knowledge necessary to expedite transactions and deliver results in a timely manner.

A cornerstone of advice Throughout the lending process, brokers are on hand to act as trusted advisers, not only offering their own guidance but bringing in other professionals around them. I often describe my role as the hub in the middle of the wheel with the different spokes extending out. Those spokes include the solicitor, the accountant, the wealth manager, the valuer, and many other professionals. The broker is integral to the way the wheel moves forward. So, why do we brokers feel awkward when discussing fees and the commission structure? In my opinion it is a legacy thing. The old stereotype has made it difficult to discuss but I believe that is changing. Customers are now acutely aware that the majority of fees are not earnt until the product has been delivered and they know that the commission is proportionate to the transaction they are involved in. We are extremely open about the fees we charge and make a point of providing the information upon our first meeting. We explain the full broking process and demonstrate to the customer what they are getting for their money. It is very seldom that we are challenged about the level of our fees. In fact it is my true belief that customers leave us feeling they have got value for money. The broking industry, with the help of the NACFB has come a long way in the years I have been involved in the finance industry. The wheel will continue to turn and brokers will remain firmly at the hub. Brokers are the glue that holds the industry together and the fees they earn are most definitely justified. Signing off from my yacht in the Bahamas, of course. NACFB | 49

Opinion

A new way of thinking Borrowing for growth, not just survival Angela Norman Head of Corporate Development Recognise Bank

s we start to recover from the impact of the COVID-19 pandemic, it’s clear that the UK’s SMEs, the lifeblood of our economy, will play a vital role in getting the country back on an even keel. Ambitious businesses will be looking to rebuild their customer bases, while others will be looking to capitalise on new opportunities created by changed trading conditions. The big question is whether those businesses will get the funding support they need to grow? Not according to an influential group of MPs who have called on the government to plug a £22 billion funding gap faced by SMEs. In a new report, the All-Party Parliamentary Group (APPG) for Fair Business Banking said the commercial finance market is, “…dominated by four large shareholder driven banks and is not fit for purpose to address growing inequalities.” The APPG said this had resulted in many small businesses struggling to get finance, especially newer SMEs, those in the building and hospitality sectors, as well as firms based outside of London and the South East. This rings true with Recognise Bank’s own research, whereby we survey financial decision makers in 500 SMEs every quarter. In our summer survey, while we found that business confidence remains strong, leading to many companies planning to invest to help grow their businesses, many were also finding it difficult to find funding. In fact 12% of the firms we surveyed said they would use their overdraft to fund business investment, while 11% said they would turn to credit cards to fund spending. But why are so many SMEs using such potentially costly means of borrowing? 50 | NACFB

Part of the reason, according to our research, is that many small businesses feel they cannot turn to their existing business banking provider for the funding they need. In our August survey, 14% of SMEs said their business bank is never able to support their borrowing needs, while 33% said their business bank was only able to help them with their borrowing needs some of the time. In addition, 11% of firms said they always used an alternative lender rather than their business bank for their borrowing needs. Only 33% of the SMEs we questioned said their business bank was always able to support their borrowing needs. The borrowing needs of small businesses are diverse, ranging from property funding through to equipment and technology to support expansion, both physically and online. Their financial circumstances can also be complex, perhaps because they are dealing with cashflow challenges or are also managing government-backed COVID support loans.

“

Perhaps they just need someone to talk to who can offer them advice?

12% of the firms we surveyed said they would use their overdraft to fund business investment, while 11% said they would turn to credit cards to fund spending

“

Only 33% of the SMEs we questioned said their business bank was always able to support their borrowing needs

This is the issue highlighted by the MPs, whereby the market is dominated by mainstream banks who are cutting back on their relationship managers, reducing their presence in the regions, and withdrawing their support for certain business sectors. However, this also creates an even greater opportunity for brokers and advisers, working with lenders such as Recognise Bank, to fill

the gap created by the bigger banks and offer true face-to-face advice and support to SMEs once again. As they take on the challenge, and the opportunity, of growing their businesses after 18 months of uncertainty caused by the pandemic, SMEs need great support and understanding. The broker community is ideally placed to provide this much-needed help.

Opinion

Hailing a new approach Structured finance can aid recovery Andrew Darby Structured Finance Director Haydock Finance

tructured finance is not for all business borrowers. Indeed, it is deployed mostly to businesses who have highly specified needs that a simple loan or another conventional financial instrument will not satisfy. In most cases, structured finance involves one or several discretionary transactions to be completed; as a result, evolved and often risky instruments must be implemented. As part of Haydock’s growth strategy, our structured finance team, led by Terry Hounsome and I, have been working alongside SMEs whose cash flows have been significantly disrupted by the pandemic. Earlier this year the team were approached by one of Haydock’s broker partners with an opportunity to assist a well-established London based cab company wishing to upgrade their diesel fleet to electric. The challenge was that the taxi industry was one of the most severely affected by COVID-19. With a halt on tourism and many people forced to work from home, demand for cabs drastically reduced, especially in London. By December 2020, a fifth of all London’s black cabs had been taken off the road with many cab drivers leaving the industry. Black cab rental firms had also been forced to hire fields and farmland around the edge of the city to store vehicles handed back by drivers. With the demand for black cabs diminishing, their values were drastically reduced too, making them a difficult asset to value. Their future was also difficult to predict as no one knew what impact COVID-19 would have on future tourism and working life. The aim of structured finance is to provide tailored solutions to opportunities that may not be inherently obvious via traditional 52 | NACFB

financing structures. With years of commercial experience behind us, both Terry and I believe that the solution relates more to the customer’s business needs and how these needs evolve to support further growth. Our approach, therefore, to this electric black cab deal was to work with both the broker and asset management to research and evaluate the possible market opportunities behind the current crisis and provide sufficient evidence in their current and future values. Despite a large percentage of taxis being deregistered, the team identified that due to the Transport for London’s licensing requirements to reduce emissions, when they came to register again, they would only be able to do so with an electric vehicle. They also discovered that due to the pandemic, journeys in black cabs had begun to steadily increase as passengers opted to travel alone instead of using public transport. With this research behind us, Terry and I facilitated a meeting between the broker’s customer and Haydock’s credit team so they could gain a sound understanding for the underwriting process. By taking a more commercial approach, the vehicles valuations were supported, enabling the hire purchase facility to be approved to the value of £750,000.

“

The aim of structured finance is to provide tailored solutions to opportunities that may not be inherently obvious via traditional financing structures

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Opinion

Green for growth Lobbying for a government-backed green loan scheme Andrew Jackson Managing Director Swishfund

alf of all carbon emissions generated by business and industry in the UK are from SMEs; and yet only 20% of small businesses have committed to a net-zero target. Sadly, the UK’s Green Finance initiatives have so far ignored the huge impact the small businesses have in supply chains for big business, and in generating carbon themselves. It’s not just about telling a small business to switch it on, or indeed, off. For many SMEs managing tight cashflows alongside environmental best practice is not a priority. However, it is becoming increasingly important and necessary to recognise that environmental responsibility will soon become a prerequisite for commercial success. For example, in June, the UK Government issued a procurement policy for “Taking account of Carbon Reduction Plans in the procurement of major government contracts”. The impact of this will trickle down the supply chain, adding further pressure to small businesses. For many, there has not been the right SME financial product that ties commercially advantageous terms with environmental benefits, until now. Swishfund has teamed up with Funding Options to lobby the government for a government-backed green loan scheme that can help small businesses become green-ready, and drive up their ESG (Environmental, Social, Governance) credentials. Our proposal sets out various products that utilise: (a) a 50% losses guarantee; and/or (b) a match-funded government fund. The guarantee structure would be similar to BBLS, CBILS, and the RLS but without the price-caps to enable the widest range of SMEs to benefit. Brokers would also be incentivised to find the best deals for their customers. The match-funded fund may access some of the 54 | NACFB

£22 billion allocated to the UK Infrastructure Bank for green projects, or another source of government funding. Of course, there will need to be tight controls for measuring ESG credentials and verifying an ESG-related proposal. The charity Carbon Footprint has a world leading online carbon calculator, which can help; but also, ESG reporting is a rapidly developing area of fintech. The proposal could be supported by the new UK Centre for Greening Finance and Investment. The term ‘ESG’ was first used in the UN’s 2005 paper ‘Who Cares Wins’, aimed at increasing sustainable and social investing. Bloomberg estimates that ESG investing may hit $53 trillion by 2025, becoming a third of all global assets under management; but these kinds of global investments leave out SMEs. The All-Party Parliamentary Group, Bankers for NetZero, recently reported that six million SMEs risk “being forgotten” in the net zero transition. Our proposal brings all the positive benefits of ESG into the small business community for the first time. If you support this proposal or have contacts in Government who you think might help to drive this forward, please contact one of my team.

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Bloomberg estimates that ESG investing may hit $53 trillion by 2025, becoming a third of all global assets under management; but these kinds of global investments leave out SMEs

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Listicle

Winning streak Results of the NACFB Commercial Broker Awards 2021

just the winners and those who were highly commended but all the firms who took the time to enter.” The winners and highly commended are:

he winners of this year’s NACFB Commercial Broker Awards were announced at a ceremony held at Edgbaston Cricket Ground on Wednesday 29th September. Hosted by World Cup winning rugby legend, and former BBC Question of Sport presenter, Matt Dawson, the awards recognise excellence within the commercial finance broking community and present the NACFB with an opportunity to thank its Members for their ongoing commitment to supporting UK SMEs in their quest for finance and growth. Backed by event sponsor Shawbrook Bank, the ceremony included a drinks reception, a three-course meal and a game of Heads & Tails which raised £3,455 for the NACFB’s chosen charity, Young Lives vs Cancer. Inundated with entries from sole-traders, regional players and national brokerages, this year the 14 awards categories were hotly contested which made for a lively discussion and heated debate amongst the independent panel of judges who agreed that the standard of submissions was exceptionally high. Commenting on the judging process, Norman Chambers, managing director at the NACFB said: “It was an extremely difficult task, despite having clear criteria against which to measure the entries. I’m very grateful to the judges for their commitment and dedication to the job and would like to congratulate not 56 | NACFB

Asset Broker of the Year Winner: PMD Business Finance Highly Commended: Alpha Asset Finance

Bridging Broker of the Year Winner: Finance 4 Business Highly Commended: Mantra Capital Group

Broker Innovation Award Winner: Synergi Partner Finance Highly Commended: Lime Consultancy

Buy-to-Let Broker of the Year Winner: Mortgages for Business Highly Commended: Vantage Finance

Cashflow Broker of the Year Winner: Reach Commercial Finance Highly Commended: Go-Factor

CBILS Broker of the Year Winner: Halo Corporate Finance Highly Commended (x2): Bathgate Business Finance, Christie Finance

Commercial Mortgage Broker of the Year Winner: Watts Commercial Finance Highly Commended: Mantra Capital Group

2021 WINNERS

Deal of the Year Winner: South West Business Finance Highly Commended: Zoom Finance

Development Broker of the Year Winner: Sirius Property Finance Highly Commended: Finance 4 Business

Factoring & Invoice Discounting Broker of the Year Winner: TSF Finance Highly Commended: Hilton-Baird Financial Solutions

Leasing Broker of the Year Winner: Lease UK Highly Commended: Synergi Partner Finance

Rising Star of the Year Winner: James Danks, Finance 4 Business Highly Commended (x3): Jake Batham Crown Business Finance James Wood - Charles & Dean Claudine Reynolds - Blaise Commercial Finance

SME Champion Award Winner: Approved Business Finance Highly Commended: PMD Business Finance

Sole Trader of the Year Winner: Icthus Consultants Highly Commended: Bridgedevelopment Property Finance

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Barclays Business is a trading name of Barclays Bank UK PLC. Barclays Bank UK PLC is 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 O�ce: 1 Churchill Place, London E14 5HP. Barclays Bank UK PLC adheres to The Standards of Lending Practice which is monitored and enforced by The Lending Standards Board. Further details can be found at www.lendingstandardsboard.org.uk. 9917873 April 2021

Five Minutes With

ive F Minutes with: Linda Martin Linda Martin Regional Director (South) Unity Trust Bank Describe your role in ten words or less? I lead Unity’s customer focussed team of experienced relationship managers.

How do you make a difference? Unity is a socially motivated commercial bank that supports businesses and organisations that share its vision of creating a better society for everyone. Our relationship managers have specialist sector expertise, and we offer loans and support to organisations that demonstrate impact, allowing them to grow and make valuable contributions to their communities.

In your view what are the key elements to a successful deal? Clear, concise, and accurate information enables Unity to fully understand an organisation’s objectives and its social impact.

What’s the most common reason for turning away a deal? Unity only lends to businesses and organisations that positively contribute to 58 | NACFB

social, economic or environmental needs so deals have to meet our policy guidelines.

What has been your lockdown essential?

If you were to start your own small business, what would it sell?

Access to the outdoors and keeping fit.

Coffee.

What changes do you hope to see in the ‘new normal’?

What is your favourite SME success story?

Continued flexible working conditions that benefit companies and employees alike.

I’m proud of all the SMEs Unity supports. We’ve just published our half yearly Impact Report which highlights some of the ways our lending has benefited local communities – from creating and safeguarding jobs and providing much needed affordable housing to supporting healthcare providers that deliver accessible frontline services for the people who need them.

Which person has inspired you the most?

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

To provide housing for all homeless people.

Unity looks for a comprehensive proposal package that has been thoroughly researched with clear, concise background information about the borrower and their objectives.

Any Olympian for their passion, focus, and determination.

What law would you pass if you were Prime Minister for the day?

Where is your favourite place in the world? Australia because of its culture of outdoor living and sunshine, which always makes one feel happy with life.

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