NACFB Magazine - April 2018 by NACFB

Issue 57 April 2018

The magazine for the National Association of Commercial Finance Brokers

Where are our workers? Construction skill shortages soar high

In this issue

Terms of business Challenging onerous clauses in broker agreement forms

FOS

What are the possible implications of extending its reach?

SME importers

How brokers can provide support during a time of â&#x20AC;&#x2DC;made in Britainâ&#x20AC;&#x2122;

built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge ovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better n better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service owledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better etter knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on lt on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience rvice built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better n better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people perience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better tter experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on t on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation ople built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better n better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge recently addressed delegates at ovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better n better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built the on Leasing Life Chief Executives’ built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service Lending Forum, where I shared owledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better my view on the future for traditional etter knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on banks, potential forks in the road and lt on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience rvice built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better an outlook on the future of the UK n better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on commercial finance market. built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people perience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better tter experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on I spoke also on the role of a trade body t on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation in our increasingly regulated world. ople built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better n better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on I appreciate that we all have the While built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge opportunity to read copious amounts ovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better n better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on of information about our industry, I built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service commend to you the Small Business owledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better Finance Markets 2017/18 report from St on John’s Wood,built London better innovation on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on etter knowledge built Fitzrovia, London Cheetham Hill, Manchester lt on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience the British Business Bank (see more • Refinance, restaurant and bar • Acquisition, 252-room hotel in central • Equity release, ground rents and rvice built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better on on page 46). I was particularly struck • £2.7m loan, 12 monthbuilt term Manchester office on better knowledge on better innovation built on better people built on better experience built on better service built onunit better knowledge built on better innovation built on better people built n better service built • 65% LTV • £14.5m loan, 6 month term • service £2.1m built loan,on 12better monthknowledge term built on better service built on better knowledge built on better innovation built on better people built on better experience built on better built on better innovation built on better people by the analysis of the confidence of perience built on better service built on better knowledge built on better innovation better service built on better knowledge built on better innovation built on better • 65%built LTVon better people built on better experience built on • 65% LTV SMEs to step outside the comfort tter experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on zone of the clearing banks and how, t on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation ople built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better despite their lack of understanding of n better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on the finance available to them, they are built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge ovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better reluctant to seek guidance, which I n better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on know is available in abundance from built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service owledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better our membership. etter knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on lt on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience The bank’s initial piece of work to rvice built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better on n better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built educate SMEs on securing finance built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people was co-authored with the ICAEW perience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better on tter experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built Corporate Finance Faculty and is t on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation available on its website, and should ople built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better be on freely accessible from SMEs’ n better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on betterEast experience built on better service built on better knowledge built Farnborough, Surrey Borough, London Brighton, Sussex built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge accountants. The bank is now about people built onand better experience built on better service on better knowledge on better innovation built on people built on better experience built on better service built on better ovation built on better • Site acquisition development • built Acquisition funding of abuilt residential • better East Sussex to embark on another initiative to n better innovation built better built onspace better experience built on better service built on better knowledge built on better of people built on better experience built on better service built on of 9on flats andpeople commercial high street portfolio, renovation ofbuilt on better innovation • Redevelopment Grade II listed built on better innovation people service built on better knowledge built on better innovation builtdevelopment on better people support education and with this in • £5.3mbuilt loan,on21better month termbuilt on better experience built on 25 better residential units building and of built on better experience built on better service owledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better • 69% LTGDV • £4.0m loan, 16 month term 70 residential units, gym and mind, I am endeavouring to engage etter knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on • better 65% LTGDV 6 commercial units innovation built on better people built on better experience more closely with the British Business lt on better knowledge built on better innovation built on better people built on experience built on better service built on better knowledge built on better • £25.4m loan, built 30 month term rvice built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge on better innovation built on better people built on better Bank to see how we can address this • built 68%on LTGDV better knowledge built on better innovation built on better people built on n better service built on better knowledge built on better innovation built on better people built on better experience built on better service fundamental issue. built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people perience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better tter experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on I was also interested to hear Andrew t on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation ople built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better Griffiths, the newly appointed minister n better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on for small business, speak recently built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge when, among other things, he stated ovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better n better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built onthe Carillion debacle had been that built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service a wake-up call for the government owledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better on regards to prompt payments etter knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built with lt on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience policy. Let’s hope that this results in rvice built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better something with more teeth that will be on n better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people a tangible help to our SMEs. perience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better tter experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on South London Shepherds Bush, West built Hampstead, London built Norwood, on better service built on better knowledge built on better innovation built onLondon better people built on better experience on better service built on better knowledge built on better innovation t on better experience Until next month, ople built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better • Bridge to let loan, office conversion to • Refurbishment loan, extension of • Development light loan, extension and n better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on 43built residential units terraced Victorian house conversion ofbetter Victorian terraced house Graham Toy, CEO, NACFB built on better people on better experience built on better service built on better knowledge built on better innovation built on better people built on experience built on better service built on better knowledge • £7.6m loan, 24 on month term £1.0m month term of multiple (HMO) people built better experience built on better service• built on loan, better12 knowledge built on better innovation built on better peopleoccupancy built on better experience built on better service built on better ovation built on better n better innovation better people built on better experience built on better service built loan, on better peopleterm built on better experience built on better service built on • built 68%on LTV • 65% LTV built on better knowledge built on better innovation • £2.5m 14 month built on better innovation built on better people built on better experience built on better service built on better knowledge built on better•innovation 57% LTV built on better people built on better experience built on better service owledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better etter knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on lt on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience rvice built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better n better serviceOctopus built on Property better knowledge built on better innovation built onNo better peopleFern builtTrading on better built on better service on better Octopus knowledge built onLending better innovation built on better people built on is the trading name of Bridgeco Ltd (Reg 6629989), Ltdexperience (Reg No 6447318), Nino Ltd (Regbuilt No 9015082), Property Ltd built on better(Reg service on better knowledge built onLimited better innovation built on better people built 33 on Holborn, better experience built on better service on better knowledge built on better innovation built on better people Nobuilt 7531926) and Octopus Co-Lend (Reg No 8913299), Registered Oﬃce: London EC1N 2HT, registered inbuilt England and Wales and Dragonfly perience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better Finance S.ar.l. (Reg No B189290) Registered Oﬃce: Parc d’Activité Syrdall, 6 rue Gabriel Lippmann, L-5365 Munsbach, Luxembourg registered in Luxembourg. Octopus tter experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on Property Lending Ltd and Octopus Co-Lend Limited are authorised and regulated by the Financial Conduct Authority. For intermediary use only. t on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better innovation ople built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on better n better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge built on built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better knowledge ovation built on better people built on better experience built on better service built on better knowledge built on better innovation built on better people built on better experience built on better service built on better

Octopus Property is a leading lender in the commercial, development and residential property markets. We understand property and have an established track record that is built on better service, knowledge and innovation. Our performance speaks for itself and our commitment to providing flexible loans enables us to cover the market and support our clients, no matter how complex the requirement

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Welcome | NACFB

Graham Toy CEO NACFB

In this April issue NACFB News 4-7 8-9 10

In the news Development Finance Day 2018 TOBAs or not TOBAs - that is the question

Compliance Update 12-13 Documenting your processing activities under GDPR

Commercial Finance 14-15 Essential news bites

Top Story 16

MFS becomes first UK bridging lender to tap into Asian market

Introducing 18

Together simplifies broker submissions for portfolio landlord cases

Case Studies 20-21 Innovative full land and build fund for established developer 22 Fully unsecured loan stands in for stock finance 24-25 Lending a hand for boutique hotel restoration 26 Bridging loan for land preparation in nine days

Patron Profile 34-35 Octopus Property: ready to support the PBSA space

Ask the Expert 36

Barrie David

Special Features 38-40 Don’t forget about importing 42 Why asset finance broker business is heating up 44-45 Has Help to Buy caused house prices to skyrocket? 46 The implications of extending the FOS reach

Industry Guides 48-49 The rising threat of asset finance fraud 50 A glimpse into the Enterprise Finance Guarantee 52-53 How to make an impression with your development finance proposal

Opinion & Commentary 54 56 58

Speculative development: why the stall? Not all lenders are created equally Support early-stage developers – it’s the right thing to do

Digest 28-32 Where are our workers?

For further information Kieran Jones, communications manager t. 020 7101 0359 Hamilton House, 1 Temple Avenue London EC4Y 0HA Email: Kieran.Jones@nacfb.org.uk Vera Sugar, editor t. 0203 818 0171 71 Gloucester Place, London W1U 8JW Email: vera@medianett.co.uk

ADVERTISING & EDITING: Medianett t. 0203 818 0163 www.medianett.co.uk DESIGN & PRODUCTION: Carbide Finger Ltd t. 0845 812 8206

NACFB Magazine | 3

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www.octopusproperty.com • sales@octopusproperty.com • 0800 2946850

Welcome | NACFB

Graham Toy CEO NACFB

In this April issue NACFB News 4-7 8-9 10

In the news Development Finance Day 2018 TOBAs or not TOBAs - that is the question

Compliance Update 12-13 Documenting your processing activities under GDPR

Commercial Finance 14-15 Essential news bites

Top Story 16

MFS becomes first UK bridging lender to tap into Asian market

Introducing 18

Together simplifies broker submissions for portfolio landlord cases

Patron Profile 34-35 Octopus Property: ready to support the PBSA space

Ask the Expert 36

Barrie David

Industry Guides 48-49 The rising threat of asset finance fraud 50 A glimpse into the Enterprise Finance Guarantee 52-53 How to make an impression with your development finance proposal

Opinion & Commentary 54 56 58

Speculative development: why the stall? Not all lenders are created equally Support early-stage developers – it’s the right thing to do

Digest 28-32 Where are our workers?

ADVERTISING & EDITING: Medianett t. 0203 818 0163 www.medianett.co.uk DESIGN & PRODUCTION: Carbide Finger Ltd t. 0845 812 8206

NACFB Magazine | 3

NACFB | in the news Association news and updates for April 2018

NACFB launches CFE 2018 mobile app For the very first time, delegates at this year’s NACFB Commercial Finance Expo can download a dedicated event mobile app to make the most of their visit.

The free app, called CFE 2018, can be downloaded via the CFE website or directly from the Apple App, and Google Play, stores. Once downloaded, attendees can plan their day by viewing a full list of exhibitors and book one-to-one meetings with the exhibitors of their choice. The app will also allow access to the conference agenda, view speaker biographies and review a digital floorplan - helping attendees to navigate the show with ease. The app also enables attendees to submit questions and comments 48 hours in advance of both the panel discussions and ‘meet the expert’ sessions. The free event is open to anyone with an interest in commercial finance and 2018’s event will host a wider spread of exhibitors than any previous year. Register today via commercialfinanceexpo.co.uk

NACFB social Are you following the NACFB on Twitter? Have you engaged with the Association via LinkedIn? Our social media platforms are the fastest way to stay up-to-date with the latest news from your trade body. Whether it’s staying in the loop for the array of upcoming events, taking part in Member surveys on your industry or talking directly to the executive team, our social media accounts offer another forum for Member engagement.

posting and we can share it with our followers, further enhancing your exposure and often prompting debate. You can also follow each event we stage using dedicated event hashtags, such as #CFE2018 for the Commercial Finance Expo and #Gala2018 for November’s NACFB Gala Dinner.

Don’t let a good thing go. We’ll cover you when you take out our Auction Finance.

Going. Going. Going. Going.

Connect with us on: Twitter via @NACFB and join the debate on LinkedIn at www.linkedin.com/in/nacfb

Whether you’re a Member who has just completed a new deal, or a Patron that is launching a new product, tag the NACFB into your social media Call us on 0203 846 6809 or visit intermediaries.lendinvest.com. LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). ICO number ZA179467. Your client’s property may be repossessed if they do not keep up repayments on their mortgage. For intermediaries only.

4 | NACFB Magazine

NACFB | in the news Association news and updates for April 2018

NACFB launches CFE 2018 mobile app For the very first time, delegates at this year’s NACFB Commercial Finance Expo can download a dedicated event mobile app to make the most of their visit.

Don’t let a good thing go. We’ll cover you when you take out our Auction Finance.

Going. Going. Going. Going.

Connect with us on: Twitter via @NACFB and join the debate on LinkedIn at www.linkedin.com/in/nacfb

4 | NACFB Magazine

NACFB NEWS

Notes from our sponsor Andy Bishop National director of business development Lloyds Bank

ith the UK’s economic and political landscape increasingly uncertain, businesses need to balance investing in growth with weathering turbulent financial conditions. The fact that there is increasing pressure on cash flow in challenging financial conditions means businesses are having to think differently about how they finance their future activity in order to compete. At Lloyds Bank, we understand that working in partnership with commercial finance brokers is integral to supporting the growth of the UK’s SMEs. Being able to access the right finance and banking relationship is vital, and so our business development team works hard to support intermediaries in giving their clients access to the products and services that will support their business ambitions. How brokers can benefit from our products and services We offer a full range of traditional and specialist banking products including finance, term lending, working capital facilities and asset-based lending. The brokers we work with have access to a dedicated business development manager who ensures they fully assess and understand the clients’ needs and, with accredited specialists in sectors ranging from manufacturing and real estate to healthcare, we can provide the expertise to source the appropriate solutions for your clients. Our single point of contact approach ensures we will deal with referrals promptly, keep intermediaries informed every step of the way and pay competitive commissions quickly and conveniently.

6 | NACFB Magazine

Cash flow In addition to our dedicated business development managers, we offer specialist teams for the provision of invoice finance. If your clients are seeking flexibility, control and reliability, these products could be the ideal solution to support the next stage of their business growth. Brokers who refer their clients to Lloyds Bank can receive a 40 per cent share of the invoice finance service fee for the lifetime of the bank’s relationship with the client. These contracts are zero month, have no minimum service fee and have a notice period of only one month for the first six months. Since we launched this proposition, the number of broker deals we’ve completed has more than doubled, which has reiterated the requirement for a dedicated team servicing the needs of the intermediary market. Hire purchase and leasing Likewise, we offer specialist teams for intermediaries offering asset finance provision. Whether your clients are looking to invest in plant and machinery or commercial transport, our hire purchase and leasing solutions can help support their growth plans. We offer flexibility in respect of funding period and deposits payable. We take your reputation and our responsibility to maintain it seriously, which is why we work hard to provide a level of service that you and your clients expect. Being voted Best Commercial Mortgage Lender and Business Bank of the Year for the last six years by the NACFB is testimony to our commitment to create longterm, sustainable relationships that benefit both broker and client.

April’s Members Days The NACFB is hosting a series of Broker Days across the UK, providing a forum for all Members to share their views on the future plans for the Association. The three Broker Days will take place in London, Manchester and Birmingham throughout April and will feature roundtable discussions on compliance issues, what brokers are looking for from the Association and how the NACFB can provide greater value for all Members.

GPDR – One month to go With one month to go until the General Data Protection Regulation (GDPR) takes effect, brokers are reminded to take stock of their data collection policies and consider how they approach data security in a compliant manner.

the explicit and implicit requirements for specific records (especially those to prove you have obtained consent from data subjects) but will also ensure you have evidence to support your claims, should there be any cause to investigate a data breach.

The NACFB Compliance website holds a range of templates, working documents, guidelines and articles on all things GDPR. You can now search the compliance knowledge base for keywords to access all the material at your disposal.

NACFB Members are aware of the importance of remaining compliant with data privacy regulation as, at the time of print, over 200 brokers have attended NACFB Compliance GDPR workshops hosted across the UK. The regulation has been described as the most important change to data privacy regulation in 20 years and becomes enforceable by law on 25th May 2018.

NACFB Members can download templates that will help you meet the GDPR’s stringent data protection requirements. These documents can be found in NACFB Compliance’s online Model Office and include:

Since 1st January 2018 NACFB Compliance has been available to all NACFB Members. Our compliance team provides you and your brokerage with the guidance, training and support necessary for staying fully compliant with both regulatory requirements and the NACFB minimum standards.

Clear Desk Policy Data Protection Policy Privacy Impact Assessment

The free events will not feature any Patrons but will instead enable the Association to listen carefully to the views of all its Members. The workshops and seminars will also be fully CPD-accredited and count towards your ongoing professional development.

In order to show that you comply with the GDPR, commercial finance brokers will need to produce and maintain a wide range of documentation (see more on page 8). This will not only help you meet

Non-disclosure Agreement Privacy Notice Consent Checklist Breach Notification Form

#CFE2018

If you wish to attend any of the below events, you can register online via nacfb.org/events or email Andrina Dhillon on andrina.dhillon@nacfb.org.uk

130+ exhibitors & 1500+ attendees

Wednesday 11th April 2018 – London, 155 Bishops Gate, London EC2M 3YB Thursday 19th April 2018 – Manchester, 40 Spring Gardens, M2 1EN Tuesday 24th April 2018 Birmingham, 125 Colmore Row, B3 3SD

Ensure you have all the information and documents you need before 25th May by subscribing to NACFB Compliance via nacfbcompliance.co.uk/subscribe

Wednesday 20th June 2018 Hall 3a, The NEC 9:30AM - 4:30PM

Professional seminar and workshop series UK’s largest commercial finance event

Exclusive NACFB Member’s lounge & networking area

NACFB Magazine | 7

NACFB NEWS

Notes from our sponsor Andy Bishop National director of business development Lloyds Bank

6 | NACFB Magazine

NACFB Members can download templates that will help you meet the GDPR’s stringent data protection requirements. These documents can be found in NACFB Compliance’s online Model Office and include:

Clear Desk Policy Data Protection Policy Privacy Impact Assessment

In order to show that you comply with the GDPR, commercial finance brokers will need to produce and maintain a wide range of documentation (see more on page 8). This will not only help you meet

Non-disclosure Agreement Privacy Notice Consent Checklist Breach Notification Form

#CFE2018

If you wish to attend any of the below events, you can register online via nacfb.org/events or email Andrina Dhillon on andrina.dhillon@nacfb.org.uk

130+ exhibitors & 1500+ attendees

Wednesday 11th April 2018 – London, 155 Bishops Gate, London EC2M 3YB Thursday 19th April 2018 – Manchester, 40 Spring Gardens, M2 1EN Tuesday 24th April 2018 Birmingham, 125 Colmore Row, B3 3SD

Ensure you have all the information and documents you need before 25th May by subscribing to NACFB Compliance via nacfbcompliance.co.uk/subscribe

Wednesday 20th June 2018 Hall 3a, The NEC 9:30AM - 4:30PM

Professional seminar and workshop series UK’s largest commercial finance event

Exclusive NACFB Member’s lounge & networking area

NACFB Magazine | 7

NACFB NEWS

Development Finance Day 2018: addressing broker questions directly

Norman Chambers Managing director NACFB

Continuing the NACFB’s regional, sector-specific days, the next stop was Birmingham for a sold-out event on all things development finance.

The NACFB hosted a packedout Development Finance Day in Birmingham on 7th March 2018. The day was the third in a series of bespoke events catering to individual aspects of commercial finance lending – this time with a focus on providing education and support for brokers operating in the development finance space. With increasing government support and growing sector confidence, the development finance market is set to boom in 2018 and the day explored opportunities for brokers to be part of it. The event’s sector support sponsor was Aldermore, and also featured representatives from NACFB Patrons LendInvest, Portman Finance and Roma Finance. Patrons were able to directly address questions from all attending brokers and draw frameworks for a number of future opportunities. The day kicked off with expert insight from sector support sponsor Aldermore’s head of property development, Simon Knowles.

8 | NACFB Magazine

Simon walked attendees through a session that analysed why the UK needs SME property developers, and explored levels of funding availability, contrasting options from traditional high street and specialist lenders.

“funders and brokers together to have open and honest conversations about how best to provide funding solutions for SME housebuilders, who have a vital role to play in solving the national housing supply shortage.”

Simon also invited Aldermore’s head of credit, Keith Cannell, to outline the underwriting process that would be undertaken during any given development finance deal. Keith spoke of their attempts to demystify the role of the underwriter and further advised on how a broker can work more efficiently with an SME to ensure all necessary information is received at the beginning of a deal.

Stewart Barnes, co-founder of Portman Finance, valued the face-toface nature of the roundtable sessions: “It was a great event and proved to be beneficial for us. We really valued the opportunity to meet some new brokers and explain what we do. We have already received many new enquiries, which is fantastic, and demonstrates that these events work.”

Attendees on the day also benefited from a complimentary compliance workshop from Roger Deane, managing director of NACFB Compliance. Roger outlined the regulatory hurdles and potential compliance pitfalls brokers may encounter during the lifecycle of a deal and concluded with a look ahead to the upcoming GDPR directive. Simon spoke of the day as being “invaluable”, adding that they bring

Meir Peer, bridging specialist at Roma Finance, added: “This event was a great opportunity for me to put faces to names, and to connect with new people in my field. “Roma is looking to strengthen our hold in the development world – I found that this was the right time for us to hear the broker’s voice, and really understand what they are looking for in a lender, specifically when it came to a development loan.”

The day formed part of continued efforts by the Association to further facilitate dialogue between lenders and brokers

Ian Boden, sales director at LendInvest, spoke of the value such days bring for both brokers and lenders: “The day had a brilliant turnout, which is key at events like these where making new contacts and building on existing relationships is where the true value lies. It was great to see brokers that take the time out to be proactive in their approach to developing their product knowledge.” The NACFB’s aim with sectorspecific days is to develop an environment that establishes centres of excellence across all commercial finance divisions. The NACFB Development Finance Day formed part of continued efforts by the Association to further facilitate dialogue between lenders and brokers to help fund UK businesses. The NACFB will continue to host sector-specific events across the country in 2018. You can find out more on these and where your nearest event will be by visiting www.nacfb.org/events or by staying up-to-date via our Twitter and LinkedIn pages.

NACFB Magazine | 9

NACFB NEWS

Development Finance Day 2018: addressing broker questions directly

Norman Chambers Managing director NACFB

Continuing the NACFB’s regional, sector-specific days, the next stop was Birmingham for a sold-out event on all things development finance.

8 | NACFB Magazine

The day formed part of continued efforts by the Association to further facilitate dialogue between lenders and brokers

NACFB Magazine | 9

NACFB NEWS

TOBAs or not TOBAs - that is the question

Challenging onerous clauses in broker agreement forms Norman Chambers Managing director NACFB

under the contract. In essence, our Members felt that they could be held liable for the repayment of a debt where they could not have been responsible for the failure of the borrower.

ne of the key roles your trade association plays is ensuring that all our Members’ interests are protected and best served. When any concern arises between our broker Members and lenders, we are well placed to act as an intermediary and moderate any potential disagreement.

We have continued to work closely with lenders to find a solution. At the NACFB’s February Patrons Day, I stood before representatives from more than fifty lenders and outlined some areas of concern because the matters that had been raised also had impacted the extent of Members’ PI insurance cover.

The NACFB also covers a broad remit. All our Members provide SMEs with vital support, expertise and guidance across key development areas of the UK economy. To put this into context, the asset finance sector achieved its seventh consecutive year of growth last year, with new business levels reaching almost £32bn.

Our aim was to relay clearly what exactly is available to the finance brokers in terms of PI cover. Generally, the insurance market excludes claims brought by a lender, the reason being that any losses sustained by lenders should be at their own risk and they should mitigate this through their own due diligence with potential customers. The NACFB policy covers claims brought by lenders if the loss was caused by the advice given by the broker to the client.

In our drive to increase engagement with our Members, our meetings have produced some valuable insight into areas of broking which have been a cause for concern. It is here that the association can help, by providing a greater degree of colour and ensuring the issue is fully researched from both the Member’s and lender’s perspective. One example is terms of business agreements (TOBA) where, in some cases, our Members had identified clauses which appeared either unreasonable or not possible to satisfy.

TOBAs often say the broker will reimburse the lender for any loss resulting from breach of the agreement - some then say the broker must arrange adequate PI cover to protect this risk. The problem here is that relevant PI cover is not readily available for such contractual liability, because it is not considered an insurable risk and therefore the broker is unable to comply with such terms.

The most common concern relates to exclusion clauses, whereby one party seeks to exclude their liability arising

Our Patrons have been very supportive when this concern was raised, as often they themselves are

10 | NACFB Magazine

unaware of the inserted clauses. We also accept that this is not a quick fix because most lenders have many layers of governance in place, which have to approve changes to any legal documents. I do entirely recognise the need for lenders to protect themselves against any fraud, but some clauses extend to elements beyond the reasonable control of a broker. Other TOBAs make the broker responsible for failed payments if the client goes into liquidation – we also deem this unfair as this should be the lenders’ exposure, not the brokers’. As with many legal documents, the number of times the actual clauses are implemented is quite small, which supports the general direction of travel of a market where broker and lender continue to demonstrate enthusiasm to work together for the benefit of their respective clients and customers. Ultimately, the NACFB is a trade body for commercial finance brokers, but we understand that we cannot dictate which clauses a lender inserts into its agreements with our Members. We can, though, seek to ensure that active clauses are fair and reasonable and relate to matters that a broker is able to directly influence and control. In the interim - and as a course of best general practice - we would encourage all our Members to read carefully the TOBAs they are signing. We continue to work with our brokers, lenders and our PI cover providers to guarantee the industry continues to thrive.

Wednesday 20th June 2018 Hall 3a, The NEC 9:30AM - 4:30PM

#CFE2018

130+ exhibitors & 1500+ attendees

Professional seminar and workshop series

UK’s largest commercial finance event

Exclusive NACFB Member’s lounge & networking area

NACFB NEWS

TOBAs or not TOBAs - that is the question

Challenging onerous clauses in broker agreement forms Norman Chambers Managing director NACFB

under the contract. In essence, our Members felt that they could be held liable for the repayment of a debt where they could not have been responsible for the failure of the borrower.

The most common concern relates to exclusion clauses, whereby one party seeks to exclude their liability arising

Our Patrons have been very supportive when this concern was raised, as often they themselves are

10 | NACFB Magazine

Wednesday 20th June 2018 Hall 3a, The NEC 9:30AM - 4:30PM

#CFE2018

130+ exhibitors & 1500+ attendees

Professional seminar and workshop series

UK’s largest commercial finance event

Exclusive NACFB Member’s lounge & networking area

Compliance | update

James Hinch (AICA) Adv. CERT (Comp) Compliance consultant NACFB Compliance

The latest from our in-house compliance team

Documenting your processing activities under GDPR

nder General Data Protection Regulation (GDPR), firms are expected to document their processing activities, but what does this mean for you and how can you prepare for this? I know that news and regulation has been taken over by GDPR, but worryingly, it seems that businesses are still ill-prepared and do not have a compliant GDPR framework embedded within their organisations. While businesses seem to have grasped most areas – such as individuals’ rights or privacy notices – it seems that documenting these processes to a compliant level has been either missed altogether or lacks the required granular detail to be compliant. The best way to start this is by conducting an information audit or data-mapping task. This will provide your business with the clarity of exactly what personal data your business holds and where. Make sure everyone in your business is engaged in this as it will minimise the risk of missing any data across your operation.

Once you have this completed, you will be in a good position to start documenting the information you must record under GDPR. There is no set method for the next steps and you can choose your own – this is just a guideline. Start by gathering granular information on each area you identified from the information audit that processes personal data and create a list of questions for each subsection, which will prompt answers for your documentation. Some example questions are: Some example questions: why do you use why dodata? you use personal personal data? who do you hold who do you hold information about? information about? what information dodo what information you hold about them? you hold about them? who you who dodo you share it with? share it with? how long dodo you hold it for? how long you hold it for? how do you keep it safe? how do you keep it safe?

Once you have these questions, it’s recommended that you then locate and review them against your business’s policies and procedures. You can review these against what is happening within your organisation and update them accordingly. Think about what types of policies this may touch: privacy, data protection, data retention, security, systems and sharing agreement policies may all be affected and should be considered.

Example – would meet GDPR documentation requirements: Purposes of processing

Categories of individuals

Categories of personal data

Staff administration

Employees

Contact details Financial details

Customer orders

Emergency contacts

Contact details

Customers

Contact details Financial details IP address

Suppliers

Contact details Financial details

GDPR requires that the documentation of your processing activities be in writing. This can be on paper or in electronic form. Whatever method you choose, it is important that you do it in a granular way. For instance, you may have various retention periods for personal data or differing locations for where data is held. The Information Commissioner’s Office (ICO) states that a generic list of pieces of information with no meaningful links between them will not meet the GDPR’s documentation requirements.

Example – would not meet GDPR documentation requirements: Categories of personal data

Categories of individuals

contact details

suppliers

financial details

employees

lifestyle information

emergency contacts

location

customers

IP address

clients

Location

Marketing

Customers

Contact details Lifestyle information

Clients Documenting using this type of approach should help you create a complete and comprehensive record of your processing activities, within which you document the different types of information in a detailed way and meaningfully link them together. NACFB Compliance has made available two documents to help you document your processing activities: one for controllers and one for processors. Each template contains a section for the information you must document, and extra sections for information you are

not obliged to document under Article 30, but that can be useful to maintain alongside your record of processing activities. Sign in and download these at www.nacfbcompliance.co.uk. These templates were created directly by the ICO and using them is not mandatory. You can document your organisation’s processing activities in many ways, ranging from basic templates to specialist software packages. How you choose to maintain your documentation will depend on factors such as the size of your business,

Contact details the volume of personal data processed and the complexity of the processing operations .

Compliance | update

James Hinch (AICA) Adv. CERT (Comp) Compliance consultant NACFB Compliance

The latest from our in-house compliance team

Documenting your processing activities under GDPR

Example – would meet GDPR documentation requirements: Purposes of processing

Categories of individuals

Categories of personal data

Staff administration

Employees

Contact details Financial details

Customer orders

Emergency contacts

Contact details

Customers

Contact details Financial details IP address

Suppliers

Contact details Financial details

Example – would not meet GDPR documentation requirements: Categories of personal data

Categories of individuals

contact details

suppliers

financial details

employees

lifestyle information

emergency contacts

location

customers

IP address

clients

Location

Marketing

Customers

Contact details Lifestyle information

Contact details the volume of personal data processed and the complexity of the processing operations .

Commercial Finance

iwoca to lend £100m to North of England SMEs Alternative finance lender iwoca has pledged to lend £100m to micro and small businesses in the North of England by 2020. The lender has committed £15m of this total to Manchester alone. The company has seen its lending to small businesses in the North of England increase by 89% per year over the past three years.

Landbay doubles lending volumes in six months

Masthaven reveals new BTL range Masthaven has launched a new buy-to-let mortgage range. The products can be used for both purchases and remortgages with two- and fiveyear fixed rate options at 70-75% LTV, as well as a two-year variable option at 70-75% LTV. Rates start from 3.44% with a maximum portfolio limit of eight properties and a maximum of £2m indebted with Masthaven.

Shawbrook appoints new chairman Shawbrook Group PLC has announced the appointment of John Callender as its new chairman. John will also chair the nomination committee and has been appointed as a member of the remuneration committee. John has extensive experience in financial services, and is the chairman of ANZ Bank (Europe) Limited and senior independent director of FCE Bank PLC.

Total income from property reaches £16.2bn The number of new landlords has increased on average by over 100,000 every year since 2011/12 as total income from property hit £16.2bn, according to new research. Financial advice firm NFU Mutual found that more than 1.9 million people received an income from property in 2015/16. The total net income showed an increase of £4.1bn over a four-year period

New support revealed for Women in Innovation

New funding and support is to be made available to women through a second round of Innovate UK’s female-only competition. The programme launched in 2016 after research revealed that only one in seven applications for Innovate UK funding came from women. Launching this year, the second phase will include a funding competition and a support package to promote more female-led innovation.

UK commercial construction industry remains stable Commercial construction in the 12 months to the end of Q4 2017 grew to £15.5bn, up 5.5% compared with the previous quarter, according to recent research. The UK Commercial Construction Activity Index from JLL and Glenigan showed activity in Q4 2017 in the office sector increasing 11.2% to £4.5bn and education up 12% to £3.5bn, while the community sector grew 19.9% to £600m.

Landbay has announced that it has lent a total of £100m to buy-to-let landlords since it launched in 2014. The specialist mortgage marketplace lender saw lending volumes almost double during the last six months after previously reporting a lending total of £59.56m in September 2017. Landbay has attributed the growth to its advanced, modular technology and tailored approach to underwriting.

Confidence high among UK commercial real estate lenders

Confidence among commercial property lenders is high, according to a new study. The market trend analysis report from Link Asset Services has found that 72% of lenders expect the number of loans they originate in the next 12 months to rise, compared with just 2% of respondents predicting a fall. Over half of lenders (53%) planned to expand their team.

39% of small business owners predict growth for next three months

71% of solicitors fear their property finance knowledge is out of date

Confidence among UK SMEs has continued to hold firm for the fourth consecutive quarter in Q1 2018, according to Hitachi Capital Business Finance. The British Business Barometer found that the outlook for SMEs remained bullish over the past 12 months, despite Brexit uncertainty. 39% of SME owners predicted growth for the three months to 31st March 2018 – a small increase on Q4 2017.

More than seven out of 10 solicitors (71%) fear that their property finance knowledge is out of date, according to recent research. A study by Key Partnerships found that 49% were concerned that enquiries go beyond their core expertise. However, 39% admitted that they did not work with independent financial advice firms on mutual clients, despite growing demand for property finance support.

Pivot secures major funding line Pivot has agreed a new funding line which will extend its institutional lending capital by £50m. Under the terms of the facility, the short-term property lender can deploy further capital towards loans secured against both residential and commercial assets and can also utilise the funds towards latter stage development loans. The new capital comes from Shawbrook Bank and Insight Investment.

Commercial Finance

Landbay doubles lending volumes in six months

New support revealed for Women in Innovation

Confidence high among UK commercial real estate lenders

39% of small business owners predict growth for next three months

71% of solicitors fear their property finance knowledge is out of date

MFS

Top | story Our pick of the latest Patron news

arket Financial Solutions (MFS) has revealed that it is expanding into Singapore, launching a new office and subsidiary company – Market Bridge Solutions (MBS). Having established itself as one of the UK’s leading bridging lenders over the past 10 years, the move comes in response to growing appetite in Singapore and the surrounding region for alternative funding sources. Seeking to take advantage of the region’s rapid rise as a global hub for finance, business and investment, this is a significant step for MFS and the wider UK bridging industry, as we are the country’s first bridging lender to expand into Asia. Singapore’s property market has grown significantly in recent years, with the country boasting investment opportunities across both its commercial

16 | NACFB Magazine

and residential markets. Moreover, the value of residential homes in Singapore is expected to rise by 5.5% in 2018.

lending models as London-based MFS, delivering bespoke, asset-backed solutions tailored to the need of the borrower.

By harnessing MFS’ experience and expertise, MBS will increase borrowers’ access to bridging loans in Singapore, offering fast, reliable and readily accessible service. The new firm will apply the same due diligence and

Paresh Raja, CEO at MFS, commented: “Having established ourselves as a leader in the UK bridging market over the last 10 years, MFS’ expansion into the Asian market represents a significant company milestone, demonstrating not only the need for alternative finance solutions in Asia but also borrower demand for MFS’ industry-leading bridging solutions.

Market Bridge Solutions will offer: short-term, asset-backed lending solutions, with a specific focus on supporting those seeking to consolidate and expand their property portfolio the same stringent due diligence processes used in the UK by MFS loans ranging from $500,000-10m, with borrowing terms ranging from three to 18 months

EXPANDING TO THE MIDLANDS

Bridging with Finesse

MFS becomes first UK bridging lender to tap into Asian market Paresh Raja CEO MFS

“As the first UK bridging lender to expand into Asia, it’s exciting to see the same assetbacked loans that we have mastered in the UK now being offered in Singapore by MBS. This is our first step into the region, and we eagerly look forward to opening more offices across Asia in the coming years.”

FREE VALUATION Helping Fund UK Business

Market Financial Solutions specialise in fast, flexible bridging loans Inhouse funding and market leader in Intermediary Incentives.

Free Valuation

Rates from 0.75 %

75% LTV

180 Days

Rates as low as 0.75% per month

Loans from £200,000 to £10 million

access for borrowers and investors to the UK and Singapore markets.

Tel: +44 (0) 20 7060 1234 | Email: info@mfsuk.com Berkeley Square House, Berkeley Square, Mayfair, London W1J 6BD, United Kingdom

www.mfsuk.com

MFS

Top | story Our pick of the latest Patron news

16 | NACFB Magazine

and residential markets. Moreover, the value of residential homes in Singapore is expected to rise by 5.5% in 2018.

lending models as London-based MFS, delivering bespoke, asset-backed solutions tailored to the need of the borrower.

EXPANDING TO THE MIDLANDS

Bridging with Finesse

MFS becomes first UK bridging lender to tap into Asian market Paresh Raja CEO MFS

FREE VALUATION Helping Fund UK Business

Market Financial Solutions specialise in fast, flexible bridging loans Inhouse funding and market leader in Intermediary Incentives.

Free Valuation

Rates from 0.75 %

75% LTV

180 Days

Rates as low as 0.75% per month

Loans from £200,000 to £10 million

access for borrowers and investors to the UK and Singapore markets.

Tel: +44 (0) 20 7060 1234 | Email: info@mfsuk.com Berkeley Square House, Berkeley Square, Mayfair, London W1J 6BD, United Kingdom

www.mfsuk.com

Introducing New and refreshed offerings for NACFB brokers on behalf of Patrons and Members

Together simplifies broker submissions for portfolio landlord cases Vera Sugar Editor NACFB Magazine

pecialist lender Together has announced that it has simplified its process for brokers submitting portfolio buy-to-let cases, following feedback from intermediaries. The lender confirmed it has moved all portfolio landlord cases onto its standard product, making it easier for brokers to source the best products through its online portal, My Broker Venue. “We’ve listened to the brokers we work closely alongside and, using our philosophy of commonsense lending, have lowered our rates and simplified the process for intermediaries submitting portfolio

landlord cases,” said Marc Goldberg, commercial CEO at Together. “This will create a more straightforward mortgage process and give brokers the confidence that the application will go through with no issues.” In addition, the lender announced that is has lowered its rates to 5.99% – its lowest ever – for prime capital repayment customers at under 65% LTV, and to 6.49% for those with higher LTVs. It also introduced reductions for interest-only customers, with a new rate of 6.49% below 65% LTV, and 6.99% for LTVs of 65% or more. Marc added: “As one of the UK’s leading buy-to-let specialist lenders, we are committed to supporting landlords looking to

My Broker Venue gives brokers access to: Quick quote calculator Product wizard Easy to use online application process Lending criteria

The loan for one project that provides funds for the next Our new refurbishment bridging product is ideal for investors who want to purchase a property, carry out light refurbishments* and then release their investment quickly to move onto the next project. • Loans from £26,000 to £5,000,000 • LTV up to 75% • Flexible terms For more information call 0161 933 7103 or visit togethermoney.com/intermedaries

Industry updates grow their portfolios in a more ‘professional’ era for the market.” Together is one of the few UK finance providers without restriction on overall portfolio value or volume.

This advertisement is intended for professional intermediary use only and must not be distributed to potential clients. * Light refurbishment includes the replacement or refurbishment of kitchens and include anything that requires planning permission or structural changes.

18 | NACFB Magazine

Introducing New and refreshed offerings for NACFB brokers on behalf of Patrons and Members

Together simplifies broker submissions for portfolio landlord cases Vera Sugar Editor NACFB Magazine

My Broker Venue gives brokers access to: Quick quote calculator Product wizard Easy to use online application process Lending criteria

Industry updates grow their portfolios in a more ‘professional’ era for the market.” Together is one of the few UK finance providers without restriction on overall portfolio value or volume.

18 | NACFB Magazine

Case Studies Completion highlights from a selection of our Patrons and Members

Innovative full land and build fund for established developer The site Jason Tebb Chief operating officer Go Develop

t Go Develop, we firmly believe that the British housing market remains chronically undersupplied and has been for the last two decades. That’s why we make it a priority when a developer or their broker approaches us with a project to get quality homes underway. In this case, an established developer came to us with an exciting development, requiring 100% funding, on the site of a former country house hotel. The project was to create Glazebrook Meadows – a select residential development in Warrington, within easy reach of Salford, Manchester and Liverpool. This remarkable site consists of 36 homes, made up of 27 houses and nine apartments, including a children’s play area and lots of open green spaces. It was vital that it remained in keeping with the aesthetics of the village and reflected the authentic green belt location. It was a fantastic opportunity, too good to give up – but our developer had all their finance deployed in other schemes.

20 | NACFB Magazine

At Go Develop, property is in our DNA. We fully understood what our developer was facing. We know that profits are often embedded in work in progress and that most good developers often have more schemes and opportunities than funds available. For that reason, we provide a complete ‘sleep at night’ solution of 100% full joint venture funding that doesn’t require a penny from the developer. We cover everything from land and build to stamp duty and soft costs – no fees or deductions – releasing our developers to get on with what they do best and build greater profits. Our Glazebrook Meadows developer couldn’t believe our offering: “I’ve used various lenders and funders over the years and I’ve never come across anything as good as Go Develop. 100% funding is a game-changer for housebuilders like ourselves.” A new SPV was set up the same day for our partner, to hold the project until it was finished and sold. A profit share contract for both parties ensured the developer remained in control of the build and marketing under their brand, with our ongoing support. In this scheme, the developer made use of our 100% funding

Development in progress

to the total of nearly £6m over 17 months. We were flexible when a five-week extension was needed due to a delay in getting discharge notices of the pre-commencement planning conditions. That’s because with Go Develop, you get to deal with real people who are easy to do business with. As a principal funder, investing our own money nationwide, we are known for being flexible for the right opportunities and making things happen fast. On completion and sale of the property, the profit was divided, with the developer getting the lion’s share. Like 92% of Go Develop partners, the developer has another project for us to review which is testament to his experience of working with us. As our partner said: “Being a joint venture partner has allowed us to snap up a very profitable opportunity which would not have been feasible otherwise. “The whole process was really straightforward and the team was extremely personable, working quickly to turn things around in a time-pressured environment. We are already looking for our next joint venture opportunity with Go Develop.” The completed development

NACFB Magazine | 21

Case Studies Completion highlights from a selection of our Patrons and Members

Innovative full land and build fund for established developer The site Jason Tebb Chief operating officer Go Develop

20 | NACFB Magazine

Development in progress

NACFB Magazine | 21

CASE STUDIES

Fully unsecured loan stands in for stock finance Stuart Urquhart Commercial partnership manager Spotcap UK

inance and lending is changing and brokers, as well as lenders, have to be alert and ready to adapt. Today’s brokers work in a fastchanging environment. They are increasingly realising that it isn’t sufficient to specialise in just one loan product, as their clients demand to work with a broker that is able to provide financing for a variety of purposes, including unsecured loans, development and invoice finance. Over the last few months, we have noticed that many brokers — which, for years, focused on asset-based lending only — are now increasingly offering other types of loans, be it for invoice finance, cash flow or bridging purposes. One of those brokers is Claratus Commercial Finance. A longstanding partner of ours, we recently provided a fully unsecured business loan to one of their clients. Claratus Commercial Finance Ltd is an FCA-regulated business finance firm based in London, providing clear, fair and effective finance to a nationwide client base of SMEs, including those in the professional services, gaming and leisure sectors. The brokerage was established in early 2015 by Nick Ray and Simon Clarke, who have 25 years of combined industry experience. Claratus has grown rapidly and has arranged over £50m of funding to date. In this case, we recently supplied a £250,000 fully unsecured loan to one of their clients, an online retailer, based in the north of England, selling small kitchen appliances, cookware as well as fitness, home and garden essentials. The privately owned company has

22 | NACFB Magazine

been fast growing, with an annual turnover of approximately £20m. Claratus had just completed a £500,000 fit out finance facility for the client’s new offices and was asked again to arrange financing to assist with purchasing additional stock. Although the company already had an existing stock finance facility in place, this was at capacity and cash reserves had been depleted due to a significant capital investment in their premises. Aware that stock finance can be challenging to arrange, Claratus discussed the requirement with Spotcap. Following prompt, positive initial review of the credit proposal by Spotcap’s experienced underwriting team, we requested further information, which the client quickly supplied. Due to the retailer’s strong growth, Spotcap was able to offer an unsecured £250,000 loan within just one working day, which the client drew down in two tranches over one week. Due to our simple and straightforward application process, we were able to provide an unsecured loan to the retailer without the need for a director’s or personal guarantee. And

by doing so, Claratus was able to further strengthen the relationship with their client, providing both asset-backed and unsecured financing for different purposes. Nick Ray, director at Claratus Commercial Finance, commented on the deal: “Spotcap’s facility allowed us to assist our client with a more challenging requirement in a timely fashion, and helped solidify our relationship as their finance partner of choice.” Collaborating with Spotcap allows brokers to close deals quickly and grow their business. We pride ourselves on our close relationships with our partners and support them as much as we can. The UK financing landscape is complex and commercial finance brokers are an important piece of the puzzle. We truly value our relationships with them and are happy to go the extra mile to secure financing for their clients.

CASE STUDIES

Fully unsecured loan stands in for stock finance Stuart Urquhart Commercial partnership manager Spotcap UK

22 | NACFB Magazine

CASE STUDIES

Lending a hand for boutique hotel restoration Tony Gilbertson CEO Signature Private Finance

xperienced property developer and investor David Edwards, director of James Edwards Development Ltd, is a longstanding client of Signature Private Finance, having worked with us on numerous projects. He is a serial entrepreneur with a proven track record as a successful property developer and a personal portfolio in excess of 50 properties. David has a good understanding of short-term property finance and how best to use it to his advantage to expand his portfolio through strategic investments. The property in question is situated in Pontyclun, south Wales, and is a 16th-century manor house known as Lanelay Hall. It has had a colourful life and was most recently

24 | NACFB Magazine

the headquarters of the South Wales Fire and Rescue Service, until they vacated the building in 2007 – since when it became dilapidated. Demonstrating his renowned vision and ambition, David was determined to bring the building back to life and convert it to high-quality housing by splitting the property into three. He purchased the property with the help of a high street lender that understood the plan to refurbish and convert. Unfortunately, once the building had been acquired, the lender decided not to advance the funds agreed for the refurbishment. It was at this point that David approached Signature Private Finance to secure the funds needed to complete the project. With a large, time-sensitive project to complete, it was important to secure a loan quickly, so that restoration work on the manor house could begin. The decision had been made to transform the property into a unique, boutique, 17-bedroom hotel,

with each bedroom individually designed and furnished with bespoke furniture, carpets and bathrooms.

much based on the strength of the relationship built over many years as it was on the loan criteria being met.

Knowing the client well and understanding their previous development history is key to making the right decisions. Signature CEO Tony Gilbertson is a proactive, handson property finance specialist, and he toured the site, listening to David explain his ambition and vision.

The multi-million-pound restoration project has transformed the disused historic building into an exciting getaway destination, complete with meeting and conference rooms for business functions.

Our experience and understanding of the market allowed us to see the bigger picture. With an office in Cardiff, Signature is one of the few bridging lenders to work with developers in Wales that’s able to match their ambition for projects across the principality.

David was able to expand his portfolio and transform this unique, unloved property into a stunning boutique hotel that will draw people to the area. This was all possible due to our commitment to find ways to lend, not turn deals down – while preserving the history and character of the building.

We undertook all the necessary background checks and investigations efficiently, and finalised our decision based on our knowledge of the market and the potential of the project.

David said: “It was refreshing to not only find a bridging lender prepared to look beyond the bare facts and recognise my ambition for Lanelay Hall, but one based in Wales that understands the market in the region.

Signature provided funding at 60% LTV and the decision to lend was as

“We welcomed Tony and his team on site a number of times. Impressed

with the transformation, Signature has delivered the financial support we need to complete the project and achieve the exceptional quality of finish that sets this property apart from anything in the region.” Our understanding of the market, combined with an effort to visit the site and immerse ourselves in the project, has ensured new funds were made available when required to complete the project to the highest quality standards.

Highlights well-known, experienced property developer extensive portfolio and history of success clear vision for the project with good exit strategy funds made available within two weeks of initial enquiry.

Tony commented: “Bridging finance is always portrayed as a numbers game, but so much of the property business is actually about relationships; about people and their ability to deliver what they say they will. “When we are approached by serious developers, like Dave Edwards, with vision and ambition to transform property for the better, we will deliver what we say we will: quick decisions, low rates and high LTVs. It’s a Signature thing.”

NACFB Magazine | 25

CASE STUDIES

Lending a hand for boutique hotel restoration Tony Gilbertson CEO Signature Private Finance

24 | NACFB Magazine

with each bedroom individually designed and furnished with bespoke furniture, carpets and bathrooms.

much based on the strength of the relationship built over many years as it was on the loan criteria being met.

The multi-million-pound restoration project has transformed the disused historic building into an exciting getaway destination, complete with meeting and conference rooms for business functions.

We undertook all the necessary background checks and investigations efficiently, and finalised our decision based on our knowledge of the market and the potential of the project.

Signature provided funding at 60% LTV and the decision to lend was as

“We welcomed Tony and his team on site a number of times. Impressed

NACFB Magazine | 25

CASE STUDIES

F R O M

Bridging loan for land preparation in nine days

oma Finance, the specialist bridging finance lender, promptly provided a loan of £248,500 to allow a developer to build two luxury detached houses. The site in Solihull already had an old property on the land, but the developers’ plans required demolishing this dwelling and preparing the land for two new builds. When Roma reviewed the transaction, introduced by Kind Commercial, it was clear that it was a viable project. The developers were experienced and had a good track record in turning around new houses from the ground up. Planning was also in place for the new properties, which meant the site would be ready as soon as it was cleared. The site was available for just £355,000 with the completed new houses being valued at £1.7m on completion. Roma visited the customer to help structure the transaction. Seeing that it was an excellent development opportunity, it immediately started the process of progressing the funds. The finance was in place in just nine days – a loan of £248,500 over 12 months – giving the developer enough time to prepare the site and arrange finance for the build of the two highly specified homes. The exit from the bridging loan was longer-term development finance with a mainstream lender. In order to complete cases much quicker than the industry average, Roma engaged with introducers that listed deliverability, speed of completion and simplicity as the three most important considerations when choosing a bridging lender. As a result, Roma has simplified and speeded up the application, valuation and legal requirements,

T H E

P E O P L E

W H O

B R O U G H T

Y O U . . .

which means deals can now complete weeks ahead of other firms, and introducers get their fee and commission much earlier. The new fast-track service has quickly become Roma’s standard way of working and is offered on all cases, including change-ofuse, conversions, HMOs, buying at auction and lending against unmortgageable properties.

THE AFS GROUP

A R E R EC RU I T I N G !

Daniel Hill, senior bridging specialist at Roma, said: “This case was well thought out by the developers and their business plan stood up to scrutiny in order for us to be confident to lend on this site. It was a viable proposal, with the completed houses having a very highvalue compared with the cost of the site and preparatory works. As is usual with our cases, we visited the site and discussed the best way to structure the transaction with the customer.

We need experienced Asset and Commercial Finance professionals to join the successful broker networks of Asset Finance Solutions and Synergy Commercial Finance. Are you an existing broker looking for further support to grow your business? Are you working for a broker but yearning to start your own business?

“Working with experienced professionals meant that it was a very smooth transaction. Our new fast-track process delivered the funds in just nine days, meaning there were no delays to the customer in getting started on the site. We have worked with the customer previously and look forward to working with them again on future projects.” The customer, Lee Edwards, commented: “I have used Roma Finance for the last few years on several transactions. Roma’s customer service is simply the best, and we wouldn’t use any other lender. Their level of service is first class. They work through the lending proposal in a very professional manner and keep things moving every step of the way, keeping us informed at each stage too. We were delighted that the bridging finance we needed was delivered so quickly.”

Are you looking to leave a financial institution and considering starting a commercial brokerage? Are you facing redundancy from a financial institution and wondering how best to help your clients or use your financial expertise? We are looking for driven and ambitious individuals who want to create and run their own asset finance or commercialfinance business.

Interested in finding out more about our national networks of more than 1 5 0 Appointed Representatives who enjoy the exclusive benefits of Broker in a Box? • Access to industry leading panel of funders • Improved terms from funder partners • Support in starting and building your business • Training and development • FCA Permissions • Compliance and operational support • Your independence

visit brokerinabox.finance for more information

Daniel Hill Senior bridging specialist Roma Finance WE’VE GOT YOU COVERED

STRONGER TOGETHER

Asset Finance Solutions (UK) Ltd and Synergy Commercial Finance Ltd are Appointed Representatives of AFS Compliance Ltd, which is Authorised and Regulated by the Financial Conduct Authority under number 6 2 5 0 3 5 .

26 | NACFB Magazine

CASE STUDIES

F R O M

Bridging loan for land preparation in nine days

T H E

P E O P L E

W H O

B R O U G H T

Y O U . . .

THE AFS GROUP

A R E R EC RU I T I N G !

visit brokerinabox.finance for more information

Daniel Hill Senior bridging specialist Roma Finance WE’VE GOT YOU COVERED

STRONGER TOGETHER

26 | NACFB Magazine

Digest The talk of the industry

Where are our workers?

Beth Fisher Editor Bridging & Commercial

The government’s ambitious plan to build 300,000 new homes each year by the mid-2020s – in a bid to tackle the UK’s housing crisis – could be scuppered before it even gets off the ground as the construction skills shortage skyrockets.

Digest The talk of the industry

Where are our workers?

Beth Fisher Editor Bridging & Commercial

DIGEST

ccording to the Royal Institution of Chartered Surveyors (RICS) Construction and Infrastructure Market Survey of Q4 2017, just 12% of surveyors thought the government would hit its housing target, with a net balance of +12% of respondents expecting a rise in margins over the coming year, as a result of higher input costs and the shortage of labour.

87% of builders predicting material prices to rise during the same period.

“The Home Office will end up in a real mess next year if there isn’t enough time to sort things out.”

Brian Berry, chief executive of the FMB, urged the government to take account of the skills shortage in the wake of Brexit: “The prime minister must ensure that the immigration system that replaces the free movement of people can take account of the particular needs of key sectors, such as construction and housebuilding.

Recent research from the Federation of Master Builders (FMB) revealed that 68% of construction SMEs are struggling to hire bricklayers and 63% are facing difficulty hiring carpenters and joiners – the highest figures since records began a decade ago.

How critical is the situation? The Construction Industry Training Board (CITB) estimates that more than 150,000 construction jobs are set to be created over the next five years, and its Construction Skills Network UK (CSN) report for 2018-2022 forecasts average output growth of 1.3% with these created.

“Without skilled labour from the EU, the skills shortages we face would be considerably worse, and it is not in anyone’s best interest to pull the rug out from under the sector by introducing an inflexible and unresponsive immigration system.”

The State of Trade Survey also found record highs in firms reporting issues hiring plumbers and electricians (48%), plasterers (46%) and floorers (30%).

On 14th February, a report by the House of Commons home affairs committee criticised the delays to the immigration white paper, claiming it had caused anxiety for EU citizens in the UK, uncertainty for UK businesses and concern in parliament.

“This story is being repeated by our clients on a fairly regular basis, particularly with regard to bricklayers,” said Angus Gordon at Investec Structured Property Finance.

“We need urgent clarity about both registration and border plans for next year so that parliament can scrutinise them and so that families, employers and officials can plan,” stated Yvette Cooper MP, chair of the committee.

“We may well still be suffering the effects of a post-2008 world where many workers had to retrain, and the industry has failed to attract new talent to fill the gaps as it regained its strength.”

“The government does not seem to appreciate the immense bureaucratic challenge they are facing or how much time and resources they need to plan on Brexit.

Due to the imbalance of supply and demand, 61% of construction SMEs expect salaries and wages to increase within the first half of the year, with

While infrastructure remains the strongest performer with an annual growth of 3.1%, public and private housing output is also expected to expand by 2.8% and 2.2% respectively. In contrast, the commercial sector is not predicted to grow at all over the next five years, due to Brexit uncertainty. “Despite all the gloom around Carillion and uncertainty from Brexit, our report’s message is that construction will continue to grow and create more jobs,” said Steve Radley, policy director at CITB, explaining that, while growth was slightly down on 2017, the range of job opportunities was growing. “While we need to bring in lots of people in the trades, the fastest growth will be for professionals at 7.8% and for managers and supervisors at 5.6%. “By 2022, employment will be in touching distance of the heady 2008

% of respondents reporting difficulty recruiting selected skills (Source: FMB, State of Trade Survey Q4 2017) 80% 70%

Bricklayers

50%

Carpenters/joiners Plasterers

40%

Roofers 30%

”We are reliant on ongoing economic growth and flexible border controls post-Brexit to ensure we can react to skills shortages” peak, so we face a massive recruitment and training challenge, which is likely to get harder after Brexit.”

peaks and troughs but, despite these fluctuations, its contributions to the economy could not be ignored.

pound would fade throughout the year, skills shortages and tightening building regulations would still drive up costs.

Paul Turton, head of sales for property development at United Trust Bank, agreed there was potential for Brexit to make the situation worse. “We rely on an EU labour force in the construction industry and the availability of workers will be determined by domestic border controls and the economic performance of the UK going forward.

“The government has various infrastructure projects, including the Northern Powerhouse and Midlands Engine in the pipeline, but this does beg the question: will there be enough workers to deliver these?”

“Brexit could potentially have further negative effects, due to the fact that EU nationals make up a considerable amount of the workforce, while the ageing nature of the existing workforce poses a worrying and unavoidable problem, given the limited incentives for young people to enter the sector.”

“On this latter point, prosperity is what attracts workers from the EU and beyond.

Painters & decorators 20%

FloorersRoofers Scaffolders

10% 0 2015 Q1

2016 Q1

30 | NACFB Magazine

2017 Q1

“As such, we are reliant on ongoing economic growth and flexible border controls post-Brexit to ensure we can react to skills shortages.” Helen Wheeler, managing director of construction finance at Bibby Financial Services, said that the UK’s construction sector was characterised by a series of

Findings from Bibby’s latest SME Confidence Tracker showed that SMEs in the construction industry are the most likely to be investing in hiring new staff (40%). “The government needs to ensure that more is done to enhance training programmes and apprenticeship schemes for the construction sector.” Helen Gough, lead director PDS – building consultancy, cost management and project management at JLL, explained that while the impact on material costs caused by the depreciation of the

Gough explained that today’s shortages had prompted debate about what tomorrow’s construction jobs would look like. “It is only a matter of time before semiautomated construction methods become widespread, but in the meantime, traditional trades will continue to be in high demand and short supply.”

NACFB Magazine | 31

DIGEST

87% of builders predicting material prices to rise during the same period.

“The Home Office will end up in a real mess next year if there isn’t enough time to sort things out.”

The State of Trade Survey also found record highs in firms reporting issues hiring plumbers and electricians (48%), plasterers (46%) and floorers (30%).

“This story is being repeated by our clients on a fairly regular basis, particularly with regard to bricklayers,” said Angus Gordon at Investec Structured Property Finance.

“The government does not seem to appreciate the immense bureaucratic challenge they are facing or how much time and resources they need to plan on Brexit.

Due to the imbalance of supply and demand, 61% of construction SMEs expect salaries and wages to increase within the first half of the year, with

% of respondents reporting difficulty recruiting selected skills (Source: FMB, State of Trade Survey Q4 2017) 80% 70%

Bricklayers

50%

Carpenters/joiners Plasterers

40%

Roofers 30%

peaks and troughs but, despite these fluctuations, its contributions to the economy could not be ignored.

pound would fade throughout the year, skills shortages and tightening building regulations would still drive up costs.

“On this latter point, prosperity is what attracts workers from the EU and beyond.

Painters & decorators 20%

FloorersRoofers Scaffolders

10% 0 2015 Q1

2016 Q1

30 | NACFB Magazine

2017 Q1

NACFB Magazine | 31

DIGEST

Technology Finance Can the industry fix the construction skills shortage?

Finance for the pace of change

EDUCATION Clearly, more young people need to be encouraged to start a career in the construction industry – whether it be via offering students more on-site experience, making use of immersive learning or ensuring the benefits of working in construction are promoted equally to both young men and women. This needs to start, but not end, in schools. According to the Special Eurobarometer report in 2011 on attitudes towards Vocational Education and Training (VET), approximately half of EU respondents thought that young people received enough advice about learning and career opportunities. The socio-demographic data also showed that more men take VET than women, by a margin of 51% to 43%. “There has been an underinvestment in attracting younger people to the construction sector and providing them with the training they need,” said Paul. “However, there are now well publicised domestic initiatives, such as the Home Building Skills Partnership, which is a collaboration within the UK housebuilding industry to provide the industry with more home-grown skills.” In February, a new procurement framework that is set to help tackle the North West’s construction skills shortage officially launched. Under the framework agreement of Procure North West, contractors will have a responsibility to support construction skills training. It will also directly fund further training by donating a percentage of the framework fee to help more young people expand their skills and access apprenticeships.

Whilst the benefits can be transformational the associated costs of maintaining or upgrading existing systems can have a significant impact on any business. Our technology finance options have been developed to help manage these costs, enabling your clients to move forward at pace.

Technology Finance at a Glance on short-term contracts – admittedly easier said than done, given the highly cyclical nature of the industry.” MODERN CONSTRUCTION TECHNIQUES Gough explained that digital-focused construction processes, including building information modelling and off-site manufacturing, would eventually transform the construction sector. “An adoption of more tech-focused disciplines could help entice the younger generation to enter the construction industry, while off-site manufacturing is likely to become mainstream and bring greater efficiencies in cost, building standards, sustainability, reliability, health and safety, labour and build time – all very attractive to a country which desperately needs new homes and suffers from a construction labour shortage.”

Angus said that while this was admirable, to date, the Apprenticeship Levy had left “a lot to be desired”.

NEW MATERIALS Adopting new building materials could also impact the skills needed by workers, according to Gough: “Crosslaminated timber (CLT), for instance, is one product that will continue to become more and more popular for medium-sized, 10-storey or below residential and commercial buildings.

“It might, therefore, be for companies to take greater training upon themselves, particularly given the length of time government reforms and initiatives take to implement.

“Not only can CLT replace hard-toget-hold-of traditional materials, it can also help with timeframes because workforces aren’t needed for as long as with conventional construction.”

“The industry also needs to become longer-term in its outlook, by looking to train and retain workers rather than hiring better-skilled international workers

However, replacing the need for bricklayers with people who have carpentry-type skills could just shift the problem.

The government also pledged to create three million apprenticeships by 2020.

As technology continues to evolve dramatically, those businesses able to cope with the rapid rate of change are creating competitive advantages by investing in the right critical platforms, software, hardware and infrastructure.

The assets and services we will finance:

“People still have to train for three to five years to learn these skills, which will likely cause a delay to getting workers with this skillset into the workforce, as they will need time to gain the necessary experience.” What about developers? Steve Larkin, director of development finance at LendInvest, explained that it would be a mistake to assume that the skills shortage started and ended with those physically building the new homes.

Hardware: laptops, desktops, displays, tablets and smartphones, printers, scanners, servers, switches, local and wireless networks, telephony systems, security, EPOS, digital signage

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Software: all business critical software including hosted software and variable licence agreements

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Services: warranties, customisation, consultancy, training, installation and deployment, Year 1 support, delivery, design

In addition to these assets and services, we are also able to fund related investments that form part of a technology based facility – including lighting, furniture, partitioning, cabling and flooring, climate control and air-conditioning.

“We are also in real danger of missing out on the next generation of property developers.

The solutions we offer:

“Just as the government is ploughing money into helping train the bricklayers and carpenters of tomorrow, so too do we need investment in helping developers put together the skills they need to manage projects properly.”

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Lease

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Hire Purchase

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Loans

Key advantages of working with us:

This is something LendInvest is looking to address through its LendInvest Property Development Academy, which has been holding courses for would-be developers across the UK since 2016. “There’s no point producing a swathe of new bricklayers and carpenters if we don’t have a similar increase in the number of developers; a more holistic approach is badly needed if we are to hit the government’s ambitious housing targets.”

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Call: 01277 892 281 technology@shawbrook.co.uk shawbrook.co.uk/technology Proudly different.

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Our leases cover 100% of software costs and up to 40% for services

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Preserve capital, protect cash flow and existing lines of credit with a dedicated technology funding line

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Finance technology investment in whole or in part, including hardware, software and servicing

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Simplify the financial impact and management of upgrades and maintenance

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Terms from 1 to 5 years, tailored to the life cycle of the technology

THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS SB/BF/TF/NACFB/160218/01

32 | NACFB Magazine

DIGEST

Technology Finance Can the industry fix the construction skills shortage?

Finance for the pace of change

Angus said that while this was admirable, to date, the Apprenticeship Levy had left “a lot to be desired”.

“It might, therefore, be for companies to take greater training upon themselves, particularly given the length of time government reforms and initiatives take to implement.

“Not only can CLT replace hard-toget-hold-of traditional materials, it can also help with timeframes because workforces aren’t needed for as long as with conventional construction.”

“The industry also needs to become longer-term in its outlook, by looking to train and retain workers rather than hiring better-skilled international workers

However, replacing the need for bricklayers with people who have carpentry-type skills could just shift the problem.

The government also pledged to create three million apprenticeships by 2020.

The assets and services we will finance:

Hardware: laptops, desktops, displays, tablets and smartphones, printers, scanners, servers, switches, local and wireless networks, telephony systems, security, EPOS, digital signage

■

Software: all business critical software including hosted software and variable licence agreements

■

Services: warranties, customisation, consultancy, training, installation and deployment, Year 1 support, delivery, design

“We are also in real danger of missing out on the next generation of property developers.

The solutions we offer:

■

Lease

■

Hire Purchase

■

Loans

Key advantages of working with us:

■

Call: 01277 892 281 technology@shawbrook.co.uk shawbrook.co.uk/technology Proudly different.

■

Our leases cover 100% of software costs and up to 40% for services

■

Preserve capital, protect cash flow and existing lines of credit with a dedicated technology funding line

■

Finance technology investment in whole or in part, including hardware, software and servicing

■

Simplify the financial impact and management of upgrades and maintenance

■

Terms from 1 to 5 years, tailored to the life cycle of the technology

THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS SB/BF/TF/NACFB/160218/01

32 | NACFB Magazine

Patron | profile

Octopus Property: ready to support the PBSA space Gavin Eustace Head of development credit Octopus Property

According to Cushman & Wakefield, there were 1.7 million students in the higher education system at the start of the 2017/18 academic year – more than ever.

34 | NACFB Magazine

his is reflected in the demand for high-quality, modern purposebuilt student accommodation (PBSA), with the national student-tobed ratio a healthy two students for every purpose-built bed space. For investors and developers, the sector continues to be one of the best-performing of all real estate use classes – continuing to grow after the referendum in 2016, despite falling volumes in other areas. As the asset class continues to mature and become more mainstream, developers are faced with an increasingly diverse choice of lending options, from specialist lenders and high street banks to debt funds and private equity providers. Our advice is always this: no one scheme will ever be the same, with differing build methods, operating plans, site layouts and strategies at play. Developers require an innovative funder that truly understands the intricacies of the asset class and is able

to structure a bespoke facility swiftly, which supports the business model.

through the whole lifecycle of any student accommodation scheme.

Since 2014, Octopus has provided close to £100m of PBSA acquisition and development finance, spanning the length and breadth of the UK from Brighton to Leicester, Worcester to Leeds, to Birmingham, Coventry, Cambridge and, of course, London. With a nine-strong development team drawn from the financial services sector and a combined 50 years of real estate experience, Octopus continues to partner with some of the most dynamic and successful developers currently operating in the market.

While happy to talk to any developer, our PBSA appetite is primarily for sites delivering up to 400 beds, in strong university cities with favourable supply/demand dynamics, providing facilities that range from £2m-35m.

Through our unique lifecycle lending model, we have a 360-degree proposition which provides borrowers with a complete range of financing options. We can offer commercial acquisition bridging facilities, which can be flipped into development on grant of planning, and then into a longer-term investment facility without double-charging arrangement fees. We truly lend

At the end of last year, we lowered the rates of our development finance product, starting from 6.5% per annum as an all-in rate, matching the rates of the challenger and private banks, which are increasingly unable to structure the complex loans required by borrowers.

For example, we recently provided a 24-month, £16m senior financing facility to Ankor Property for the development of two Grade-A London schemes, in Ealing and Greenwich, available to students for the start of the 2017/18 academic year.

A further demonstration of our innovative approach to lending is that

Octopus can put in place the ability to either service or roll the interest during the rent stabilisation period once the asset is income-producing. This allows developers the flexibility to structure their capital more efficiently and potentially allowing increased gearing, ensuring the equity works more efficiently. Bespoke facilities can be up to 65% loan-to-GDV or 85% LTC, while allowing for an uplift in value if the developer has increased the value in some way – which is often the case with student sites. Partnering with Octopus provides other advantages. With £7bn of assets under management by our parent Octopus Group, we aim to provide certainty of funding even during times of wider macro-economic uncertainty. Our talented team also fully understands the macro landscape. Construction and labour costs, monetary policy, regional demand/ supply dynamics – all of these

impact on the development process and are a key discussion point between us and a borrower. Finally, Octopus has the ability to structure multiple deals with developers and can assist in helping build large portfolios of assets for their clients. Long-term data shows that student accommodation is a deep and stable market, with Savills forecasting UK undergraduate numbers growing to 523,900 in 2017/18 compared with 509,065 in 2010/11. We have identified a strong pipeline of student deals targeted for completion in H1 2018 and with the sector’s stable characteristics, attractive yield, the low interest rate environment and foreign exchange tailwinds, it makes student accommodation a preferred sector for us to lend in.

NACFB Magazine | 35

Patron | profile

Octopus Property: ready to support the PBSA space Gavin Eustace Head of development credit Octopus Property

According to Cushman & Wakefield, there were 1.7 million students in the higher education system at the start of the 2017/18 academic year – more than ever.

34 | NACFB Magazine

to structure a bespoke facility swiftly, which supports the business model.

through the whole lifecycle of any student accommodation scheme.

A further demonstration of our innovative approach to lending is that

NACFB Magazine | 35

Ask | the expert Your questions answered by the most knowledgeable industry insiders

Limitations on the regional office sector Barrie David, head of UK regional office research at JLL, on the factors holding back development in key regional cities

Q A

What is the JLL Arrested Development report about?

The regional office markets in the UK have been starved of new stock in recent years and this will continue into 2018. The report examines the key issues impeding development and discusses the implications of the current shortfall. We focus on the key regional cities – namely Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester – which have seen strong demand over recent years and face a severe shortfall unless more development can be stimulated.

Q A

Is there one key factor holding back development?

Yes. We found that since the financial crisis, developers have faced a restricted market for finance. The major UK clearing banks have sought to reduce their exposure to the sector, and to speculative development in particular. This is a step change from historic experience, as these banks have traditionally been very active in the market. With the banks in retreat, a handful of German lenders are funding speculative schemes, although they tend to focus on the prime locations in certain cities and on developers with a strong track record. Debt funds and insurance companies have also taken a rapidly rising share of the UK lending market, and are more willing

36 | NACFB Magazine

to finance speculative development. They are typically competing for loans of between £10m-30m and are prepared to provide finance at higher LTV ratios. Regional office markets also tend to face a higher hurdle than other sectors to get speculative schemes financed. Lenders have preferred other sectors where they perceive lower levels of void risk. Furthermore, they want assurance that income will flow quickly upon scheme completion, and the rent-free incentives that are commonplace in the office market are a drawback, compared with other sectors.

Q A

Are there any additional factors?

Competition from other uses, such as residential, hotels and student accommodation has resulted in an increasingly challenging environment for office developers to secure the best sites in our regional cities. Furthermore, rising construction costs are also putting the pressure on the viability of office development. Falling unemployment and skills shortages have increased wages, and the renewal of the labour force has not kept pace with demand. Brexit may intensify this problem, although EU workers are not as high a proportion of the regional construction workforce as in London.

What effect will this have on our regional cities in terms of property fundamentals?

Principally, with the supply and demand imbalance for good quality space looking set to continue, prime rents will rise. Consequently, occupiers will need to take early action in order to secure good quality space. We have already seen this with over 1.5 million sq ft of pre-let agreements in 2017 – the highest on record.

Q A

And in terms of new office development?

In the short term, the lack of new space will drive increased refurbishment activity, although this is by its nature limited, and regional cities need to see new development to spur inward investment. We have seen local authorities become more active in the commercial property environment over the past year or so, and they have emerged as the key drivers of speculative schemes. They can provide funding at below market interest rates or take on the role of the overriding tenant, and are being nudged away from using prudential borrowing to invest in schemes away from their area. Their support is often predicated on the office development being part of a wider development or regeneration scheme. Looking further ahead, we expect to see development being catalysed by infrastructure projects and associated improvements.

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Ask | the expert Your questions answered by the most knowledgeable industry insiders

Limitations on the regional office sector Barrie David, head of UK regional office research at JLL, on the factors holding back development in key regional cities

Q A

What is the JLL Arrested Development report about?

Q A

Is there one key factor holding back development?

36 | NACFB Magazine

Q A

Are there any additional factors?

What effect will this have on our regional cities in terms of property fundamentals?

Q A

And in terms of new office development?

SPEED MEETS FOCUS 020 7655 3388

Special | features An up-to-date insight into the industry

Don’t forget about importing Phil Tobin Managing director for trade finance Bibby Financial Services

mid the backdrop of Brexit, the balance between import and export is a continuous juggling act for economies around the world. In the three months to December 2017, the UK trade deficit grew by £3.8bn to £10.8bn. These figures became the latest rallying cry for businesses to ramp up export volumes, while sterling’s devaluation seemingly remains in their favour.

While exporting undoubtedly presents growth opportunities, there is an equally important form of trade which is often overlooked. Walk along the aisles of any supermarket and you will find thousands of them. Take a trip to a local shopping centre and you will be surrounded by them. Even the cars we drive are either one, or most certainly made of them. I am, of course, referring to the wealth of goods and services imported each day.

desire to focus on boosting the ‘made in Britain’ brand. Among public and private sector organisations alike, it is often viewed as the poor relation of international trade. Exporting, by comparison, has its own government-backed campaign.

Importing is a vital means of efficiency and growth for millions of businesses and supply chains throughout the world. It enables economies to expand customer choice, increase competition and reduce manufacturing costs. However, importing is frequently overshadowed by a national

According to Bibby Financial Services’ Trading Places report, the average SME importer has 10 overseas suppliers and purchases goods from five countries. Perhaps unsurprisingly, China is the top import market among UK SMEs, followed closely by Germany and the US. More than half of the top 20 import markets are within the EU, highlighting the importance of Brexit negotiations surrounding customs, duty and tax.

UK trade in goods top 10 import countries in 2017 Germany China Netherlands USA with Puerto Rico France Belgium and Luxembourg Norway Italy Spain Rep of Ireland 0 2017 Annual

2016 Annual

38 | NACFB Magazine

£ billion, seasonally adjusted | Source: Office for National Statistics

NACFB Magazine | 39

Special | features An up-to-date insight into the industry

Don’t forget about importing Phil Tobin Managing director for trade finance Bibby Financial Services

UK trade in goods top 10 import countries in 2017 Germany China Netherlands USA with Puerto Rico France Belgium and Luxembourg Norway Italy Spain Rep of Ireland 0 2017 Annual

2016 Annual

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£ billion, seasonally adjusted | Source: Office for National Statistics

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Assetz Capital, more than a partnership

Contribution of goods imports to total EU and non-EU imports, three-months to December 2017 on previous three-months to September 2017 Unspecified goods Miscellaneous manufactures

Our fast and flexible approach to lending will enable you to support existing borrowers and identify new clients

Machinery and transport equipment Material manufactures Chemicals Fuels Animal and vegetable oils and fats Crude materials Beverages and tobacco Food and live animals Total -0.5 EU

Non-EU

While importers and exporters are often considered as unique groups, these two forms of trade are not mutually exclusive. Our research shows that more than a quarter of those SMEs that import (29%) sell goods or component parts onward overseas. While a weaker pound benefits those that manufacture domestically and sell overseas, the situation is far more complex for many businesses that are involved in trade flows both in and out of the country. More than two-fifths of SME importers (41%) believe that Brexit has been bad for their business, compared with over a quarter of exporters (29%). Yet it does not necessarily follow that exporters see Brexit as a positive outcome. Those selling goods overseas are only marginally more likely to believe that the effects of Brexit have been positive for their businesses to date. What is clear is that the EU referendum and subsequent negotiations have had a profound impact on importers and exporters. More than two-thirds of SMEs transacting in foreign currencies (67%) have been negatively impacted by fluctuations. SMEs estimate a financial loss of £70,000 to their businesses due to currency fluctuation over the past 12 months.

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0.5

1.5

2.5

£ billion, seasonally adjusted | Source: Office for National Statistics

Despite this, almost a quarter have never reviewed their foreign exchange facilities. Though managing currency risk is a challenge facing all those trading overseas, SME importers face a unique set of hurdles. Cash flow is a key concern for importers, many of which are often required to pay suppliers up front and then wait for goods to arrive before fulfilling orders and receiving customer payment. Logistics and managing duty, VAT and freight payments are also key challenges faced, and each must be front-of-mind throughout the UK’s negotiations with Brussels. However, while such challenges must be considered during the government’s next round of Brexit negotiations, there are ways that importers can help themselves and protect their businesses from widespread uncertainty. Trade finance, for example, is a funding and support solution for businesses buying goods for resale from UK or overseas suppliers. It helps by guaranteeing payment to suppliers before goods are in transit and making payment when items are dispatched. This enables businesses to develop relationships with suppliers through payment guarantees and helps them to negotiate early payment discounts.

Furthermore, to protect against currency volatility, trade finance and foreign exchange providers can help SME importers reduce exposure to currency fluctuations by enabling them to lock in exchange rates, giving businesses both control and protection. While the UK hopes to have a formal withdrawal agreement by mid-October this year, negotiations on a future trade deal are unlikely to start until the UK formally leaves the EU in March 2019. Undoubtedly, there will be much focus on positioning UK goods with new and existing trading partners as part of the EU divorce process. However, as the UK enters a new territory outside of the second-largest economy in the world, it is time that the voices of UK importers are lifted out of the shadows and treated in equal measure to their exporting counterparts. In the meantime, more needs to be done to highlight the measures available to support UK importers both now and in the future.

Over £440m lent to date

Our lending solutions include SME business term loans, commercial mortgages, development finance, bridging finance, buy-to-let for landlords, renewable energy loans, property investor hunting licence and residential refurbishment. Find out more at assetzcapital.co.uk/borrow or call 0800 470 0432 Assetz SME Capital Ltd 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 (Reg No: 724996). ‘Assetz Capital’ is a trading name of Assetz SME Capital Ltd. Assetz SME Capital Ltd is registered with the Office of the Information Commissioner (Reg No: Z3338899) for data protection purposes.

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Assetz Capital, more than a partnership

Contribution of goods imports to total EU and non-EU imports, three-months to December 2017 on previous three-months to September 2017 Unspecified goods Miscellaneous manufactures

Our fast and flexible approach to lending will enable you to support existing borrowers and identify new clients

Machinery and transport equipment Material manufactures Chemicals Fuels Animal and vegetable oils and fats Crude materials Beverages and tobacco Food and live animals Total -0.5 EU

Non-EU

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0.5

1.5

2.5

£ billion, seasonally adjusted | Source: Office for National Statistics

Over £440m lent to date

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Supporting the needs of Brokers, all in a day’s work. Time starved businesses are increasingly finding that Brokers and Just Cashflow’s flexible finance solutions are a winning combination. Businesses often leave it late to arrange the finance they need and then look to Brokers to provide a timely finance solution. As one of the leading and most innovative alternative lenders, Just Cashflow works with professional Brokers and Intermediaries seeking to provide medium to longer term funding for their clients, and has a clear focus on what is needed to get deals over finishing line.

Why asset finance broker business is heating up Vincenzo Scalzone Head of broker, asset finance Hampshire Trust Bank

rokers and the businesses they support face a number of challenges this year due to ongoing political and economic uncertainty. However, with the Bank of England signalling that the economy is recovering to some degree and the resilience that we are seeing in certain SME sectors, we believe the future could be increasingly positive for asset finance brokers. According to figures from the Finance and Leasing Association (FLA), asset finance new business grew by 5% in 2017, compared with the previous year, with brokerintroduced finance increasing by almost three times as much (14%) over the same period. This comes as no surprise to us here. So why is business booming for many asset finance brokers? First, brokers in this space play an increasingly important role in providing business customers with access to finance. Intermediaries have access to a wider range of lenders than ever before, many of which work exclusively through brokers. This means that businesses working with brokers can often get access to a far broader range of funding options and a more specialist service.

Second, we are seeing strong growth in a number of the sectors that asset finance supports. For instance, according to FLA figures, plant and machinery finance increased by 12% in 2017. This is a trend we are seeing here in Hampshire Trust Bank’s asset finance team. Running costs can be particularly high for businesses in sectors that rely on plant and machinery, such as agriculture and farming, and the assets themselves can be relatively expensive. Hire purchase and leasing finance can help to spread the cost of these assets and it makes sense that this type of funding is being tapped into more and more.

adapted to support new technology. Firms are now starting to think how they can invest in their future vehicle needs, and brokers are there to support them.

According to our SME Growth Watch research, transportation and storage another sector that relies heavily on asset finance to fund expansion - has grown 41% in the past five years. This is reflected by our own data, with our asset finance team seeing a 15% increase in business from the transportation and distribution sector in 2016/17. In addition, our research found that nearly a quarter of smaller firms in the transport and distribution sector (24%) have plans to expand in the next 12 months, which is positive news for brokers.

The investment in electric vehicles appears to be working. According to SMMT figures, appetite for alternatively fuelled vehicles has reached a record high, with UK consumers buying more plug-in cars than anywhere else in Europe. This trend is set to filter through to commercial vehicles with electric taxis already on the streets in the capital and Royal Mail starting to trial electric vans of varying sizes. We expect other businesses to follow suit.

The transport sector is undergoing a great amount of change, and with change comes opportunity. In a bid to tackle air pollution, the government plans to end the sale of new petrol and diesel cars from 2040, meaning the existing infrastructure network will be increasingly

The changes to accommodate new transport requirements are already well underway. Indeed, as part of the Autumn Budget, the government reiterated its commitment to electric vehicles, announcing significant investment in changing infrastructure and extending the plug-in car grant to 2020, to help consumers with the cost of purchasing new electric and hybrid vehicles.

Asset finance brokers help drive SME growth by providing them with access to finance that can fund their expansion. We believe there will be increased opportunities for intermediaries in the year ahead and are committed to supporting these growth aspirations wherever we can.

Just Cashflow provides fast, flexible funding solutions from £10,000 to £500,000 to help ambitious businesses grow. They know that every business is different and are able to offer tailored financial solutions to meet the requirements of Broker clients.

This could mean partnering with other lenders or whatever it takes to help find

the optimum solution to suit the client’s business funding needs. Brokers can’t be expected to know exactly how all the various funding solutions can benefit their customers and this is where the Broker Relations Team at Just Cashflow comes into its own. Led by Wayne Martin, he understands how important it is to quickly provide Brokers and their business customers with the answers and solutions they need.

The team’s personal attention, together with a dedicated broker portal, provides total transparency allowing cases to be tracked and any hold ups identified and quickly resolved. This joint approach is designed to deliver excellent service to Brokers so in turn they can show their business customers everything is being done to get deals completed. The Broker Relations Team also work closely with Brokers on their marketing and email campaigns to further drive

business enquiries and demand.

Over the past 12 months this has led to Just Cashflow receiving a fivefold increase in Broker enquiries and commission pay-outs are at record levels. A number of their Broker customers have joined the top tier commission level which is awarded to Broker introducers as they introduce more business. This increased demand has led to Just Cashflow doubling the size of its Broker Relations team and further expansion is already underway.

So it is exciting times for this alternative lender that realises what support their Broker customers need to deliver timely and flexible funding to their clients.

To find out more about Just Cashflow and how, through partnership with them, they can support your clients’ business growth in the longer term, give Wayne a call on 0121 2276450 and he will be happy to help get your clients’ across the finishing line.

The final piece in the puzzle

- a loan you can design yourself. As a professional broker or intermediary you’ll be used to seeking fast and flexible funding for your clients. Just Cashflow knows that every business is different and our new loan products enable us to offer you tailored financial solutions to meet the requirements of your clients. Now you can design a loan with your Client that can give them access to funds from £10,000 to £500,000 in a way that exactly fits with their business needs. Blend a short term and long term loan, pay it off without penalties, add in a payment holiday - a Just Cashflow loan can do it all.

The application process is really simple and straightforward and our underwriting team will support you and help you complete the picture for your clients. Just call us now

0121 418 5037

FS668057

Alternatively, find out more

justcashflow.com/partner

BCMS668054

Just Cash Flow PLC is registered at 1 Charterhouse Mews, Farringdon, London EC1M 6BB under Company number 08508165 © Just Cash Flow PLC 20 17

42 | NACFB Magazine

SPECIAL FEATURES

Why asset finance broker business is heating up Vincenzo Scalzone Head of broker, asset finance Hampshire Trust Bank

adapted to support new technology. Firms are now starting to think how they can invest in their future vehicle needs, and brokers are there to support them.

This could mean partnering with other lenders or whatever it takes to help find

business enquiries and demand.

So it is exciting times for this alternative lender that realises what support their Broker customers need to deliver timely and flexible funding to their clients.

The final piece in the puzzle

The application process is really simple and straightforward and our underwriting team will support you and help you complete the picture for your clients. Just call us now

0121 418 5037

FS668057

Alternatively, find out more

justcashflow.com/partner

BCMS668054

Just Cash Flow PLC is registered at 1 Charterhouse Mews, Farringdon, London EC1M 6BB under Company number 08508165 © Just Cash Flow PLC 20 17

42 | NACFB Magazine

SPECIAL FEATURES

Has Help to Buy caused house prices to skyrocket?

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It has been viewed as one of the most significant interventions in the UK housing market by a government in over 30 years, but since its inception in 2013 there has been continued controversy surrounding the Help to Buy (HTB) scheme, which aims to help buyers on to the property ladder.

Michael Kearney Deal origination Maslow Capital

hile hundreds of thousands of households’ acquisitions have been supported by HTB equity loan schemes, it has been widely reported that the scheme has also resulted in a disproportionate increase in house prices which has, in turn, further exacerbated the affordability factor. However, a closer look at regional statistics shows that the relationship between house prices and HTB is not so obvious. For example, London has evidenced a significant house price increase of 51% since April 2013, however, only 13.4% of new-build sales were supported by HTB equity loans. Conversely, Newcastle upon Tyne has recorded a price increase of 20.6%, with a significant 50.6% of new-build sales supported by the HTB scheme. This is similarly evidenced in Liverpool

and Sheffield with 37.9% and 32.2% of purchases being supported by HTB respectively – but house price growth in these locations has been below the national average over the same period. In addition, affordability remains an issue in many locations even with the support of the scheme. HTB equity loan purchasers require a 5% deposit which equates to £27,000 in London, £12,000 in Birmingham, £11,700 in Leeds and £9,400 in Liverpool, based on average new-build house prices recorded by HM Land Registry. With the Office for National Statistics reporting that UK median disposable household income is around £27,300, it can still take residents many years to save up enough to qualify for the scheme. While it’s easy for critics to blame HTB for price rises, the last five years have been an unprecedented political and economic rollercoaster, and there have been many other factors at play, including interest rates at historically low levels and a weakened currency – which has made UK real estate, including regional property, more attractive

to overseas investors. Moreover, it is a well-known fact that the housing market remains inherently undersupplied in many parts of the country. While it cannot be argued that house prices across England have increased significantly since 2013, it is difficult to assess the true impact of HTB where markets are so undersupplied. While HTB continues to cause controversy, it is my view that affordability measures such as HTB are required to ensure home ownership can be achieved by a greater proportion of the population. These measures, however, are not the only solution and the continued supply of accommodation in all regions is essential. New supply will not only deliver affordable accommodation, but also assist in moderating the high rate of price growth that has been evidenced. Maslow Capital is focused on supporting housebuilders in affordable locations and recognises the HTB scheme as one part of a portfolio of measures to assist purchasers with owning their own home.

House price growth/HTB equity loans as % of new build sales 60% 50% 40% 30% 20% 10% 0 Bristol House price groth

London

Manchester Nottingham Birmingham

Leeds

HTB equity loans as % of new build sales

Sheffield

Liverpool

Newcastle upon Tyne

Bradford

Source: HM Land Registry, Ministry of Housing, Communities and Local Government

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SPECIAL FEATURES

Has Help to Buy caused house prices to skyrocket?

SPECIAL FEATURES

Michael Kearney Deal origination Maslow Capital

House price growth/HTB equity loans as % of new build sales 60% 50% 40% 30% 20% 10% 0 Bristol House price groth

London

Manchester Nottingham Birmingham

Leeds

HTB equity loans as % of new build sales

Sheffield

Liverpool

Newcastle upon Tyne

Bradford

Source: HM Land Registry, Ministry of Housing, Communities and Local Government

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The implications of extending the FOS reach Phil Reynolds Managing directorlending Newable

t present, only consumers and around 5.5 million micro-enterprises can contact the Financial Ombudsman Service (FOS) if they have a dispute with a financial services firm. On 22nd January this year, the FCA published a consultation paper highlighting its views on expanding the eligibility of small businesses to access the FOS for financial services dispute resolution. Under the proposed changes, approximately 160,000 additional SMEs, charities and trusts would be able to refer their complaints to the ombudsman, rather than going to court – which for many, as Andrew Bailey, chief executive at the FCA, claimed “is not a realistic option”. Businesses with fewer than 50 employees, annual turnover below £6.5m and an annual balance sheet below £5m would become eligible to access the ombudsman, following a change to eligibility criteria. The ombudsman would then be able to consider complaints about any regulated and some unregulated activity, such as lending to companies or the activities of business turnaround units. SMEs would be allowed to lodge complaints about financial services companies free of charge, and pursue redress of up to £150,000 without resorting to the courts. The proposal follows a review of the protections available to SMEs as users of financial services, which began in 2015. According to the consultation paper, the principle behind the planned changes is that while “larger SMEs will have the bargaining power, organisational resources and understanding of financial services to protect their interests in disputes with firms”, smaller businesses “struggle to resolve disputes with financial services firms through the courts and have few alternative routes to seek redress”.

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The FCA’s consultation asks for views on what more can be done in relation to SME disputes not covered by its proposed changes. Some argue the proposals do not go far enough at present and should permit more SMEs access to the FOS. On the flip side, the FCA estimates that its current proposed changes could already mean a further 1,500 disputes being referred to the FOS annually. This will inevitably mean an increase in the FOS’s operating costs and, more worrying, potentially add to the time taken to resolve FOS disputes. Within the introducer industry, the broader consequences of this proposal are likely to impact the requirements and obligations of firms that provide regulated and unregulated financial services. This could include advisers to SMEs, credit providers and intermediaries dealing with SME complaint handling, resolution, recording, reporting and publishing data about complaints. Newable is welcoming of any additional protections which are offered to small businesses, and their potential ability to utilise the FOS is therefore encouraging. However, the details behind the implementation of this proposed change will be key, and it is very much hoped

that the practicalities do not in any way further inhibit an already underserved market in accessing much-needed growth finance. Many viable SMEs continue to find it incredibly difficult to access the funding they need to put their growth plans into operation, and it is vital that they face no further barriers. Newable will continue to work closely with our introducers to make sure the growth finance that their clients require is provided in a way that remains compliant to all parties, whatever changes result from this initiative. We’re also very supportive of ensuring that SMEs access fast, fair and friendly business finance. Having operated as a responsible finance provider for many years, we have a history of ensuring our loan products are there to enable businesses to grow and reach their potential without being hamstrung by obscure, opaque and unfair terms. The FCA has asked for comments on its proposals by 22nd April 2018, and intends to finalise any changes by this summer.

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The implications of extending the FOS reach Phil Reynolds Managing directorlending Newable

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Industry | guides Insider tips from the Association’s Patrons and Members

The rising threat of asset finance fraud Paul Burke Managing director Davenham Asset Finance

he law describes fraud as deliberate deception to secure unfair or unlawful personal or financial gain, or to deprive a victim of a legal right. Unfortunately, it’s on the rise. In January 2018, the Financial Times published an article with findings from a study highlighting the 15-year high £2.11bn value of UK fraud. Furthermore, according to a separate review by the UK antifraud charity Fraud Advisory Panel (FAP), business fraud accounted for almost 75% of the total that the UK loses to fraud – and the worrying thing is there’s no limit to who or what businesses it can affect. The impact of fraud on asset finance can be daunting as the threat can occur through a number of routes, no matter how innocuous, and can quite easily be overlooked or brushed aside as simple mistakes or typos in the paperwork – when actually their impact is far more sinister. In this article, as managing director of Davenham Asset Finance, I want to highlight some examples we have successfully avoided, while – more importantly – providing ideas on how brokers and funders can work together to combat these threats. One of the key initial steps is awareness and understanding what the client is presenting in

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terms of a request for funding and reading the proposal paperwork thoroughly: does what we are being told – compared to what we can see – add up? Does it make sense? The examples of fraud we have seen cover numerous areas, from identity to asset ownership. These normally come to light when a funder begins to carry out their AML/KYC checks and general due diligence around the asset and business concerned. The whole AML and KYC compliance should all tie together and link to other checks, namely credit searches, land registry reviews and supporting evidence, including passports and driving licences. The use of social media also provides valuable sources of understanding and helps glue the whole picture together. How many of us would know how to recognise a fraudulent passport or driving licence, and not just tick the AML box simply because the client produces one? Do you know what all of the numbers and references mean? They all create a picture that must fit together to ensure the jigsaw works. Recent cases have seen minor differences in names on the land registry, compared with other supporting documents, as clients try to prove they own a property only for us to find out they don’t. We’ve also seen addresses on driving licences not matching to anything, and then the client passing the blame to DVLC for making the error. Online checks are efficient and helpful, but can they really replace an inquisitive eye?

When valuing an asset, we would always ask for the mileage or kilometres of the vehicle concerned. Numerous times we arrive to inspect the asset (to make sure it actually exists and is actually the asset we are expecting) to be confronted with a speedometer showing a completely different figure to that advised on the proposal paperwork – it’s always a typo/transposition error, with an apology, but still asking us to advance the same amount of money. Shockingly, very occasionally, the mileage appears correct, but when we see the vehicle it looks as if it’s been round the globe. The customer just says it needs a clean until we do the online MOT checks to find it has been clocked and even worse has no MOT. The client still argues its right, and that it’s a DVLA error. Serial numbers are always a key area susceptible to fraud. Clients giving incorrect dates of manufacture that then don’t agree to the serial number, or parts missing from the serial number. The full serial number with prefix/ suffix has a meaning and must agree to confirm authenticity/ history/identification. A recent example has been where we looked to fund a three-year-old canal boat. Boats of this age, by law, have to be stamped with a Watercraft Identification Number. When we checked with the manufacturer (identified by the number), it turned out the boat should have been 10 feet shorter than we were informed. Needless to say, this was put down to a paperwork

mistake. Surely you would know if you lost 10 feet off your boat?! The key form of deception or fraud that causes us most concern often stems from simple questions, such as why people need certain assets, what they use them for or what their business does. Or, in the case of a refinance, what the funds are required for. Pretty simple and reasonable questions if you are about to lend a substantial sum of money to somebody you know very little about, other than their credit checks. So when clients get uptight about such questions, it may be because they have something to hide. Fraud and deception being overlooked can have devastating results, as reported in a recent newspaper article, which highlighted the results of an uninsured vehicle and loss of life due to reckless driving. This is now a known form of deceit by unscrupulous car rental companies or, more worryingly, non-rental businesses (both start-ups and established businesses), appearing to be legitimate businesses with perfect credit to finance cars across a whole spectrum of type and value. The cars are normally funded with good deposits, with the cars then sub-hired/provided to the criminal world. So knowing why a client wants an asset, and whether it makes sense, is important. The question is, how do we know when these are genuine errors or deception? Age, experience and how cynical you are would, I expect, give varying views.

There are essential protocols brokers and funders should work together on to help prevent falling victim to fraud, which we have introduced here at Davenham: if your client is an SME looking to purchase an asset, research the seller by using platforms such as HPI, Companies House and credit referencing agents to ensure everything is as it should be check the asset is fit for acquisition/purpose; discuss with an independent plant engineer. Chances are they will also know more about the asset and its history as well speak to the client to assess the business and establish reasons for requiring the finance. If they brush you off, it may be a sign all is not as it seems never share payment details or sensitive information over email, or on a platform where they could be intercepted establish relationships with local law enforcement and gain an understanding of current investigations to look out for issues/fraud. It is vital that the broker-client relationship is strong enough to give the funder confidence, especially with the ever growing legislative responsibilities being imposed on us either through AML, KYC, the FCA and now the new Criminal Finances Act 2017. Fraud can have a devastating impact for both the funder – through capital losses – and the broker – through debit backs – in addition to the investment of time and money in the evitable investigation, which is more than likely to include the police. Finally, this raises the question: does the current, highly competitive market and constant drive for new business result in basic questions and errors being missed? Does the drive for efficiency and speed via electronic checking/signing in prescribed manners, enhance the fraudsters’ opportunity? Although it is fully

appreciated, such approaches are not always practical when considering the large-volume funders who will enviably factor a level of fraud into their risk and reward assumptions. However, are what were historically lending basics being eroded due to market pressures and are these changes helping fraud to rise?

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Industry | guides Insider tips from the Association’s Patrons and Members

The rising threat of asset finance fraud Paul Burke Managing director Davenham Asset Finance

48 | NACFB Magazine

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THE TEAM FOR BRIDGING LOANS

GUIDES

A glimpse into the Enterprise Finance Guarantee Reinald De Monchy MD, guarantee and wholesale solutions British Business Bank

any small business leaders know that accessing external finance can be the key to unlocking success for their venture. However, too often a ‘no’ from a finance provider can stop a small business in its tracks. The British Business Bank’s 2017 Small Business Finance Markets report found that 38% of smaller businesses who sought finance but did not get what they wanted ended up cancelling their plans. At the British Business Bank, we work to make finance markets for smaller businesses function more effectively, helping those businesses prosper, grow and build UK economic activity. We don’t lend directly – rather, the bank works with delivery partners to grow both the supply and diversity of finance available to smaller businesses across the UK. My role is to oversee our programmes which help increase the flow of debt finance available to smaller businesses. My team works with a wide range of delivery partners to help turn those ‘no’ credit decisions into a ‘yes’. Our flagship programme supporting access to debt finance is the Enterprise Finance Guarantee (EFG). The EFG programme facilitates additional finance to smaller businesses that are viable, but unable to obtain finance from their lender due to having insufficient

security to meet the lender’s normal requirements. The programme does this by providing the lender with a government-backed 75% guarantee. The guarantee is security provided to the lender and not the small business. As with any other commercial transaction, the borrower is always responsible for repayment of the full value of any facility supported by EFG. The EFG programme is one of the bank’s most successful and longstanding interventions. Since the programme began in 2009, more than 28,000 facilities have been drawn down by smaller businesses, with an aggregate value of over £3bn. The programme is expanding and, in October last year, we announced the first accredited lender under the new asset finance variant (Hitachi Capital). We worked closely with the sector to design this new variation to the programme, which will help provide additional asset finance – a vital funding option for smaller businesses looking to grow, expand and create jobs. The effectiveness of the EFG programme is widely recognised by the government. An independent review of the EFG published in November 2017 identified that EFG-supported facilities to smaller businesses across 2010/11 to 2012/13 generated £415m of economic benefits. In the Autumn Budget, the chancellor extended and increased the EFG, enabling us to guarantee up to £1.95bn of finance over the next four years to help smaller businesses achieve their ambitions. In February 2018, the government announced further help for those

EFG in action One smaller business that has benefited from the EFG programme is Grimsby-based Blackrow Engineering. The company needed finance to take on two new, large projects and expand their business. The EFG facility they obtained via EFG partner ABN AMRO helped to provide the working capital needed to fund their growth and, at the same time, preserving their apprenticeship programme, developing specialist skills. In early 2017, Buckinghamshire Mazda Ltd, an Aylesbury-based car dealership, undertook a detailed strategic review, which identified a range of opportunities to grow and improve the business. These improvements, such as new workshops, a new MOT bay and staff training and development would all require further investment, but the garage couldn’t provide the security needed for a loan. Thanks to an EFG facility, the firm was able to secure £200,000 worth of finance and begin investing in their business. smaller businesses affected by the collapse of Carillion. This included the EFG supporting up to £100m of lending to smaller businesses, including those affected by Carillion, via accredited lenders. These examples give a glimpse of the potential the EFG programme is unlocking across the UK by helping more small businesses to access the finance they need.

In the Autumn Budget, the chancellor enabled us to guarantee up to £1.95bn of finance over the next four years to help smaller businesses achieve their ambitions

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THE TEAM FOR BRIDGING LOANS

GUIDES

A glimpse into the Enterprise Finance Guarantee Reinald De Monchy MD, guarantee and wholesale solutions British Business Bank

In the Autumn Budget, the chancellor enabled us to guarantee up to £1.95bn of finance over the next four years to help smaller businesses achieve their ambitions

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GUIDES

How to make an impression with your development finance proposal

David Nieman Principal Specialist Finance

For those of us who have been raising property development finance for more years than we care to remember, we would have witnessed the property boom years and, of course, the depressed property markets, where many seasoned developers struggled to survive. 52 | NACFB Magazine

ven through the tough times, specialist lenders still carried on lending, although typically at lower levels – which is not surprising when you consider the high LTVs that were readily available in the marketplace. I always assumed that when applying for finance, submitting a detailed proposal to lenders was the norm. However, I was surprised to learn that this is often not the case, and that lenders are being approached and asked to provide indicative terms based on information provided in a three-line email. We always take the view that first impressions of a development proposal are very important. This was even more so during the property downturn, when lenders were cherry picking the schemes they were prepared to lend on. In fact, I have been approached by developers who have been turned down for funding by their own bank, yet having looked at the scheme, there is often nothing fundamentally wrong with it at all. What had let it down was the overall presentation. Had it been presented in the correct way, there would have been a very good chance of it progressing.

A good presentation is of the utmost importance and is often the difference between obtaining indicative terms and having the proposal declined from the outset. A good proposal should always start with a general overview of the project, providing an immediate understanding of what it is you are aiming to achieve. The lender will want to understand the structure and to feel totally comfortable that the client is capable of carrying out the project, so a detailed CV is very important. This will need to be supported with a comprehensive summary of previous projects, including photos wherever possible. The lender will usually want evidence that the developer has carried out similar projects in the past to the one that is being proposed. As most forms of borrowing require a certain level of personal guarantee, an overview of the client’s current assets and liabilities should also be included, which in some cases will need to be certified by the client’s accountant. A detailed development appraisal will also need to be included, showing a breakdown of costs and fees. It is always worth breaking the build costs and professional fees down

and showing a 5-10% contingency. It is also good practice to include a copy of the planning approval, a copy of the plans and various photos of the site. The final part of the presentation should include a market report from at least one estate agent, together with evidence of comparables in the location. The lender will want to feel comfortable at an early stage that there is likely to be sufficient profit margin within the scheme, so that they have no concerns about getting their capital back once the project has been built out. It is also important to be able to support the GDV as most lenders now base their lending criteria on the lower of either a percentage of the end sales value or a percentage of the total costs. So what is available in the marketplace in the current climate? If we look at the high street banks, those that are lending are typically lending at around the lower of 60% of costs or 50% of GDV. If we are looking for higher borrowing levels from a primary lender, then we would need to look at the specialist lenders. It has been surprising to see that borrowing levels have been increasing

over the years to the levels not seen since prior to the last property crash. There are numerous lenders who have entered the market and there is now a good deal of choice, which has resulted in more competitive terms. It is possible to obtain 100% funding covering all costs for the right type of scheme – this is particularly useful where a developer is running several projects together and has low cash reserves. However, it is now quite common for lenders to lend up to 90% of costs or 70% of GDV, or even 75% of GDV with mezzanine finance. In addition, there are now many mezzanine providers, so combining mezzanine finance with senior debt makes it possible to come up with an attractive, blended rate at higher borrowing levels.

cost between the various lenders and these costs, together with the other fees, can end up being more expensive than a lender quoting a higher interest rate and lower fees. Following this process has worked well for us over the years. We obtain a lot of repeat business from satisfied clients and we have developed excellent working relationships with the lenders. The client also appreciates that they get value for money for the fee that we charge – not just for this initial work, but also for working closely with them right through to completion.

Interest rate is, of course, only part of the story. It is very important to consider all fees and costs associated with a loan. Exit fees based on GDV can seem very harsh, particularly for larger schemes, and the same can be said of non-utilisation of fund fees. It is crucial to find out what the lender’s legal fees are, as well as the valuation and the monitoring surveyor fees. There can be huge differences in

NACFB Magazine | 53

GUIDES

How to make an impression with your development finance proposal

David Nieman Principal Specialist Finance

NACFB Magazine | 53

Opinion | & commentary Thought leadership from our Patrons and Members

Speculative development: why the stall?

James Bloom Managing director of short-term lending Masthaven

nce upon a time, speculative office development was all the rage. I can remember the years when millions of square feet of new space was springing up left, right and centre, all over the country – in London, but also in the all-important regions. Today, things are a little different. Despite strong demand for space, speculative development is in stall mode, and particularly in the regions. Recent analysis by JLL draws out the scale of the issue: after the recession, speculative development dropped significantly between 2010 and 2015, with a very low level of project completions. While things picked up (modestly) in 2016 and 2017, there is a lack of strong commitment in the coming years and, for 2020, there is nothing on the slate at all. It’s not like there isn’t any demand. There is. JLL says that in the ‘Big 6’ regional markets – Manchester, Birmingham, Leeds, Bristol, Edinburgh and Glasgow – take-up in the first half of 2017 stood at a whopping 2.3 million square feet. The problem is that not a lot of new supply is coming through the pipeline. I think one of the biggest reasons for this is reticence on the part of mainstream banks to engage with this kind of lending anymore. The recession changed the

financial landscape immeasurably. It was caused by a multitude of factors, but one of them was an increasingly uncontrollable appetite for risk which, left unchecked, sent everything tumbling down. Ramifications are still being felt today. In the sphere of commercial property, risk-averse became a new watchword, especially for mainstream banks. Bruised by the bloody battle, they have increasingly shied away from this kind of lending, pulling back completely or stipulating much stricter lending criteria, which has left many developers priced out – especially SMEs. And let’s not forget that the emergence of slotting regulations – which mandate banks to hive off capital to mitigate against possible future loan losses – has hampered things all the more. What all of this means is that funding options for property developers have shrunk considerably, particularly if financing new projects through equity release or securing pre-let agreements. These simply aren’t options on the table. While the move away by big banks has seen debt funds and insurance giants creep on to the market, I really feel that challenger, or alternative, banks have a central role to play in spurring finance to help developers unlock projects and start doing what they do best: develop. At Masthaven, for example, our development finance product – suitable for ground-up developments and more – has at its heart a flexible financing solution. At the start of the development loan,

we agree drawdown amounts for each stage of the build; this means the right amount of cash is available at each stage. This helps control management of the project as it works through the build and, crucially, gives developers peace of mind. This is the kind of creative, flexible approach developers crave – one that’s tuned to meet their needs, rather than an off-the-shelf product that just doesn’t. As for what stalling speculative development means for the property market – well, there are all sorts of implications. It can push rents up, it can restrict the market, and it could see a switch to the refurbishment of existing properties rather than building new ones. But most important of all is the knock-on effect it could have on the wider world around it. This is a crucial time for UK regions. As focus starts to shift from London, cities such as Leeds, Birmingham, Manchester, Glasgow and more are benefiting from investment, greater local authority powers and a whole lot more. Government projects like the oft-mentioned Northern Powerhouse and infrastructure jobs like HS2 are all designed to boost local economies. Office development is an important part of all this – new offices create jobs, boost areas, forge links and breathe new life into underdeveloped areas. With Brexit approaching, it’s crunch time. Let’s focus on building creative, flexible financing products that support developers, not phase them out.

We’re redefining standard

We’ve put a lot of thought into our newly extended suite of short-term lending products. In an increasingly diverse world we know brokers need maximum flexibility to handle the widest possible range of client scenarios.

Standard bridging that’s anything but standard • • • • •

Prime Bridging Standard Bridging Light Development Development Commercial

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masthaven.co.uk Masthaven Bank Limited is a company registered in England & Wales with registration number 09660012 and whose registered office is at: 11 Soho Street, London W1D 3AD. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Firm reference number 719354).

54 | NACFB Magazine

The “Masthaven” name and logos and all other brands, names, logos, marks and slogans on this document are the trademarks or service marks of us or our licensors.

Opinion | & commentary Thought leadership from our Patrons and Members

Speculative development: why the stall?

James Bloom Managing director of short-term lending Masthaven

We’re redefining standard

Standard bridging that’s anything but standard • • • • •

Prime Bridging Standard Bridging Light Development Development Commercial

Are you ready to rethink what standard means?

54 | NACFB Magazine

The “Masthaven” name and logos and all other brands, names, logos, marks and slogans on this document are the trademarks or service marks of us or our licensors.

OPINION & COMMENTARY

Not all lenders are created equally Jonathan Sealey CEO Hope Capital

evelopment finance continues to be a key topic of conversation and all the reports would have us believe that there is a flood of people moving into this market. However, I believe the reality may be somewhat disguised. ’Development finance’ can cover a couple of guises: there are developments that involve the existing building shell and encompass everything from a refurb to a complete change of use. This is the type of development lending that most lenders do, including Hope Capital. Then there are the ground-up developments, which involve either the demolition of existing buildings to start again or begin with nothing more than a piece of land. These are a whole different scenario. They involve knowledge of planning and a much greater grasp of the challenges that can occur during construction. It is, therefore, a brave lender that moves into this space without prior knowledge and experience. The challenge with this type of lending is the ‘J’ curve. A piece of land with a property on it is worth a certain amount of money; when the existing property has been demolished, the site is likely to be worth considerably less. Any lender that has to take possession at that point potentially needs to be able to bring in another developer to develop the site, either to the previous plans or to a point where the plot is worth enough that it can be sold at a profit. From the perspective of a broker, or indeed the borrower, it is far shrewder to use a development lender that is familiar with ground-up developments than a bridging lender who has decided to expand, but has no prior knowledge of this space.

the development and potentially even use their experience to help with issues. Despite a flurry of announcements of new development lenders, this is the space that will remain relatively uncrowded and the experienced development lenders are likely to price in the additional level of risk and experience they can bring. This highlights more than ever that selling short-term loans on price may well leave the borrower wanting. Even with non-ground-up developments, such as extensive refurbishment or change of use, lender know-how can be absolutely fundamental – and that’s where Hope Capital comes into its own. It may seem relatively unimportant at the outset to have a lender with knowledge of the process – after all, no one goes into a project expecting there to be issues. Most developers have a clear plan of how they are going to convert their property to create enough value to remortgage or

Key things for brokers to look out for: What are the processes if things don’t go to plan? Will that lender allow an extension and what are the penalties for doing that? Or will the borrower need to switch to another bridging lender in order to finish the project? What if the project is complete but all the units have not been sold? Hope Capital offers a marketing bridge, to give developers an extra three to six months to properly market their units and achieve maximum price for them. Many lenders don’t do this, so if the market is not heading in the right direction at that time, the developer often has to sell their units at a lower price in order to be able to exit the loan on time.

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And, of course, just how quickly can a lender turn a loan around at the outset? Does that lender just accept vanilla cases or will they be able to lend on the more complex ones? Lenders with the lowest rates will usually take on the least risk and expect the developer to do more for themselves. sell. However, we also know that life, and development, rarely run that smoothly. At the time of the January price way – when many lenders lowered their rates – it became clear that not all bridging lenders are created equally, so it is important both for broker and borrower that you find a lender that can lower its rates without lowering its standards. Some lenders look at the reason they cannot lend – whereas others look for reasons to say yes.

Competitive rates - Quick Decisions

A good development lender will be able to advise the borrower at different stages of

For further details: telephone 01624 694694 email info@conisterbank.co.im or visit www.conisterbank.co.im

56 | NACFB Magazine

Conister Bank Limited. Registered in the Isle of Man No. 000738C. Registered Office: Clarendon House, Victoria Street, Douglas, Isle of Man, IM1 2LN. Conister Bank Limited is licensed by the Isle of Man Financial Services Authority for its deposit taking activities and is authorised and regulated in the United Kingdom by the Financial Conduct Authority for its consumer credit activities and mortgage lending administration, firm registration number 619002.

OPINION & COMMENTARY

Not all lenders are created equally Jonathan Sealey CEO Hope Capital

What can Conister do for you... Wholesale Funding Asset Finance Block Discounting Commercial Loans Premium Finance Personal Loans

Competitive rates - Quick Decisions

A good development lender will be able to advise the borrower at different stages of

For further details: telephone 01624 694694 email info@conisterbank.co.im or visit www.conisterbank.co.im

56 | NACFB Magazine

OPINION & COMMENTARY

Michael Dean Principal Avamore Capital

2016 study by Tom Archer and Ian Cole from Sheffield Hallam University found that the top 10 housebuilders increased their share of housing production from 9% to 47% between 1960 and 2015. In 1980, there were over 10,000 SME housebuilders building 57% of all housing. Fast forward to 2014 and this number sits at just 2,800 SME housebuilders, delivering only 27% of completions. Over the last 40 years, the number of completions annually has fallen consistently to the point where we are now faced with a housebuilding crisis of significant proportions. Volume housebuilders ultimately report to their shareholders and cannot be expected to deliver housing indiscriminately, especially with the cost, risk and investment required for each site. These housebuilders are correct, in principle, in maximising profitability from each site they develop, including (occasionally) land banking. However, a lack of competitive force within the sector in the delivery of all types of sites ultimately limits completions. Increasing the number of players at all levels is essential. Access to larger sites, particularly on public land in London, can also be dominated by volume housebuilders. Small- and medium-

58 | NACFB Magazine

sized developers are often unable to tender, bid to promote or develop on these sites. Accordingly, this ties up the larger sites in the hands of developers who can land bank and control supply to suit their means. There also remains a skills shortage in the housebuilding industry. With a more diverse selection of developers offering work, contractors and subcontractors would be more confident in offering apprenticeships to young trainees. With housing completions dominated by a narrow group of builders, this potentially leaves tradesmen exposed in a downturn with fewer alternative sources of business and, as a result, they are less keen to take on the overhead of a young apprentice. Smaller developers within the property sector face different dynamics to volume players. These housebuilders work hard to create a strong team of tradesmen, land directors and support staff. The only way to keep these individuals within the business is for an SME developer to keep developing, regardless of market conditions. Accordingly, an increase in the number of SME developers will lead to an increase in housing completions as a consequence. However, starting a housebuilding business is difficult in its early stages, often due to capital constraints. Even shrewd housebuilders face funding challenges, no matter how well sites can be purchased. Despite a plethora of mainstream development finance options being available, all require a substantial tranche

of equity, something many early-stage housebuilders cannot access. Furthermore, accessing senior development finance is not easy for inexperienced or new housebuilders. Clearing banks and most challenger banks are not viable options in the current market. Some lenders, like ourselves at Avamore Capital, are picking up the mantle and we have begun to create products and specialise in programs for ‘newbie’ developers. As a consequence we are creating a reputation for delivering bespoke development finance solutions on small schemes and conversions, especially for early-stage players. Avamore has even looked at providing guidance to customers by matching them with contractors, development managers and other professionals. This ‘finance as a service’ approach is all about generating positive outcomes for our customers and contacts. In the long run, this approach will have positive benefits for the housebuilding industry and the economy as a whole.

Online bridging valuations in an instant Our online Automated Valuations (AVMs) for Bridging Finance can be generated in an instant to help your customers seal the deal faster. At only £99 at the point of application, they could save money too. Automated valuations available subject to criteria Quick decisions to meet tight transaction deadlines Dedicated underwriter from DIP to completion Joint legal representation available to help keep costs down If you wish to discuss a case please contact our Intermediary Support Team for more information.

Those of us in the finance sector need to be innovative and broad-minded when it comes to early-stage developers. By doing so, we may just enable the volume developers of tomorrow to build the homes that we desperately need today.

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Support early-stage developers – it’s the right thing to do

OPINION & COMMENTARY

Michael Dean Principal Avamore Capital

58 | NACFB Magazine

Call us

0800 116 4385

Visit us

precisemortgages.co.uk

FOR INTERMEDIARY USE ONLY.

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Support early-stage developers – it’s the right thing to do

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