NACFB Magazine - February 2017 by NACFB

Issue 43 February 2017

The magazine for the National Association of Commercial Finance Brokers

ÂŁ7.3bn With a market this big, do P2P investors need a comparison platform?

Plus + Continuing professional development with MyNACFB see page 4

In this issue

Books to inspire in 2017

Expert-recommended reads to keep you motivated

Easing the burden A guide to commercial loan servicing for established and new lenders

Consumer buy-to-let

A look at what 2017 holds for the consumer sector and loan approval levels

Welcome | NACFB Since 1st January, we have increased the minimum requirement for continuing professional development (CPD) to include completion of the five modules – available via MyNACFB – for all registered individuals (RI). The subjects are the fair treatment of customers, complaints handling, data protection, introduction to consumer credit regulation and financial crime.

Property finance, the way it should be.

This further demonstrates the Association’s commitment to raising the professional standards of our members and to supporting compliance in the regulatory environment in which we operate. Completion of these modules will form the basis of CPD requirements for 2017 and we strongly encourage all member firms to subscribe to MyNACFB. At just £4 per month for each adviser, it represents exceptional value for money, offering qualifications written in conjunction with high street banks. Not everyone is using MyNACFB, so from those that aren’t signed up we will accept certified confirmation at annual membership renewals that all RIs have completed and passed an acceptable equivalent version of each of these modules. Nonetheless, we encourage all members who are not currently signed up to MyNACFB to get on board, because it’s our way of bringing everything under one roof as it were, and ensuring that the CPD you do is tailored and monitored by people who understand what it is to be a commercial finance broker. Best regards Rob Lankey

octopusproperty.com Octopus Property is the trading name of Bridgeco Ltd (Reg No 6629989), Fern Trading Ltd (Reg No 6447318), Nino Ltd (Reg No 9015082), Rednel Ltd (Reg No 7531926) and Octopus Co-Lend Limited (Reg No 8913299), Registered Office: 33 Holborn, London EC1N 2HT, registered in England and Wales and Dragonfly Finance S.ar.l. (Reg No B189290) Registered Office: Parc d’Activité Syrdall, 6 Rue Gabriel Lippmann, L-5365, Munsbach, Luxembourg registered in Luxembourg. Rednel Ltd and Octopus Co-Lend Limited are authorised and regulated by the Financial Conduct Authority.

Rob Lankey CEO NACFB

In this February issue NACFB News 4

CFE - registration now open Increased minimum requirements on MyNACFB New patrons joining the Association Notes from our sponsor Dates for your diary

4 4 6 6

Commercial Finance 8-10

Top Story Introducing Fleet revamps limited company BTL products

Case Studies 16 17

The 72-hour bridging deal Specialist education finance helps boost university investment 18 A tailored approach makes the complex simple 20-21 Flicking on the ‘funding switch’ when it’s needed most

Cover Story 22-24 Is there a need for a P2P comparison platform for investors?

Blockchain technology in mainstream finance – navigating ‘cowboy land’

Patron Profile 28-29 LendInvest

Ask the Expert 30

Essential news bites

12-13 PCFG granted banking licence 14

Spotlight

Martin Day - London Institute of Banking & Finance

Special Features 32

Consumer buy-to-let in 2017 - what to expect 34-35 Together urges specialist market to ‘step up’ corporate responsibility

Industry Guides 38-39 Books to inspire in 2017 40 A guide to commercial loan servicing

Debate 42-43 How does the industry weigh in on P2P regulation?

Opinion & Commentary 44 46

Credit crunch: surviving uncertainty a decade on Maximising portfolio value while adapting to buy-tolet changes

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

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

NACFB Magazine | 3

Property finance, the way it should be.

Rob Lankey CEO NACFB

In this February issue NACFB News 4

CFE - registration now open Increased minimum requirements on MyNACFB New patrons joining the Association Notes from our sponsor Dates for your diary

4 4 6 6

Commercial Finance 8-10

Top Story Introducing Fleet revamps limited company BTL products

Case Studies 16 17

Cover Story 22-24 Is there a need for a P2P comparison platform for investors?

Blockchain technology in mainstream finance – navigating ‘cowboy land’

Patron Profile 28-29 LendInvest

Ask the Expert 30

Essential news bites

12-13 PCFG granted banking licence 14

Spotlight

Martin Day - London Institute of Banking & Finance

Special Features 32

Consumer buy-to-let in 2017 - what to expect 34-35 Together urges specialist market to ‘step up’ corporate responsibility

Industry Guides 38-39 Books to inspire in 2017 40 A guide to commercial loan servicing

Debate 42-43 How does the industry weigh in on P2P regulation?

Opinion & Commentary 44 46

Credit crunch: surviving uncertainty a decade on Maximising portfolio value while adapting to buy-tolet changes

ADVERTISING & EDITING: Medianett 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 February 2017

Chairman’s address Paul Goodman Chairman NACFB I am delighted to announce that, following our AGM in November, at our January meeting your NACFB board reappointed me as chair for a second term, to drive forward our work from the last two years. I will again be supported by vice chair Adrian Coles. When I first wrote to you as chair in February 2015, I talked about a backdrop of uncertainty with an upcoming general election and the EU referendum. However, the sands continue to shift all around us as the outcomes of our country’s decisions only now begin to take shape. So the challenges remain essentially unchanged – and so are my aspirations for the NACFB. We need to be a rock of certainty, steadiness and common sense in a fast-evolving world. Delivering practical support for our Members and Patrons We must continue to promote our industry’s interests to our colleagues in the FCA and across governmental departments. We must also offer the best support to our Members and Patrons in a very real, practical sense. The new cycle of regulation being implemented by the FCA is now in motion with their teams in the field inspecting regulated organisations. The NACFB is mirroring their work by providing health checks for our Members, with more than 250 already completed. Feedback so far has been that our health checks are positive and supportive, and will help our Members ensure their ongoing compliance with the regulator. Upholding standards is at the heart of all we do and our plans to offer

4 | NACFB Magazine

additional compliance services directly from the NACFB are well advanced. By offering wrap-around support we will empower our members and patrons in turn to be beacons of certainty and optimism. Looking to the future 2017 is a 25-year milestone for the NACFB and we truly are going from strength to strength, with ever higher numbers of Members and Patrons and an increasing national influence. To mark the anniversary we already have plans for an increased presence at our incredibly successful Commercial Finance Expo, and our annual gala dinner will include a fitting celebration. There will also be some changes as we take stock within the organisation, with a significant review of our corporate governance, designed to ensure we remain fit for purpose in the wider commercial environment, as well as in the face of disruptive technologies which seem to offer businesses an alternative way of sourcing funding. While I acknowledge their place in the market, I believe that people buy people and it’s up to us to promote and deliver the added value of dealing with a broker as a trusted advisor who understands both the client and potential funders, and will deliver the right solution for all. By working together we can support those UK SMEs who have aspirations to grow now, regardless of what’s happening all around, and give confidence to those who may have delayed on investments by offering well put together deals that make this the right time to move ahead. So as we face another exciting year together I’d like to thank you all for your ongoing support and I look forward to seeing many of you at our meetings and events over the year.

Increased minimum requirements on MyNACFB We have increased our minimum requirement on MyNACFB to include completion of the five modules: fair treatment of customers, complaints handling, data protection, introduction to consumer credit regulation and financial crime.

New Patrons joining the Association We are pleased to welcome Rivers Leasing and Foundation Home Loans as our most recent patrons of the Association.

CFE registration now open The NACFB’s eighth Commercial Finance Expo is now open for bookings. The event takes place on 21st June 2017 at Birmingham’s NEC at a new venue – Hall 3A. There has been huge interest from the NACFB’s 142 lenders, so exhibitors need to register soon while some stands are still available.

Project nearing completion? Switch to cheaper funding. Maximise profits for your client by replacing costly Development Finance with flexible, low costing funding. To find out more, speak to Magnus today on 020 7118 1133 or visit your dedicated lending resource: intermediaries.lendinvest.com 0.7% interest pcm Rolled or serviced payments available Loans between £250k to £5m LTV up to 75%

Please register to exhibit by visiting: www.commercialfinanceexpo.co.uk The NACFB looks forward to seeing you. Put the date in your diary today!

LendInvest is registered at 8 Mortimer Street, London W1T 3JJ (Company No.08146929), and is authorised and regulated by the FCA, no FSCS. Your property may be repossessed if you do not keep up repayments on your mortgage. For intermediaries only.

NACFB | in the news Association news and updates for February 2017

4 | NACFB Magazine

New Patrons joining the Association We are pleased to welcome Rivers Leasing and Foundation Home Loans as our most recent patrons of the Association.

Please register to exhibit by visiting: www.commercialfinanceexpo.co.uk The NACFB looks forward to seeing you. Put the date in your diary today!

NACFB NEWS

Notes from our sponsor Karen Bennett Sales and marketing director Shawbrook Bank

With 2017 now in full swing, lenders have had time to adapt to the consequences of the Prudential Regulation Authority’s (PRA) new affordability requirements for buyto-let (BTL) mortgages, which came into effect on 1st January.

While this has undoubtedly created challenges for financial institutions and forced a rethink of how we all approach debt servicing and affordability assessment, this should be seen as an additional opportunity to embed a customer-centric approach. Those lenders who took a measured approach and reacted early are the ones whose customers will benefit moving forward. Bearing this in mind, Shawbrook has been keen to present a well-defined approach to our intermediary partners and their clients as early as possible to support accurate assessment at the outset of all applications. We began consulting with our brokers back in late September 2016, initiating a conversation around what the impacts of the PRA’s report findings might be. This process continued behind the scenes before we announced our updated approach to affordability assessment in December to our broker partners and the wider market, as well as how this would affect the Shawbrook proposition. We were by no means the only lender to react in this way. Others took a similarly proactive approach which we were pleased to see, keeping their intermediaries and their clients clearly informed throughout the process. Such transparency is vital in order to protect the best interests of our customers and something the NACFB encourages at the very heart of its business practices. The market has done well to weather many a storm throughout the last year. Despite these trials, our research indicates that brokers, as well as their clients, tend to be bullish about the year ahead. Our Property Finance Broker Barometer in particular revealed an encouraging level of optimism, with brokers reporting resilient levels of business, and clients who are adapting well to both the Brexit vote and the tax changes which were instituted from 1st April 2016.

6 | NACFB Magazine

FUNDERS - We have access to a panelof over 100 funders • Access to exclusive funders in the broker market

Dates for your diary NACFB Roadshows with Barcadia – West When: 21-24th February Where: Bristol, West Midlands, Bolton & Belfast NACFB Roadshows with Barcadia – South When: 23-26th May Where: Venues TBC Commercial Finance Expo When: 21st June Where: NEC Birmingham

• Unrivalled whole of market funding panel with all products, customer types and asset categories catered for • Benefit from our excellent funder relationships with enhanced pricing & commission terms

INDEPENDENCE – Autonomy whilst benefiting from being part of a network • Maintain your existing trading name and style • No targets to meet – work how you want • Achieve your work-life balance goals • No red tape or reporting burden

• Regular funder updates and meetings SYSTEMS – The best tools to enable you to do the job • Proposal Management System • Access to funders online systems • Access to asset finance quote system

FUNDERS

• Funder guidance system

INDEPENDENCE

SYSTEMS

NACFB Roadshows with Barcadia – East When: 17-20th October Where: Venues TBC

SUPPORT COMPLIANCE

Finance Professional Show When: 9th November Where: Olympia London Gala Dinner & Industry Awards When: 30th November Where: Park Plaza Westminster Bridge, London

These targeted barometer surveys – across both the commercial and residential businesses within the property division – often provide a range of interesting insights and have a significant impact on the product and process innovations which are a key part of our offering. As always, we have several updates in the pipeline for the year ahead and many ideas brewing which will benefit our intermediaries and their clients. Lastly, we are thrilled to be working side by side with the NACFB once again in 2017. Their Code of Practice – focused on the education of intermediaries and promoting only the highest professional standards among their members – is one which all lenders can support. Long may this continue in a marketplace which never ceases to provide challenges, as well as numerous opportunities to grow responsibly.

I.T. USEFUL TOOLS AND MEMBERSHIPS

SUPPORT – Advice and support always available • Two-day induction upon joining with ongoing optional training events • Sales support office offering holiday cover, help and assistance when required • Regular meetings with the banks and finance companies keeping you informed • Existing members are always willing to offer advice and share their experience • Socialise and meet other members at the Annual Conference and ‘Meet the Funder’ events

COMPLIANCE - AFS Compliance takes regulatory responsibility for your activities • Comprehensive AR compliance manual along with FCA training modules (AML, TCF, DPA etc.) • Marketing material (websites, EShot, mailshots etc.) compliance checked

I.T. - Fullremote I.T. support

• Access to our qualified fully functional Compliance department

• Google Mail, Apps and Drives

USEFUL TOOLS AND MEMBERSHIPS – Access to the right industry partners

• Compliance reviews, audits and updates to evidence you are trading compliantly

• Secure automatic back up & storage

• Professional Indemnity Insurance

• All FCA reporting carried out for you

• Full system encryption

• Creditsafe

• Disaster recovery

• NACFB membership

BE PART OF THE FAMILY...

STRONGER TOGETHER

ASSET FINANCE SOLUTIONS HEAD OFFICE: Suite 4 , First Floor, Challenge House, Challenge Way, Greenbank Business Park, Blackburn BB1 5 QB tel: 0 1 2 5 4 9 5 8 7 7 7 I email: enquiries@afsuk.com I assetfinancesolutions.com SYNERGY COMMERCIAL FINANCE HEAD OFFICE: The Warehouse, Murton Lane, Murton, York YO1 9 5 LN tel: 0 1 9 0 4 4 8 1 7 8 6 I email: enquiries@synergy.finance I synergy.finance Asset Finance Solutions (UK) Ltd and Synergy Commercial Finance Limited are an Appointed Representative of AFS Compliance Ltd, which is Authorised and Regulated by the Financial Conduct Authority under number 6 2 5 0 3 5 .

NACFB NEWS

Notes from our sponsor Karen Bennett Sales and marketing director Shawbrook Bank

6 | NACFB Magazine

FUNDERS - We have access to a panelof over 100 funders • Access to exclusive funders in the broker market

FUNDERS

• Funder guidance system

INDEPENDENCE

SYSTEMS

NACFB Roadshows with Barcadia – East When: 17-20th October Where: Venues TBC

SUPPORT COMPLIANCE

Finance Professional Show When: 9th November Where: Olympia London Gala Dinner & Industry Awards When: 30th November Where: Park Plaza Westminster Bridge, London

I.T. USEFUL TOOLS AND MEMBERSHIPS

I.T. - Fullremote I.T. support

• Access to our qualified fully functional Compliance department

• Google Mail, Apps and Drives

USEFUL TOOLS AND MEMBERSHIPS – Access to the right industry partners

• Compliance reviews, audits and updates to evidence you are trading compliantly

• Secure automatic back up & storage

• Professional Indemnity Insurance

• All FCA reporting carried out for you

• Full system encryption

• Creditsafe

• Disaster recovery

• NACFB membership

BE PART OF THE FAMILY...

STRONGER TOGETHER

BIG in commercial

Commercial Finance | news Essential news bites from the world of commercial finance House price inflation will ‘not be extensive’ in 2017

The National Association of Estate Agents (NAEA) and Association of Residential Letting Agents (ARLA) have outlined their predictions for the UK property market in 2017. The NAEA has predicted that there will not be any ‘extensive’ house price inflation during 2017, while the number of transactions will remain steady. It also believes that first-time buyers should find it easier to enter the market as price inflation stalls with almost a third of agents predicting that sales to this group will increase.

SMEs to benefit from new payment reporting rules

Small businesses are set to benefit from new government measures designed to increase the transparency of payment practices.

From April 2017, large businesses will have to publish details twice a year on the average time taken to pay supplier invoices. Small business minister Margot James made the announcement in December as part of a package of reforms to tackle late payments.

Further growth in asset finance

Figures released by the Finance & Leasing Association show that asset finance new business (primarily leasing and hire purchase) grew by 1% in October, compared with the same month in 2015 – the 37th consecutive month of growth. New business reported by the business equipment finance and plant and machinery finance sectors grew in October by

8 | NACFB Magazine

16% and 10% respectively, while commercial vehicle finance fell by 1% over the same period.

Landbay granted full FCA authorisation

Landbay has been granted full authorisation from the Financial Conduct Authority for peer-to-peer lending, paving the way for the launch of its Innovative Finance Isa this year. John Goodall, CEO and co-founder, commented: “We are pleased to confirm that the FCA has granted Landbay its full authorisation for peer-to-peer lending. “This is a significant milestone for Landbay and we look forward to launching our property-backed Isa before the end of the tax year”.

Robust growth in consumer used car finance

Figures released by the Finance & Leasing Association (FLA) show that new business in the point-of-sale (POS) consumer used car finance market grew 12% by value and 9% by volume in October, compared with the same month in 2015. The POS consumer new car finance market also reported new business up 8% by value and 1% by volume in October. The percentage of private new car sales financed by FLA members through the POS reached 86.3% in the 12 months to October, up from 86.2% in the 12 months to September.

Conveyancing activity soars by 55%

Productivity levels in the conveyancing market have risen by 55% over the past three years, new figures have revealed.

Data published by property and land search provider Search Acumen showed an average of 110 transactions per conveyancer during 2015, up from 71 in 2012. The average conveyancer completed one transaction every 2.4 working days in 2015, compared with just one every 3.5 working days in 2012. This rise may be attributed in part to a 7% drop in the number of active conveyancers over the same period.

Metro Bank to lend £1bn to UK businesses

UK businesses have received a major boost after Metro Bank revealed it has ring-fenced £1bn of funds for business and commercial customers.

The challenger bank lent £551m in the first three quarters of last year to its business and commercial customers and hopes these new funds will increase lending over 2017. “Businesses are the very bedrock of the UK economy and it’s absolutely vital that lenders do what they can to support their growth,” said Mark Stokes, managing director of commercial banking at Metro Bank.

Treasury appoints RBS head as fintech envoy

Economic secretary Simon Kirby has announced the appointment of two new fintech envoys for Scotland.

Louise Smith, head of design in personal and business banking at Royal Bank of Scotland, and David Ferguson, CEO of Nucleus, will provide leadership and form connections to help Scotland take advantage of the UK’s fintech boom.

Fintech – which can include digital currencies, robo-advice and crowdfunding platforms – contributed £6.6bn to the UK’s GDP in 2015 and was responsible for 61,000 jobs.

Principal lenders who provide commercial property loans from £250,000 up to £10m. Loans available release, elease, ffr from om 3 to 24 months.

Bridging lender bids to double loan book

Bridging and development finance lender Zorin Finance has set its sights on lending over £200m in 2017, £100m more than the amount it lent during 2016.

Zorin plans to increase lending by bolstering its origination team, as well as increasing its maximum loan size and introducing new products, rates and technologies. The lender will also be relocating to larger offices in London’s Knightsbridge from 9th January 2017 to allow for the expansion of its team.

SME loan approvals drop 12%

CMY

Lending to small- and mediumsized enterprises (SMEs) fell 12% during the third quarter of 2016, according to the latest figures from the British Bankers’ Association (BBA). Banks approved £5.6bn of new loan and overdraft facilities during Q3, 12% less than in the same quarter in 2015. This drop was accompanied by a 13% decline in the number of loan applications, with figures tumbling from 35,767 in Q3 2015 to 31,596 in Q3 2016.

Say Hello!

1,000 bank branches closed in two years

0208 349 5190

finance@alternativebridging.co uk alternativebridging.co.uk

@ABC_Bridging

alternativebridging.co.uk

High street banks have closed more than 1,000 branches in the last two years, according to new research. Figures released by Which? found that a total of 1,046

A PRINCIPAL LENDER

BIG in commercial

Commercial Finance | news Essential news bites from the world of commercial finance House price inflation will ‘not be extensive’ in 2017

SMEs to benefit from new payment reporting rules

Small businesses are set to benefit from new government measures designed to increase the transparency of payment practices.

Further growth in asset finance

8 | NACFB Magazine

16% and 10% respectively, while commercial vehicle finance fell by 1% over the same period.

Landbay granted full FCA authorisation

Robust growth in consumer used car finance

Conveyancing activity soars by 55%

Productivity levels in the conveyancing market have risen by 55% over the past three years, new figures have revealed.

Metro Bank to lend £1bn to UK businesses

UK businesses have received a major boost after Metro Bank revealed it has ring-fenced £1bn of funds for business and commercial customers.

Treasury appoints RBS head as fintech envoy

Economic secretary Simon Kirby has announced the appointment of two new fintech envoys for Scotland.

Fintech – which can include digital currencies, robo-advice and crowdfunding platforms – contributed £6.6bn to the UK’s GDP in 2015 and was responsible for 61,000 jobs.

Principal lenders who provide commercial property loans from £250,000 up to £10m. Loans available release, elease, ffr from om 3 to 24 months.

Bridging lender bids to double loan book

Bridging and development finance lender Zorin Finance has set its sights on lending over £200m in 2017, £100m more than the amount it lent during 2016.

SME loan approvals drop 12%

CMY

Say Hello!

1,000 bank branches closed in two years

0208 349 5190

finance@alternativebridging.co uk alternativebridging.co.uk

@ABC_Bridging

alternativebridging.co.uk

High street banks have closed more than 1,000 branches in the last two years, according to new research. Figures released by Which? found that a total of 1,046

A PRINCIPAL LENDER

COMMERCIAL FINANCE NEWS

branches were shut between January 2015 and January 2017, with rural areas such as Wales, Scotland and south-west England among the worst affected. HSBC was revealed to have made the most cuts with 321, or 27%, of its branch network closing during this period. Royal Bank of Scotland, Lloyds Bank and Barclays also made significant closures, shutting 191, 180 and 132 branches respectively.

Retail giant to invest £35m in challenger bank

Challenger bank Tandem has announced a multimillion-pound partnership with House of Fraser.

The retailer has made an initial commitment to invest £35m in Tandem, subject to preconditions being met. The deal will see Tandem accelerate its growth by providing financial solutions to House of Fraser’s customer base.

Pub insolvencies fall 7%

Pub and bar company insolvencies have fallen from 521 to 480 in the past year, according to new research from Ortus Secured Finance. The leisure sector lender revealed that there had been a steady decline in the number of firms going insolvent thanks to the opportunity of replacing scarce bank funding with alternative finance or debt from non-bank lenders. Over the last three years, insolvencies by pub and bar companies fell by 16%. Ortus believes that alternative lending has helped many firms transform their profitability by being able to offer craft beers and more expensive ‘hipster’-style food.

10 | NACFB Magazine

Three fintech companies to invest in the UK

Three Canadian fintech companies have announced new investments in the UK.

Banking technology platform Zafin, due diligence specialist OutsideIQ and investor relations firm Q4 Inc will create around 150 jobs between them, with more commitments expected in future. The three firms visited London as part of a delegation of 12 Canadian companies that had been invited to the UK by the Department for International Trade.

Four out of five SMEs confident about 2017

Some 82% of SMEs are confident about their business prospects for 2017 despite Brexit concerns. According to the Aldermore SME Future Attitudes report, of those confident in their outlook for next year, 39% expect to see a growth in revenue in 2017. Of those expecting growth, 39% aim to do so by launching new products and services, 30% intend to enter new markets, while 20% are planning to expand by enhancing their technology. With regards to the Brexit vote, over half (66%) believe that Brexit will either have a positive impact or no impact at all on their company.

Eight bridging lenders named in Spear’s 500

Eight bridging lenders have made it on to the Spear’s 500 list for 2017.

Regentsmead, Octopus Property, LendInvest, London Bridge, Greenfield Capital, Fortwell Capital, Amicus Property Finance and MTF were all recognised for their services to the property finance industry. Octopus Property was included in the Spear’s 500 top five property finance firms, which

also included investment firm Mitheridge, broker MCIFA Property, Enness Private Office and LargeMortgageLoans.com.

valuers might raise at rent reviews or lease renewals value.

The other seven bridging lenders were named in the top recommended category by Spear’s 500, along with broker Adapt Finance.

Millions of Brits could help to bridge the £4bn business funding gap, according to research by peer-to-peer (P2P) lender ThinCats.

Ireland anticipates authorisation rise from UK firms

The Central Bank of Ireland has reported that Brexit has led to an increase in the number of authorisation queries from UK firms.

The body responsible for regulating financial firms in Ireland said its workforce planning for next year reflects the additional resources needed to deal with the rise in applications. Cyril Roux, deputy governor of the Central Bank of Ireland, warned UK firms that they faced a rigorous process before they could become authorised to operate in Ireland as he confirmed the rise in enquiries.

One in five commercial properties at risk of devaluing

New research has found that as much as £16.5bn could be wiped off the value of UK commercial property portfolio due to upcoming energy legislation. A paper undertaken by CO2 Estates has outlined the impact of the minimum energy efficiency standards (MEES) legislation. The government has already found that 19% of all commercial property in England and Wales is in danger of not complying with the legislation with £16.5bn of the commercial property market at risk.

Brits could solve £4bn business funding gap

The firm cited figures which showed that in 2015, banks turned down 26% of the 324,000 loan applications made by small- and mediumsized enterprises. By contrast, more than 1.6 million people have lent money directly to a friend or family member to help them start or grow a business. In total, the public has provided some £7.2bn to their close acquaintances, with an average loan size of £4,479.

£1bn funding package could boost rural property investment

Specialist finance. By specialists Amicus group provides outstanding solutions for specialist markets. Working with us means you work with real people: talented teams with the drive, experience and insight to make things happen.

A £1bn funding package for British digital infrastructure could boost property investment in rural areas.

In a report analysing the Autumn Statement, Market Financial Solutions (MFS) suggested that improved digital connectivity would be welcomed in the more remote parts of the UK as poor access to the internet can hamper property investment. The lender cited figures from April of last year showing that 62% of property buyers believe fast broadband is equal to or more important than an extra bedroom.

property ﬁnance

commercial ﬁnance

asset ﬁnance

Bespoke short-term lending

Flexible invoice discounting

Specialist asset ﬁnance

Despite this, MFS highlighted the lack of stamp duty reform in the chancellor’s statement.

The research has also pointed out the effects of MEES on rent and capital values by examining the implications of the various related arguments

Discover more at amicusplc.co.uk

Amicus is a trading name of Amicus Finance PLC. Registered in England & Wales, no. 06994954. Registered oﬃce: 7 Air Street, London W1B 5AD.

Helping Fund UK Business

COMMERCIAL FINANCE NEWS

Retail giant to invest £35m in challenger bank

Challenger bank Tandem has announced a multimillion-pound partnership with House of Fraser.

Pub insolvencies fall 7%

10 | NACFB Magazine

Three fintech companies to invest in the UK

Three Canadian fintech companies have announced new investments in the UK.

Four out of five SMEs confident about 2017

Eight bridging lenders named in Spear’s 500

Eight bridging lenders have made it on to the Spear’s 500 list for 2017.

also included investment firm Mitheridge, broker MCIFA Property, Enness Private Office and LargeMortgageLoans.com.

valuers might raise at rent reviews or lease renewals value.

The other seven bridging lenders were named in the top recommended category by Spear’s 500, along with broker Adapt Finance.

Millions of Brits could help to bridge the £4bn business funding gap, according to research by peer-to-peer (P2P) lender ThinCats.

Ireland anticipates authorisation rise from UK firms

The Central Bank of Ireland has reported that Brexit has led to an increase in the number of authorisation queries from UK firms.

One in five commercial properties at risk of devaluing

Brits could solve £4bn business funding gap

£1bn funding package could boost rural property investment

A £1bn funding package for British digital infrastructure could boost property investment in rural areas.

property ﬁnance

commercial ﬁnance

asset ﬁnance

Bespoke short-term lending

Flexible invoice discounting

Specialist asset ﬁnance

Despite this, MFS highlighted the lack of stamp duty reform in the chancellor’s statement.

The research has also pointed out the effects of MEES on rent and capital values by examining the implications of the various related arguments

Discover more at amicusplc.co.uk

Amicus is a trading name of Amicus Finance PLC. Registered in England & Wales, no. 06994954. Registered oﬃce: 7 Air Street, London W1B 5AD.

Helping Fund UK Business

Top | story

The banking licence is a game-changer in terms of potential size, but it won’t fundamentally change what the business does

Our pick of the latest patron news

Specialist lender Private & Commercial Finance Group (PCFG) granted banking licence Scott Maybury CEO Private & Commercial Finance Group

In 2016, we saw an increasing number of specialist lenders applying for banking licences, with the number of lenders in the midst of application reaching 15 in November last year. What was the motivation for PCFG to apply for a licence and extend its services?

The key driver was to de-risk our funding model by diversifying the source of funding away from wholesale banks – but the banking licence also means we can take our already successful business model and scale it up significantly. There are many advantages that come with access to more diverse sources of funding, including greater flexibility, lower interest costs, improved customer retention, access to the Bank of England funding schemes and scope to enter the prime segments of our existing markets. Despite having excellent relationships with our brokers, our previous model of obtaining funding from wholesale banks effectively priced us out of some parts of the market. With this retail deposit-taking licence, however, we can now offer rates which are competitive with our peer group. Additionally, the banking licence means that in adverse economic conditions, we are less susceptible to wholesale funding being limited or even removed by larger banks.

12 | NACFB Magazine

Now that PCFG’s application has been declared successful, what are the company’s planned next steps to meet the requirements during the mobilisation period?

Obtaining a licence for specialist lenders also represents new challenges, such as increased regulation as well as more in-depth underwriting standards. Do the benefits outweigh the hindrances?

The mobilisation period will include an ongoing assessment of – and changes to – our governance framework, staff resources and IT systems, with new technology being the largest part of the project. Our position as an established, profitable business gave us the confidence to commence this work early and we are well advanced with mobilisation. As of December, we have a new chairman and we’re already nearly six months into implementing the new IT systems. In the interim, we are very comfortable that our facility headroom and capital position will allow us to maintain our current momentum. The benefit of having a well-established business model is that retail deposits can translate into growth very quickly once we mobilise, and represent a lower risk way to achieve scale.

Are there any foreseeable changes that might take place within the organisation due to the newly obtained licence, such as changes to the team or internal structure? There will certainly be some internal adjustments, but the core team will remain the same. From a governance perspective, we have brought in Tim Franklin as our new chairman, which is a great appointment for the company. Tim has robust executive experience working in retail banking for businesses such as Barclays Bank and Britannia Building Society, and currently sits on the board of the Post Office. Our executive management team of Robert Murray, David Bull and myself remains the same, and other new key functions are already in place, such as heads of savings, compliance and risk, and treasury. There are one or two other key hires and some support staff to join through the mobilisation period, and we will be adding resource across sales and new business origination to support growth.

Absolutely. Our strongly improving profits have already demonstrated that we can make significant economies of scale with our business model, so the additional lower-cost funding capacity with the banking licence will afford us even better economies as we grow. I’m also a firm believer that the regulatory obligations placed on a bank are there for a good reason, and serve to protect both the consumers and the banks themselves. PCFG has operated successfully for many years under the consumer credit regulatory regime and has the knowledge, systems and business conduct standards necessary to be successful in a regulated environment. We already have a high-quality loan portfolio of £122m, with a record low impairment charge of only 1% last year, so we expect that our book of business will continue to deliver. Without the banking licence, we were effectively priced out of a significant part of the market, so for us the increased regulatory obligation is more than offset by our increase in scale. We’re hoping to increase our portfolio to £350m in three years, and £750m over five years.

Operating since 1994, PCFG has laid solid foundations to now support its new position as a provider of banking services. What are the key considerations for specialist lenders before attempting to enter the banking industry? I can only speak for PCFG, but for us, having a successful business model already and knowing our markets inside out was vital. We will continue to support our chosen sectors of consumer motor finance and SME asset finance. We know that these sectors are profitable, and trust in the model and portfolio we’ve built over the last 20 years. It’s a model that has proved itself over several complete economic cycles and through the most difficult of times between 2008 and 2013. In particular, we have been a longstanding and loyal supporter of the broker market and already have many strong broker relationships. Now that we have the banking licence and the ability to increase our business originations significantly, we will be looking to develop existing broker relationships as well as source new ones. The banking licence is a game-changer in terms of potential size, but it won’t fundamentally change what the business does – initially at least – and this provides certainty on delivery and minimises risk. We may look at our product offering further down the line, once we’ve got some experience operating as a bank, but initially sticking to what we know will make the transition to becoming a bank much more straightforward and achievable.

NACFB Magazine | 13

Top | story

The banking licence is a game-changer in terms of potential size, but it won’t fundamentally change what the business does

Our pick of the latest patron news

Specialist lender Private & Commercial Finance Group (PCFG) granted banking licence Scott Maybury CEO Private & Commercial Finance Group

12 | NACFB Magazine

Now that PCFG’s application has been declared successful, what are the company’s planned next steps to meet the requirements during the mobilisation period?

Obtaining a licence for specialist lenders also represents new challenges, such as increased regulation as well as more in-depth underwriting standards. Do the benefits outweigh the hindrances?

NACFB Magazine | 13

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

Fleet revamps limited company BTL products All three products come with a 1.5% fee and again rent is calculated at 125% at 5%.

Bob Young CEO Fleet Mortgages

This year has kicked off with the introduction of the first stage in the Prudential Regulation Authority (PRA) underwriting changes. This focuses on the increased rental stress tests that PRA-authorised lenders have had to introduce. As 2016 drew to a close, many lenders began to make the necessary changes and we have now entered what I call a new environment for buy-to-let. From a general perspective, I’m aware there’s been a large degree of pessimism about the PRA rules. However, I’m of the glass half full position and believe that, on the whole, the changes can be seen as a huge positive for the intermediary sector. I view these changes as an opportunity because, as is always the case with regulation, different lenders will interpret them differently and we already know here at Fleet that we are taking an alternative approach based on our specialist market knowledge and the team’s long track record of lending to those who can afford it. I suspect, and we’re already beginning to see this, that we will have an increase in the complications around buy-to-let – especially when the rest of the rules are introduced in autumn. Once again – and the Mortgage Market Review (MMR) was the same – it makes the case for using an adviser’s knowledge of the industry as a tool for securing client leads and repeat business. Certainly, if you’re a portfolio landlord who is not using a limited company, there will be a large increase in the paperwork required, given that the lender has to take all existing properties into account. In particular, for such situations, advisers seem the perfect solution; I can’t imagine many landlords wishing to go direct. The limited company product point is still extremely valid. You should all be fully aware of the reasons why limited companies might make sense for clients, in terms of

The rest of our limited company range is available up to 75% LTV and, in the same vein as above, we currently offer a pay rate lifetime tracker at 4.2%, a two-year fix at 3.6% and a five-year fix at 3.99%.

the mortgage interest tax relief changes to be introduced in April, but also (rather importantly) in terms of the stress testing and the maximum loans available, compared with holding the properties individually. At Fleet Mortgages we’ve certainly seen a vast increase in interest and take-up of limited company products, and I suspect any serious specialist lender in the buy-tolet market will be no different. It’s a hugely important part of our overall offering and with our refreshed limited company product range we are able to offer some highly attractive rates and flexible criteria. At the tail end of last year, we added to our limited company range by launching three new products, available up to 65% LTV. They are: A pay rate lifetime tracker at 4% – rent is calculated at 125% at 4% A two-year fix at 3.4% – rent is calculated at 125% at 5% A five-year fix at 3.79% with rent again calculated at 125% at 5%. Our newly launched limited company products, for those using corporate structures, are: A two-year 80% LTV fix at 4.39% A 75% LTV lifetime tracker at 4.2%

Business-boosting loans up to £500,000 Fixed rate loans with no set up fees or early repayment charges Security may be required. Product fees may apply. Over 18s only. Business turnover of up to £2 million. Excludes reﬁnance and Commercial Real Estate Finance.

I think it’s fair to say that we anticipate the limited company part of the buy-tolet market to be increasingly important and attractive. However, make sure as an adviser that you’re not getting drawn into conversations about tax advice with clients. Clients must have those conversations with their tax advisers and accountants. Many have complex tax arrangements and the wrong advice can be costly – especially if the client believes you have supplied it. Our advice is stick to your knitting and make sure your client is aware of this. Fleet also offers individual buy-to-let products up to 75% LTV with a two-year fix at 3.09%, a five-year fix at 4.09% and a lifetime tracker at 4% – this with a pay rate of 125% at 4%. Plus, we offer products specifically for the purchase of HMOs and multi-unit blocks up to both 65% and 75% LTV, again with a range of fixed rates and a lifetime tracker. Overall, I am positive about the buy-tolet market in 2017, which is not to say I’m anticipating significant overall growth in lending from the entire market, but at Fleet Mortgages, we are. As specialists in this market, we fully understand the sector, the changes and your needs– plus (rather importantly) we have the appetite to lend. We’re here to support your activities in buy-to-let and to help you throughout the rest of the year and beyond. Please don’t hesitate to contact us. For full details on all our products, please visit: www.fleetmortgages.co.uk.

Email us at brokerteam@natwest.com

A 65% LTV lifetime tracker at 4%.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT. 14 | NACFB Magazine

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

Fleet revamps limited company BTL products All three products come with a 1.5% fee and again rent is calculated at 125% at 5%.

Bob Young CEO Fleet Mortgages

Email us at brokerteam@natwest.com

A 65% LTV lifetime tracker at 4%.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT. 14 | NACFB Magazine

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

The 72-hour bridging deal

In order to ensure the deal was completed within the client’s deadline, Borro’s underwriting team focused on the value of the residence, taking into account the client’s large property portfolio. To ensure the legal process was completed in time, Borro provided its list of panel solicitors. Each firm has been chosen based on their ability to make the legal process clear and quick for clients, reducing unnecessary delays and miscommunication. The solicitors worked quickly and the client received their funds in time to complete their intended purchase.

Claire Barrington-Jones Director of sales Borro

Claire Barrington-Jones, director of sales at Borro, said: “This is the level of service we strive to provide every day. Our internal processes are designed to ensure cases move quickly and our award-winning team is dedicated to making borrowing straightforward for partners and clients.”

Bridging funding has developed a welldeserved reputation over the past few years as a great resource for advisers and their clients when they need immediate financing backed against property. Not only is it adaptable for so many needs, but it can be delivered in a timeframe that may be startling to those used to conventional lending taking weeks or even months.

Kris commented: “I have been extremely impressed by the speed and the desire from Borro to get this case completed. Our broker turned to us for the urgent specialist help we pride ourselves on, and we’re extremely pleased that this was matched by the lender – especially at this time of the year [just before Christmas].”

In this instance, the vital component was speed. Would Borro be able to provide the necessary finance to allow a father to help his daughter complete the purchase of a new property? Happily, Borro provided a Crystal Specialist Finance client with a loan of £590,000 secured as a first charge on their main residence in just three business days. Crystal’s client had agreed to pay a deposit on a property for one of his daughters pending the sale of a business. Just after his daughter exchanged on her new property the business sale stalled, leaving the client facing a 10-day completion deadline. The deal, which required dedication and expertise to complete speedily, was going to be challenging. With both the introducer and the client eager to complete, Kris Corns, operations manager at Crystal, referred the loan to Borro. The regulated nature of the deal, combined with Borro’s dedication to fast, high-quality service made the lender a natural choice.

16 | NACFB Magazine

This case shows clearly that bridging finance can provide a vital short-term solution, which means that more longterm transactions can go ahead.

This case shows clearly that bridging finance can provide a vital shortterm solution, which means that more long-term transactions can go ahead

By concentrating on the value of the property being put up as security as well as ensuring the client was not over-extended and would have the means to repay the loan when his property sale went through, Borro was able to act swiftly and decisively to provide the necessary funds.

The very nature of the education sector means that our client has to deal with a variety of challenges

Specialist education finance helps boost university investment

recently with the government’s move to staged payments. The existing funding provider was unable to offer the flexibility our client required, and the university was in danger of stifling its growth plans – hence the search for an additional and complementary flexible funding solution. The income manager of the university said: “We needed a finance partner who [would give] us the flexibility of funding to help us achieve our ambitions. We chose to work with Sancus Finance because they understood us and could see the potential. They helped accelerate the payment from the student loan company and we used these funds to invest and offer our suppliers the ability to get paid quicker, providing us with peace of mind that continuity of service would not be disrupted.

Caroline Langron Managing director Sancus Finance

Our client – a university based in southern England – is feeling optimistic about achieving both ambitious growth plans as well as satisfying the ongoing challenge of business expenses and ensuring its suppliers are paid on time – thanks to an innovative finance facility from Sancus Finance.

“Our facility with Sancus Finance … puts us back in control of our finances as it helps bolster our cash flow gaps when we need it. It’s a long-term solution but with short-term flexibility.

The university – which has been operating since 1993 – employs 1,200 staff and provides a range of highquality degree-level and vocational courses for 15,000 students. The institution has ambitious plans to invest in improved infrastructure and facilities to continue attracting high numbers of students, as well as increasing their international reach. The very nature of the education sector means that our client has to deal with a variety of challenges. Competition to attract students is at an all-time high, putting pressure on universities to offer a wider range of facilities with state-ofthe-art infrastructure. This need to continually invest can present dilemmas when there are high operating expenses to be paid. Salaries are a large cost for any university; coupled with this is the need to ensure that suppliers of vital services – such as accommodation, IT and communication – are paid on time. Student-related income is critical to the smooth management of finances, and this has become challenging

Our facility with Sancus Finance … puts us back in control of our finances as it helps bolster our cash flow gaps when we need it. It’s a longterm solution but with short-term flexibility

“Being able to invest in the facilities that we can offer to our students will help keep us one step ahead of our competition. It also enables us to continue to recruit highcalibre lecturers to meet increasing demand and keep our courses running smoothly, while ensuring our suppliers are paid quickly … This has all been made possible thanks to the innovative funding line we have agreed with Sancus Finance.” Caroline Langron, managing director at Sancus Finance, said: “Using our specialist education finance solution can help alleviate the pressures felt by many educational institutions. They benefit from an important injection of funds to realise their investment plans, knowing that their supply chain is also protected. It’s great to see our client benefiting from the funding we provide and look forward to their future success.”

NACFB Magazine | 17

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

The 72-hour bridging deal

Claire Barrington-Jones Director of sales Borro

16 | NACFB Magazine

This case shows clearly that bridging finance can provide a vital short-term solution, which means that more longterm transactions can go ahead.

This case shows clearly that bridging finance can provide a vital shortterm solution, which means that more long-term transactions can go ahead

The very nature of the education sector means that our client has to deal with a variety of challenges

Specialist education finance helps boost university investment

Caroline Langron Managing director Sancus Finance

“Our facility with Sancus Finance … puts us back in control of our finances as it helps bolster our cash flow gaps when we need it. It’s a long-term solution but with short-term flexibility.

Our facility with Sancus Finance … puts us back in control of our finances as it helps bolster our cash flow gaps when we need it. It’s a longterm solution but with short-term flexibility

NACFB Magazine | 17

CASE STUDIES

Market Financial Solutions Bridging with Finesse

A tailored approach makes the complex simple was a challenging loan to fund and required a significant level of property expertise from MFS to understand the nature of the security, the demand for the end product being developed by the borrower and the exit strategy from the bridging loan,” Marc commented.

Paresh Raja CEO Market Financial Solutions

It’s no secret that property developers have been turning to the bridging market to overcome the liquidity shortfalls of traditional lending institutions. With the annual regulated completions within the UK bridging market amounting to £4bn a year, commercial developers have been relying on bridging lenders to facilitate fast loan deals. London-based bridging lender Market Financial Solutions (MFS) demonstrates how its offering of tailored bridging loans has allowed them to deliver fast and effective loan solutions, and become industry specialists in resolving complex and multi-faceted deals.

traditional finance institutions for the capital to support their portfolio expansion. Britain’s property market is competitive, and developers can often lose out on opportunities because they haven’t been able to secure a bank loan in time.”

MFS provides tailored, packaged solutions for a diverse collection of commercial clients, ranging from small- and medium-sized businesses to multi-national corporations and property developers. Since 2008, the bridging provider has effectively arranged funding in excess of £1bn, with requests ranging from thousands of pounds to tens of millions.

In this particular case, the property developer MFS was servicing required a bridging loan to purchase a 36-bed former care home in Surrey. With residential property prices in the county increasing by 8.24% over the past year, the developer was seeking a bridging loan to acquire the care home with the long-term plan of converting the building for residential usage.

Seeking a loan for portfolio expansion In light of MFS’ expertise, broker Marc Ahearne from Heron Capital Ltd approached the lender seeking property finance on behalf of a property developer client. Paresh Raja, CEO of MFS, noted that the case presented to him exhibited the common factors currently experienced by British developers seeking to expand their property portfolio.

“Despite the number of bridging loan lenders operating in the market, this

“The UK property market is a dynamic entity, presenting an untold amount of opportunities for developers with a vision to transform older properties into new commercial and residential buildings in areas where demand is rife. Such dynamism, however, can also pose a significant problem for developers relying on

developers can often

Britain’s property market is competitive, and lose out on opportunities because they haven’t been able to secure a

Working towards customisation Following the enquiry by Marc, MFS simultaneously worked with solicitors and valuers to develop a tailored bridging solution that would allow the developer to receive a loan in a fast and effective manner. With a country house used as an asset to support the loan, MFS was able to quickly facilitate a £1.4m loan, based on a loan-to-value ratio of approximately 70%. Through this process, in-house funding was provided to the client, which allowed them to acquire the desired property and successfully expand their portfolio. The exit strategy for the loan will come through a long-term refinancing with a banking institution. Market awareness is key Marc added: “Without this level of market awareness from MFS, this property could not have been purchased by my clients and the opportunity would have passed to a cash purchaser.” Reflecting on the deal, Paresh was also very satisfied with the outcome. “It was a pleasure to support this property developer by allowing them to take advantage of a fantastic opportunity. As we look to 2017, state-backed initiatives across the country are likely to present similar openings for commercial developers, and bridging will provide a bespoke solution to help overcome stringent and time-consuming measures from high street banks.”

Market Financial Solutions is an award winning independent Bridging Finance provider that deals with a range of innovative bridging solutions that are fast and flexible for all our intermediaries and clients.

Low monthly interest rates From 0.75%

Independent Lenders , in-house funding for fast effective solutions

Funding for commercial, residential investment properties towards acquisitions & re-mortgage

Specialists in complex deals Simple & Transparent approach

0845 303 8686 info@mfsuk.com

bank loan in time www.mfsuk.com

18 | NACFB Magazine

Berkeley Square House, Mayfair, London W1J 6BD

CASE STUDIES

Market Financial Solutions Bridging with Finesse

Paresh Raja CEO Market Financial Solutions

“Despite the number of bridging loan lenders operating in the market, this

developers can often

Britain’s property market is competitive, and lose out on opportunities because they haven’t been able to secure a

Low monthly interest rates From 0.75%

Independent Lenders , in-house funding for fast effective solutions

Funding for commercial, residential investment properties towards acquisitions & re-mortgage

Specialists in complex deals Simple & Transparent approach

0845 303 8686 info@mfsuk.com

bank loan in time www.mfsuk.com

18 | NACFB Magazine

Berkeley Square House, Mayfair, London W1J 6BD

CASE STUDIES

Flicking on the ‘funding switch’ when it’s needed most

Edward Winterton Commercial director Bibby Financial Services Sometimes the nature of a business and its product mean that there are huge peaks and troughs in its sales as the need for services alters with the seasons. Putting in place a flexible funding package that is adaptable to seasonal requirements can be the lifeblood of a small- or mediumsized business (SME) and its ability to manage its cash flow. This is the type of funding package that we were able to put together for Kilfrost Group in 2016. Set up in the 1930s, Kilfrost is a thirdgeneration, family-owned business which pioneered the first ever de- and

20 | NACFB Magazine

anti-icing solutions for the aviation industry. The business played a leading role during the Second World War, helping to keep the RAF flying. Since its inception, Kilfrost has been a leading innovator in the industry, expanding to serve the rail and ground sectors. Most recently, the business has developed a world-first heat transfer fluid which is set to revolutionise food and drink production globally.

Getting to know each other We were approached by Deloitte, on behalf of Kilfrost, to put together a funding package for the business. We quickly worked on getting to know the business and the intricacies of how the group functions and operates. We discovered the enormous impact and economic reach that Kilfrost has within a very specialised market. In the current wintery conditions gripping much of Europe, if a scheduled flight is delayed due to inclement weather, the potential financial penalties to airlines are enormous. Speed of response is a crucial operating factor to the business. However, this speed is condensed into three to four months of the year. Kilfrost’s business model relies on seasonality, which in turn causes cash flow constraints for the duration of the year.

Putting together the perfect package After we had analysed the business and how it functions, we were able to start working with Kilfrost to put together the right funding package. It was clear that because of the highly seasonal peaks of the business, we needed to offer a bespoke invoice financing package. To get to where they needed to be, we took a further look at the business and created a funding package which utilised both its customer inventory as well as existing stock. Funding against its existing levels of stock involved another aspect of complexity. With customers requiring products in a matter of hours, Kilfrost has a network of products throughout the UK and Europe, allowing for rapid dispatch and delivery time windows. This meant we had to understand how its stock is geographically located, what quantities are in each location and what type of products are at each storage facility.

A successfully tailored outcome With these two funding parts in place, we are now able to work with Kilfrost to enable the additional funding when it is most needed. While the invoice financing helps to support the business throughout the year, the amount advanced can be increased through our funding against pre-existing stock during the peak seasons. Gary Lydiate, CEO of Kilfrost Group, said: “We were delighted to work with Bibby Financial Services as they share our family values, as well as our North of England heritage. Their support has enabled us to fast-track the launch of our exciting new range of lowviscosity heat transfer fluids into the food production, heating ventilation and air conditioning sectors.”

It was clear that because of the highly seasonal peaks of the business, we needed to offer a bespoke invoice financing package

By being adaptable in our approach and providing a flexible package, we were able to work with Kilfrost in putting together the right funding that the business needs.

NACFB Magazine | 21

CASE STUDIES

Flicking on the ‘funding switch’ when it’s needed most

20 | NACFB Magazine

It was clear that because of the highly seasonal peaks of the business, we needed to offer a bespoke invoice financing package

By being adaptable in our approach and providing a flexible package, we were able to work with Kilfrost in putting together the right funding that the business needs.

NACFB Magazine | 21

Cover Story | feature Is there a need for a P2P comparison platform for investors? Beth Fisher Editor Medianett

Life can be running smoothly for SMEs until they hit a bump in the road or suddenly have an opportunity of which they can take advantage. Often traditional Banks aren’t structured to provide finance quickly enough and this is where professional brokers and intermediaries can prove invaluable. Too many SMEs aren’t aware of the thriving alternative finance sector that today compliments what traditional Banks have to offer and can support SMEs at different stages of their development. This is when you need a professional partner who can help you support your clients by providing fast and flexible funding. Just Cashflow is one of the leading and most innovative alternative lenders and is offering flexible funding solutions to ambitious businesses from £10,000 to £500,000 to support their continued growth. The company works with professional Brokers and intermediaries seeking to provide medium to longer term funding for clients with a clear focus on what is needed to get deals over the finish line.

With even more platforms looking to enter the widening peerto-peer market, Beth Fisher investigates whether a definitive comparison platform could help investors understand the lending products behind the sector which has lent £7.3bn to date.

This could mean partnering with other lenders or whatever it takes to help you find the optimum solution for your clients’ businesses. Just Cashflow knows that every business is different so are able to offer tailored financial solutions to meet these requirements. Just one example of their tailored and innovative approach is The BusinessPlus MasterCard® Card which offers up t0 £25,000 pre-approved credit line that is designed to help your clients with day-to-day cash flow and has flexible repayments. John Davies, Director at Just Cashflow says ‘We are seeing strong demand for the card as even when SMEs are provided with finance it is difficult to get a business card as traditional banks want to see at least two years trading history. Even then they prefer the discipline of providing a charge card that has to be repaid in full every month - not ideally suited to managing cash flow issues.’ Just Cashflow can help you get your clients funding deals across the finish line - why not talk to them today.

The fast, flexible way to help grow your client’s business... ✓ £25,000 pre-approved credit line made accessible on

The BusinessPlus Card can help with day-to-day cash flow

According to the Peer-to-Peer Finance Association (P2PFA), total cumulative lending via the Association’s members broke through the £7bn barrier in the fourth quarter of last year. The results coincided with a rise in investors throughout the year, with a total of 169,747 in Q4 2016. That is over 28,000 more than at the start of 2016. On top of this, there are numerous platforms that are either within or awaiting authorisation to enter the market. As of September last year, 85 platforms had applied for peer-to-peer (P2P) authorisation, with 39 of them already operating under interim permission.

What information is out there already? Members of the P2PFA are obligated to regularly publish a range of key data, including investor returns, loan performance and a description of how their platform works. This includes being required to disclose their loan books and their default rates to investors. “We, along with other members of the P2PFA, are setting new standards for transparency in financial services,” said John Battersby, director of communications and policy at RateSetter. “We publish details of every loan we have ever made, along with annual performance data and analysis illustrating the diversity of our investors and borrowers. Try asking your bank for the same information!” Continued

22 | NACFB Magazine

Get your client business across the finish line.

Just call us now

0121 418 5037 Alternatively, find out more

justcashflow.com/plus

MasterCard is a registered trademark of MasterCard International Incorporated. The Card is issued by Wirecard Card Solutions Ltd (“WDCS”) pursuant to license by MasterCard International Inc. WDCS is authorized by the Financial Conduct Authority to conduct electronic money service activities under the Electronic Money Regulations2011 (Ref: 900051). All transfers of funds are processed by Intercash partner banks using the approved Intercash “PrepaidGate” technology. The pre-approved limit made accessible on The BusinessPlus Card from Just Cashflow is available to UK limited companies, subject to status at time of application. Just Cash Flow PLC is registered at 1 Charterhouse Mews, Farringdon, London EC1M 6BB under Company number 08508165 JCF10391 | © Just Cash Flow PLC 2017

Cover Story | feature Is there a need for a P2P comparison platform for investors? Beth Fisher Editor Medianett

The fast, flexible way to help grow your client’s business... ✓ £25,000 pre-approved credit line made accessible on

The BusinessPlus Card can help with day-to-day cash flow

22 | NACFB Magazine

Get your client business across the finish line.

Just call us now

0121 418 5037 Alternatively, find out more

justcashflow.com/plus

COVER STORY

However, while the Association claims to represent over 90% of the P2P lending market in the UK, there is a need to see the same information from other P2P platforms for investors to make marketwide comparisons. Currently, investors can compare P2P platforms via sites such as ratings and research agency 4thWay, Orca Money and comparison giants Gocompare.com and MoneySuperMarket. However, despite the P2P industry breaking into the mainstream with comparison sites such as these, many investors are said to be gravitating towards larger platforms.

Quick facts Q1 2016

Q4 2016

Number of current borrowers

306,885

392,111

Number of current investors

141,321

169,747

New lending

£715,000,000

£843,917,664

Cumulative lending

£5,114,000,000

£7,347,991,895

Source: P2Pfa.info

“Scale provides comfort and the larger platforms are building more confidence among investors,” said Chirag Shah, founding partner of Nucleus Commercial Finance.

Mat said: “It’s vital that P2P comparison sites do not promote one type of platform or loan type over others as this could mean that riskier loans are being promoted.

Mat Gazeley, PR manager at Folk2Folk, said that while most comparison sites already do a good job, there was no “stand out” platform just yet.

“It’s more important that any comparisons are delivered based on the input from the investor and their preferences of how they invest.”

What issues could a definitive comparison platform have? Comparison sites that provide information on defaults and missed payments could be beneficial to investors, however, many P2P platforms are concerned about the challenges of a site displaying information correctly. “As an increasing number of platforms appear with new products and features, a comparison site may indeed help investors to see all things in one place,” stated John Goodall, CEO and co-founder of Landbay. “All investments are different, and this certainly applies within the P2P market,” he added. “Investors should not just be chasing yield, but should consider the types of loans they are investing in. A challenge for any comparison site would be to measure and display the differing levels of risk in a consistent way.” Chirag added that emphasising the wide range of lending products available – including different rates, security and terms – could be problematic. “The challenge for a comparison platform will be in getting these differences highlighted so that investors can make an informed choice.” Therefore, it’s important that comparison platforms provide accurate information on things such as asset classes, loan types and risk warnings.

24 | NACFB Magazine

John said that if a comparison platform was to focus on just one aspect of P2P platforms that it represents, it could be negative and misleading - for example, if a platform only displayed rates without making it clear that higher rates usually come with more risk.

If anything, a couple of larger platforms have regressed in terms of the amount of information available to investors “Additional aspects of the P2P platform’s business models are also key. For example, whether the loans are secured and, if so, what they are secured on,” he added. “Consumers and the platforms representing them need a holistic view of how each P2P lender works before making an informed decision, and may wish to diversify across multiple platforms to spread risk between asset classes.” Kevin Caley, co-founder and chairman of ThinCats, stated: “As the FCA recently found when conducting their interim report on the sector, P2P platforms

now come in very different forms, making direct comparisons difficult. “…There are also fundamental differences in the way that platforms operate, which may be too complex to reflect in a comparison site designed to be understood by people who are only just considering P2P as an option. “On this basis, I would be reluctant to say that the sector would benefit from such a platform.” Could a P2P comparison platform help dispel transparency concerns within the sector? “If comparison sites can provide data from platforms in the future, then that is a benefit to the customer as well as the industry in providing open and transparent information,” Mat said.

Your client needs funding. They need a quick turnaround to pursue their ambitions right away. That’s why they came to you. We can help you deliver.

CMY

If reporting criteria from all platforms were set at a high standard, Chirag also believes a comparison platform would help increase transparency. “The sector needs to provide more data and statistics on performance and many platforms are reticent to do this. If anything, a couple of larger platforms have regressed in terms of the amount of information available to investors.” However, Kevin said a lack of transparency wasn’t a major issue for the sector, highlighting that the main problem was having no benchmark dictating how transparent platforms must be, resulting in a varied amount of disclosure offered to investors. “This may change following the FCA’s review of the sector as an agreed standard of transparency may be established, but before that time, a comparison platform will be of little use.”

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Decision typically within 2 working days

Loans from 6 months to 5 years

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COVER STORY

Quick facts Q1 2016

Q4 2016

Number of current borrowers

306,885

392,111

Number of current investors

141,321

169,747

New lending

£715,000,000

£843,917,664

Cumulative lending

£5,114,000,000

£7,347,991,895

Source: P2Pfa.info

“Scale provides comfort and the larger platforms are building more confidence among investors,” said Chirag Shah, founding partner of Nucleus Commercial Finance.

Mat said: “It’s vital that P2P comparison sites do not promote one type of platform or loan type over others as this could mean that riskier loans are being promoted.

Mat Gazeley, PR manager at Folk2Folk, said that while most comparison sites already do a good job, there was no “stand out” platform just yet.

“It’s more important that any comparisons are delivered based on the input from the investor and their preferences of how they invest.”

24 | NACFB Magazine

Your client needs funding. They need a quick turnaround to pursue their ambitions right away. That’s why they came to you. We can help you deliver.

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No early repayment fees

Decision typically within 2 working days

Loans from 6 months to 5 years

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Spotlight Unmissable industry coverage

Nic: 020 7655 3397 Daniel: 020 7655 3388

Blockchain technology in mainstream finance – navigating ‘cowboy-land’ Vera Sugar Editor NACFB Magazine Speaking at the London Institute of Banking & Finance (LIBF) on 11th January, regulatory compliance consultant David Hume discussed the opportunities and challenges of inviting blockchain technology into the mainstream finance industry. Ever since the first appearance of bitcoin in 2009, the cryptocurrency created by Satoshi Nakamoto (or the man behind the pseudonym) has been under discussion in all industries – not just the world of finance. With bitcoin’s pound value hitting an all-time high in January – increasing by more than 150% during the past year – it is clearly here to stay. Now it seems we are approaching the time when bitcoin – or rather, the technology behind it – may be a very real consideration for mainstream financial services, according to regulatory compliance consultant David Hume. David has spent the last three years researching cryptocurrencies, as well as the potential of the underlying technology. A key component of cryptocurrency is the blockchain, which is, in effect, a decentralised ledger that contains every transaction ever processed on the network, allowing all users to access, review and, most importantly, validate each transaction. This exists in both public and private forms. Bitcoin’s ledger is entirely public, and relies on peer-to-peer participation, meaning that the network is controlled exclusively by bitcoin users themselves. Its key characteristic is transparency. Speaking at the LIBF in early January, David discussed some of

26 | NACFB Magazine

the considerations and challenges to imposing regulation on bitcoin. He noted that banning or strictly regulating the cryptocurrency in its entirety would be difficult to enforce, and both actions could lead to stifling innovation where there may be potential. Taxation poses an added challenge. In general, there seems to be a wait and see approach to the technology, which David said is “the safest option to date”. Notably, several financial institutions are already looking into adopting private blockchain technology, which allows for control of access to the ledger. The Financial Times reported in October last year that both Bank of China and HSBC were looking to launch mortgage valuation services based on blockchain technology in Hong Kong. In the UK, the Financial Conduct Authority announced in November the successful applicants to the first cohort of the regulatory sandbox for Project Innovate; an initiative supporting companies in navigating the regulatory systems while testing new products and services. Technologies to be tested include blockchain-based, crossborder payment systems and lifecycle management. Additionally, ABN Amro launched a pilot to explore the benefits of blockchain in commercial real estate in December last year. The implementation of blockchain technology raises several important issues that adopters need to consider,

including data privacy, security and transparency. This still remains a largely uncharted territory in mainstream services, so it is no surprise that adoption and regulation has been a slow process. David’s conclusion was clear – all too often we see people moving away from mainstream technology for lack of trust in data protection and privacy issues. He said: “What we need is a better alternative, so people don’t move away from the establishment.” However, he emphasised the benefits of innovative technology, adding: “Bitcoin won’t usurp the banking industry … but there are a lot of positive benefits for banking and finance.” There is undoubtedly a long way to go before blockchain becomes an easyto-navigate territory. David said: “Many incumbents in the financial services world … see this as cowboy-land and correctly perceive a threat of being disintermediated. The banks have responded to this threat by building their own syndicated, permissioned blockchain in an attempt to protect the status quo. “The jury is still out as to whether … there’s enough space in the market for both [private and public blockchain] – which increasingly looks to be the case. However, many of the bitcoin pundits believe there’s far too much pent-up opportunity for social good in ‘cowboy-land’ for the status quo to remain untouched.”

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Spotlight Unmissable industry coverage

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26 | NACFB Magazine

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Patron | profile

At the heart of everything we do is a mission to make mortgages better

Making mortgages better through sustainable funding

Matthew Tooth Chief commercial officer LendInvest

Having lent over £800m to property investors since its launch in 2013, LendInvest is one of the most active shortterm mortgage lenders in the UK.

So, what is LendInvest and what can it offer NACFB members and its clients? Providing short-term property finance to professional property investors and developers, LendInvest is a specialist finance lender built on years of sector expertise. The company began lending in 2013 after it was spun out of Montello Bridging Finance, the established short-term finance provider which had been launched in 2008 to fill a crucial funding gap for experienced borrowers during the credit crunch. At the heart of everything we do is a mission to make mortgages better. Whether that’s improving the mortgage application process or supplying funds to underserved creditworthy borrowers, LendInvest is committed to driving forward product and service innovation in the mortgage market to deliver a superior level of service to brokers and their clients. Today, LendInvest has originated over £830m of loans to landlords, investors

28 | NACFB Magazine

and developers for terms lasting one month to three years making it one of the UK’s most active short- to mediumterm mortgage lenders. At LendInvest, we are also committed to building sustainable and stable funding and today we manage a book close to £300m. We fund our loans from three principal sources spanning high-net-worth investors to major international banks, meaning that when we say we’ll lend, we will be able to do so confidently. When our model was tested during and after the Brexit vote, we continued to prove our capacity to deliver funds – a commitment that our brokers really value. Our products As the post-credit crisis market has evolved, bridging finance has become cheaper, more adaptable and more accessible. Yet it’s still not a default component of every broker’s portfolio of options to present to a client.

We develop products with one clear objective: to eradicate the one size fits all approach to bridging. Instead of directing borrowers to bridging finance, we’re fixed on bringing short-term loans to them, in the shape and size that they need it.

We currently offer six tailored products to our network of brokers and their clients: Auction finance – LendInvest auction finance offers borrowers a fast-tracked service that gives them the comfort they need that they’ll receive the finance they need within the 28-day completion deadline. Tier 1 residential bridging – Our most ‘vanilla’ bridging finance product lent against light refurbishment projects secured by first charge. Tier 2 residential bridging – Comprises the greatest part of our business, lending against properties that need

heavier than usual refurbishment or are a non-standard construction. Commercial bridging – Loans are made against semi-commercial properties, commercial properties and land. We have lent on a wide range from hotels to fish and chip shops under this banner and we always use the residual ‘bricks and mortar’ valuation here. Development exit – This loan was specifically designed for developers who have finished constructing, but have not yet sold all their units. Borrowers can switch from development finance to shorter-term, lower-cost, more flexible funding that suits their changing circumstances.

Plans for the future This year will be one of building on and consolidating the gains of previous years. Last year we launched LendInvest in northern England and Scotland – two regions where we see huge potential with increasingly liquid markets and resilient property prices. Brokers also can look forward to more launches of tailored, short-term products specifically designed to suit their clients’ needs and help complete even more good deals.

Short-term development finance – When traditional lenders aren’t able or incentivised to lend to small-scale, independent developers looking to build smaller schemes, the capacity of short-term lenders to fill the gap becomes vital.

NACFB Magazine | 29

Patron | profile

At the heart of everything we do is a mission to make mortgages better

Making mortgages better through sustainable funding

Matthew Tooth Chief commercial officer LendInvest

Having lent over £800m to property investors since its launch in 2013, LendInvest is one of the most active shortterm mortgage lenders in the UK.

28 | NACFB Magazine

NACFB Magazine | 29

Ask | the expert Answers and help from among the most knowledgeable of NACFB associates

We look forward to working with the NACFB to help every one of their members achieve their career objectives Martin Day, managing director, The London Institute of Banking & Finance

Why did ifs University College change its name to The London Institute of Banking & Finance?

In September 2016, after an extensive consultation process with our partners, stakeholders, students and wider community, we launched a new strategy for our organisation which included the introduction of a new name and brand: The London Institute of Banking & Finance. We intend this new brand to speak clearly and boldly to a national and international audience, as well as to finance professionals from across every sector of the banking and finance industries. It is to represent a clear and progressive distinction from our old ifs name and brand.

Beyond the re-brand, are you changing anything else in the organisation?

Of course a visual identity is only part of an organisation’s strategy and much work has already been undertaken to support this shift and to broaden our offering to members of all finance-focused organisations, including those within the NACFB. Chief among these is our new professional qualifications framework, which has been completely redesigned to be more attuned to the needs of professionals who require flexibility in their development activity. This not only fits in with their needs in terms of managing a positive work/life balance and accessing learning resources through a variety of online and offline channels, but is also firmly aligned with their employers’ objectives.

Q A

What is behind the change to these qualifications?

Having been responsible for the development and provision of the professional qualifications delivered by our organisation for a number of years, I have seen first hand the enormous changes that have swept through the banking and finance sectors, with many corporates now preferring more accessible and flexible programmes of study which focus on specific business areas, compared to the traditional generalist qualifications studied for up to three years that were undertaken previously.

Q A

When will you be launching the new framework?

Throughout the first half of 2017 we will be launching a new group of specialist qualifications, which place e-learning, on-demand assessment and flexibility at their core. For example, our recently launched Diploma in Asset Finance (DipAF) supports those working in the asset finance and leasing sector and can be completed in around 18 months, covering a multitude of industry-related topics. This means that busy professionals juggling work and study pressures can acquire the relevant skills and knowledge they need without it taking over their non-working lives.

Q A

How will these qualifications benefit career planning?

Alongside our approach to the development of new and flexible programmes such as the DipAF, we are retaining our principles and commitment

to academic rigour and are still offering support to those wanting to map out their career plans through more extensive programmes of study. We continue to offer our benchmark Certificate in Business Banking & Conduct (CertBB&C) and the higher level Diploma in Business and Commercial Banking & Conduct (DipBB&C) within the framework, allowing routes to the Professional Diploma in Banking & Finance and on to our coveted Chartered Associateship status for banking and finance professionals seeking to demonstrate their commitment to personal development and professionalism.

Q A

How do you think the change in approach will be received?

We are confident that our new professional qualifications framework will become a core element of The London Institute of Banking & Finance’s future, ready to support its students, stakeholders and the industry itself in the years to come. We look forward to working with the NACFB to help every one of their members achieve their career objectives.

Q A

Yes. It’s never a maybe with our bridging finance decisions When we say yes, we mean yes Once we agree a bridging loan, assuming nothing changes, it’s set in concrete. Final, done, dusted. We won’t change our minds or try to re-negotiate. We’ll just get on with making the background process as quick and simple as possible, so you can get on with what you set out to do.

For more information about our bridging products please contact us on 020 7036 2000 or email enquiries@masthaven.co.uk

Where can people go for more information?

For more information on The London Institute of Banking & Finance’s qualifications for finance professionals, visit our website www.libf.ac.uk

masthaven.co.uk Your property, provided as security for the loan, may be repossessed if you do not keep up with payments. 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). 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.

30 | NACFB Magazine

Ask | the expert Answers and help from among the most knowledgeable of NACFB associates

We look forward to working with the NACFB to help every one of their members achieve their career objectives Martin Day, managing director, The London Institute of Banking & Finance

Why did ifs University College change its name to The London Institute of Banking & Finance?

Beyond the re-brand, are you changing anything else in the organisation?

Q A

What is behind the change to these qualifications?

Q A

When will you be launching the new framework?

Q A

How will these qualifications benefit career planning?

Alongside our approach to the development of new and flexible programmes such as the DipAF, we are retaining our principles and commitment

Q A

How do you think the change in approach will be received?

Q A

For more information about our bridging products please contact us on 020 7036 2000 or email enquiries@masthaven.co.uk

Where can people go for more information?

For more information on The London Institute of Banking & Finance’s qualifications for finance professionals, visit our website www.libf.ac.uk

30 | NACFB Magazine

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

Consumer buy-to-let in 2017 what to expect Narinder Khattoare Sales & marketing director Kuflink Bridging

Looking into the future and giving predictions is at best presumptuous, and at worst sets up the commentator for ridicule if they get it wrong when we look back with the benefit of hindsight. However, from the perspective of a bridging lender, I shall endeavour to find a balance between guesswork and reality.

Consumer buy-to-let (BTL) as a sector will shrink in 2017 as the changes to stamp duty (already being felt) and those surrounding tax relief make the â&#x20AC;&#x2DC;amateurâ&#x20AC;&#x2122; landlord think twice about further investment or even whether the investment he or she already has is worth the effort. These are not the only issues facing the consumer sector. Changes announced by the Prudential Regulation Authority around underwriting standards will have a significant effect on sentiment among landlords. The regulator is insistent on making sure that customers are not being put in a position where sudden changes to interest rates or personal circumstances can cause problems. So, affordability and stress testing on interest rate movement will have a direct effect on loan approval levels. Allied to interest rate coverage ratios of between 125% and 145%, this means that while access to funding will remain strong, there will be far more enquiries refused than previously experienced. Every landlord, regardless of his or her portfolio ambitions, will also need to develop a more in-depth approach to analysing their potential return on investment. Obtaining easy yields is going to be more difficult, particularly early on, as the higher price of entry will also push set-up costs higher. With rental charges at their highest levels, trying to leverage even higher rents to cover the increase in costs could prove difficult, even though the shortage of rental properties for now remains in the landlordsâ&#x20AC;&#x2122; favour. One of the key elements for landlords is going to be location. For the more ambitious landlord, this means that if they want to find the best yields, they are going to have to look further afield, where the combination of rental income and property prices are still in their favour.

32 | NACFB Magazine

Would-be landlords can no longer expect to do a simple calculation on the back of a napkin to see whether they qualify for a BTL loan Ultimately, the success of the consumer BTL market in 2017 is going to hinge on the morale of landlords and their perception of whether BTL is still a good investment. The government has put enough fresh barriers in place to make potential investors reconsider the merits of becoming landlords. But with traditional forms of saving still significantly unattractive and potential interest rate rises threatened, I am sure that BTL will remain an important sector for investor consideration. Would-be landlords can no longer expect to do a simple calculation on the back of a napkin to see whether they qualify for a BTL loan. More importantly, the new rules and tax changes suggest that BTL can no longer be a place for hobbyists. This year will see existing landlords making some hard-nosed decisions about their existing portfolios and there will be fewer new part-time landlords. The days of easy pickings have come to an end.

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

Consumer buy-to-let in 2017 what to expect Narinder Khattoare Sales & marketing director Kuflink Bridging

32 | NACFB Magazine

SPECIAL FEATURES

Together urges specialist market to step up corporate responsibility Giving back to both charities and employees could boost the reputation of the specialist lending market, according to Marc Goldberg, commercial CEO at Together, who argued that the alternative sector was particularly well placed to benefit those less fortunate.

SPECIAL FEATURES

check in the fast-paced world we live in that it’s not all about targets and numbers.”

Last year, Together raised £26,000 to refurbish the bone marrow transplant unit at Royal Manchester Children’s Hospital.

Another of Together’s volunteering programmes ‘Let’s Make It Count’ spans six different areas, including community support, mentoring and environmental initiatives.

“Corporate responsibility is a huge part of reputation and the specialist lending sector needs to step up collectively in this area, as showing a greater commitment to giving back to the community won’t just help the individual firms involved, it will reflect on the whole sector,” Marc explained.

“We’ve been doing these things for a long time, but this year we’ve really put more emphasis on it and created more of a structure, and I’m really proud of the way our colleagues have reacted with a phenomenal response to our requests for help,” Marc added.

“The mainstream lenders have long recognised the importance of corporate responsibility, but we have so much opportunity in the specialist sector to come up with exciting and innovative ways to help.”

‘Beyond our walls’ This dedication to charitable causes was echoed by Clare Jupp, director of people development at Brightstar.

ith the help of its colleagues and broker partners, Together hosts a variety of fundraising events for its charity programme ‘Let’s Get Giving’.

Marc was quick to praise the broker community as “a really generous network”. He added: “It’s really important to give something back, and it’s often a reality

“…Our family extends ‘beyond our walls’, which means that we are committed to helping others either in a business sense, through community work or by charitable work.

“Annually, we ‘adopt’ one main company charity; this being selected on the grounds that it has a close personal connection with a team member.” Meanwhile, some specialist finance businesses go so far as to launch their own charity. In 1987, the founders of bridging and development lender Regentsmead set up Rosetrees Trust to support cutting-edge medical research across all areas of health and disease. The charity currently funds over 300 separate projects, ranging from basic laboratory research through to clinical studies testing new drugs. Sam Howard, chief operating officer at Regentsmead, insisted that “giving back to society is paramount” to the lender. “…It’s not only about giving part of its profits to Rosetrees, we share the same office space and the two teams

YOUR SPECIALIST FINANCE PARTNER

Marc Goldberg presents Royal Manchester Children’s Hospital with a cheque for £26,000

34 | NACFB Magazine

Brightstar named Investors in People Gold Employer of the Year

NACFB Magazine | 35

SPECIAL FEATURES

check in the fast-paced world we live in that it’s not all about targets and numbers.”

Last year, Together raised £26,000 to refurbish the bone marrow transplant unit at Royal Manchester Children’s Hospital.

Another of Together’s volunteering programmes ‘Let’s Make It Count’ spans six different areas, including community support, mentoring and environmental initiatives.

‘Beyond our walls’ This dedication to charitable causes was echoed by Clare Jupp, director of people development at Brightstar.

ith the help of its colleagues and broker partners, Together hosts a variety of fundraising events for its charity programme ‘Let’s Get Giving’.

Marc was quick to praise the broker community as “a really generous network”. He added: “It’s really important to give something back, and it’s often a reality

“…Our family extends ‘beyond our walls’, which means that we are committed to helping others either in a business sense, through community work or by charitable work.

YOUR SPECIALIST FINANCE PARTNER

Marc Goldberg presents Royal Manchester Children’s Hospital with a cheque for £26,000

34 | NACFB Magazine

Brightstar named Investors in People Gold Employer of the Year

NACFB Magazine | 35

SPECIAL FEATURES

Nevertheless, Marc suggested that charity work and staff development often went hand in hand.

work closely together sharing ideas and best practice,” he explained. “For the Regentsmead team to see the amazing research Rosetrees support and to hear the medical breakthroughs gives both an impetus and a perspective to the work.”

“…We have a learning and development team that focuses solely on helping our colleagues develop, and work with them to get the best out of them.

Big plans As well as helping those less fortunate, Clare stressed the importance of investing in one’s own staff. “It’s my opinion that high-quality professional development should be an entitlement of all employees, with organisations regarding successful training and development programmes as being vital to motivating and retaining valued employees.” In June, Brightstar was named Investors in People Gold Employer of the Year. Clare revealed that the firm offers staff ongoing training and development, including frequent coaching sessions and access to a full range of learning opportunities or qualifications.

Spotlight on: Buy-to-let

“Alongside that, however, we also offer colleagues a host of opportunities to get involved in our charity and community initiatives.”

It’s really important to give something back, and it’s often a reality check in the fast-paced world we live in that it’s not all about targets

Buy-to-let for a Limited Company?

Marc claimed that Together had “big plans” for charity work in 2017 and would continue to expand its focus on that area. “Let’s hope others feel the same.”

Alex Lynn Reporter Medianett

Whatever your client’s circumstances or property type, it’s likely we’ll have criteria to fit. With an expert team able to manually underwrite cases, we’re able to make common sense decisions in sensible time.

Together, powering UK businesses to grow

As a Buy to Let specialist, we could help with: • First charge prime rates under 7% up to 65% LTV • 5 year fixed rate option • Maximum loan size £500K • Limited Company applications • First and second charge mortgages • Interest only or repayment options • No maximum age • Only 120% rental coverage required, projected rent accepted

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36 | NACFB Magazine

Nick Jones National Sales Manager

Residential and commercial, first and second charge mortgages | Buy-to-let Bridging finance | Auction finance

This advertisement is intended for professional intermediary use only and must not be distributed to potential clients.

SPECIAL FEATURES

Nevertheless, Marc suggested that charity work and staff development often went hand in hand.

“…We have a learning and development team that focuses solely on helping our colleagues develop, and work with them to get the best out of them.

Spotlight on: Buy-to-let

“Alongside that, however, we also offer colleagues a host of opportunities to get involved in our charity and community initiatives.”

It’s really important to give something back, and it’s often a reality check in the fast-paced world we live in that it’s not all about targets

Buy-to-let for a Limited Company?

Marc claimed that Together had “big plans” for charity work in 2017 and would continue to expand its focus on that area. “Let’s hope others feel the same.”

Alex Lynn Reporter Medianett

Together, powering UK businesses to grow

Speak to Nick or one of the team on 0161 933 7103 or visit togethermoney.com/findmyBDM

To power your business call us today

01784 227322

hitachicapital.co.uk/business-finance

36 | NACFB Magazine

Nick Jones National Sales Manager

Residential and commercial, first and second charge mortgages | Buy-to-let Bridging finance | Auction finance

This advertisement is intended for professional intermediary use only and must not be distributed to potential clients.

Industry | guides Enhancing your sector knowledge

Books to inspire in 2017 As we settle into the new year and face the challenges and changes it brings about, it is easy to lose sight of motivation. With MyNACFB, members of the Association have an easily accessible resource to keep learning and developing professionally; and to help with this, we have asked some of our patron firms’ experts to present us with their most inspiring reads to help keep creative juices flowing as we head further into 2017.

Legacy: What the All Blacks Can Teach Us About the Business of Life by James Kerr Andy Hart Head of Investec Asset Finance Group Investec Although not strictly about finance, ‘Legacy’ addresses culture – a critical element of Investec’s identity. Some practical lessons from the book came up at our recent broker conference, where James Kerr was speaking. Five of those lessons in particular resonate with me: Adapt: when you’re on top of your game, change your game – Never be complacent, as an individual or as a business. The world is constantly changing and you need to keep being innovative, giving fresh ideas and inspiring those around you. Purpose: play with purpose – Don’t try to be all things to all people. Work to make a difference to the people around you. Stay grounded and never be too big to do the small things that need to get done. Pressure: keep a blue head – As a leader, clients, employees and shareholders look to you for support and help – this can create a lot of pressure and it’s something that I have learnt to deal with throughout my career. Ensuring that you have the right people around you helps you stay focused and drive things forward. Learn: create a learning environment – Leaders are teachers. A noblame culture of innovation and learning helps to drive businesses

38 | NACFB Magazine

forward. We pride ourselves on this at Investec – if mistakes are made, we learn from them and adapt for next time. Employees should feel empowered to make a difference. Legacy: write your legacy – For big firms, such as Investec, brand is the DNA of the organisation, therefore, it’s critical that the people you employ believe in your organisation, values and ethos – and this belief needs to be sustained. Financial services attract smart, young people who are driven and entrepreneurial. Leaders should create an environment that nurtures them and where everyone “leaves the jersey in a better place”, as James Kerr would say. The Intelligent Investor by Benjamin Graham Stephen Johnson Deputy CEO Shawbrook Although not directly linked to the mortgages industry, I read ‘The Intelligent Investor’ by Benjamin Graham several years ago and found it to be thought-provoking as well as useful in my everyday business life. The main emphasis of the book is that anyone working in finance should conduct deep, considered research into potential investments and business decisions – a longgame approach which prioritises stable growth over short-termism. This is a philosophy that translates well into our marketplace, especially considering the challenges we have encountered during the preceding 12 months around Brexit, the tax regime and the recent updates to affordability assessment.

Considering the book was originally written in 1949, its ongoing relevance demonstrates just how clever and forward-thinking a read this is. It was also described as “the best book that has ever been written on investing” by Warren Buffett. And if it’s good enough for Warren, it’s certainly good enough for the rest of us. The Long and the Short of It by John Kay Matthew Tooth Chief commercial officer LendInvest ‘The Long and the Short of It’ is John Kay’s most accessible book to date – a self-help guide for those fortunate enough to have surplus capital to invest, and who want to understand how to do this effectively themselves. Kay covers the theory and the reality of efficient markets, the relationship between risk and reward, and the corrosive impact of taxes and fees on investment returns. This is probably as good as it gets in terms of explaining portfolio allocation to an investment novice, and pointing out the pitfalls of believing that you will ever be any better than an average investor. What is missing from the book is recognition that time is money, and beyond the simplest strategies it often pays to use a professional adviser. Anyone considering to become a self-directed investor must consider the time and intellectual commitment needed to do this well. Regulation has greatly improved the standard of financial advice and the

anecdotes in the book about how people in the financial world have badly served customers are a little out of date, but there will always be some bad advisers and the warnings are well-intended, and will never be completely out of date. Ayrton Senna: The Hard Edge of Genius by Christopher Hilton Mark Stokes MD – commercial banking Metro Bank I first picked up Hilton’s biography of the Brazilian racing driver more than 25 years ago when, as a fresh-faced graduate, I first entered the world of work. Little did I know how many times I’d end up coming back to Hilton’s words. Every time I read the book, I’m amazed by how much of what made Senna so successful is transferrable to the world of business. Senna had a clear vision of not just what he wanted to achieve, but a relentless drive to succeed. It was not about just doing his best, it was about being the very best. Undoubtedly Senna had great talent, but this was coupled by sheer determination. He absorbed information and learned from others, incorporating the best into his own performance. That breadth and depth of experience is often underrated in business, but gives you the necessary judgement to make the right decisions. Perhaps the biggest lesson I learned from the book – and one that continues to guide me – has been the importance of having a plan that starts with where you want to be in

three years and works back. Short-term thinking only gets you so far – plan more and let your ambition, like Senna, carry you the rest of the way. Losing My Virginity by Sir Richard Branson Marc Goldberg Commercial CEO Together Sir Richard Branson is an inspiration to entrepreneurs and business people everywhere, and as someone who has seen first-hand the ups and downs of what it takes to make a business a success, I found his autobiography ‘Losing My Virginity’ to be inspiring. One of the main things I admire about him, which really came across in the book, is his ability to deal with challenges. From being dyslexic at school to facing huge financial losses, he never lets the obstacles overcome him. He’s resilient and tenacious and he’s not afraid to take risks. When you think of how contrary it was to take the word “virgin”, which was quite taboo at the time, and turn it into a brand, you can imagine the resistance he must have faced – yet look at it now! It’s instantly recognisable in a global market. He’s simply a master of branding and he knows when he’s on to a winning formula. He also recognises the importance of customer service and that’s something that resonates with us in the specialist lending sector, where customer outcomes are at the heart of all we do. He’s a pioneer and someone that can teach us all a thing or two, in business and in life.

NACFB Magazine | 39

Industry | guides Enhancing your sector knowledge

38 | NACFB Magazine

NACFB Magazine | 39

GUIDES

A guide to commercial loan servicing for both established and new lenders whereas for smaller lenders it may be uneconomic to employ someone for this task alone. It should be noted that all credit decisions are fully controlled by the lender, unless they choose to delegate tasks to the servicer.

Mark Caplan Managing director, commercial servicing Pepper Group After working for a major high street bank for 25 years, the last 15 of which were in real estate finance with the majority in loan restructuring, I took the calculated gamble in 2014 to exit the safe and familiar environment which I had known since leaving school. A short period later, I was offered a fantastic opportunity to establish a commercial loan servicing division at Pepper UK, who were already one of the country’s leading servicers of regulated residential mortgages. Since forming the new team, we have enjoyed huge success, growing to over 50 in numbers in two UK locations, and won more mandates than any of our competitors, with around 3,000 loans and £3bn of outstanding balances, secured by 8,000 properties. Much of our work has been on behalf of investors, servicing portfolios purchased primarily from banks. However, over the last year we have been spending increasing amounts of time talking with challenger banks, peer-to-peer platforms and crowdfunders, along with existing specialist bridging, development and more general commercial lenders. So why would organisations from all corners of the lending spectrum want to talk to a loan servicer? The short answer is that lenders are recognising areas where they do not excel and where the time and/or cost of enhancing their performance is potentially prohibitive. These include three distinct specialisations: loan administration (primary servicing), arrears management (special servicing) and technology platforms. Types of services Some lenders we talk to have very impressive new business pipelines, yet have less sophisticated procedures for monitoring those loans once drawn.

Finally, there is the lender’s technology platform. Lenders can, of course, choose to develop their own platform, but this can be expensive. We allow our clients access to our loan platform, which can negate the need for the lender to invest in creating and maintaining their own loan engine and CRM tool. These tasks are the core activities of the servicer and are commonly called primary servicing. While less glamorous than lending money, these activities are no less important – arguably more so. They include all post-drawdown activities from issuing welcome letters, collecting all funds due, chasing covenant information or updating customer data to issuing statements and managing redemptions. We also provide customer service to the borrowers, such as confirming balances, producing statements and addressing general enquiries. Having someone concentrate on these core activities means the lender can spend time generating new business. Our staff also spend time with the originator’s business, getting to know them and taking the time to appreciate the desired customer experience. Another attractive option is known as white-label servicing. Here we service and communicate to the borrowers in the name of the lender, so the borrower is unaware that a servicer has been appointed to manage their loan. Another area of activity is special servicing, which involves managing loans not performing as expected. We have considerable experience here, having dealt with £1.5bn of non-performing loans in the last 24 months, showing our ability to maintain a large pool of skilled people who specialise in this work;

A FS GROU P

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So a servicer can help a lender by:

SUPPORT

Dealing with loan administration, enabling them to concentrate on core business activities Managing cases in arrears in which it will usually have more resource and skills than the lender Providing a proven technology platform. The costs of loan servicing One might suspect the cost of loan servicing for a smaller/challenger lender could be prohibitive. Most lenders are surprised at how costeffective a servicing solution is, particularly when clients factor in the savings in people and technology investment costs, the benefits of being able to focus on growing their business and the comfort the regulator will take from knowing they have appointed a third party to support them in these specialist areas. So, if you’re an established or growing lender, or one starting out with big plans, a loan servicer may be able to help you achieve your goals.

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Debate | the burning issues Two Patrons discuss the hot topics affecting the industry

How does the industry weigh in on P2P regulation? Regulation must reflect consistency and integrity Tony Hedger Director of sales Peer Funding Limited How far will the FCA changes go? It’s clear from the interim feedback published by the FCA with regards to the rules of crowdfunding that change is required. While we think we understand peer-to-peer (P2P), it can mean any number of different business models, and the need for change is driven by the review of platforms which are yet to complete the migration from interim to full permission for the regulated activity of advising on investments. What change brings to the sector We have yet to see whether these changes will stifle the sector or add further validation, consistency and professionalism. However, they will undoubtedly reflect the need to protect private investors and the way they engage with the sector. The importance of a consistent and level playing field for investors across all platforms cannot be underestimated. While the review has focused mainly on investors, it’s fair to say the same principles of consistency, product integrity and client engagement apply

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to borrowers too, and in the case of peerfunding.co.uk, professional advisers and their business clients. Competing with the high street For P2P to compete with the high street on level terms, NACFB members and their clients need to see there is consistency across the market, that products are designed to service their needs, and that they are engaging funders via a platform that acts in a regulated manner. Peer Funding Limited only accepts introductions from NACFB members or professional regulated bodies for good reason. We need to know that client engagement standards are high and codes of conduct are followed. This gives us consistency and professionalism. For NACFB members, dealing with peer-to-peer platforms that are regulated is just as important, offering the same consistency and professionalism in return. The positives of regulation Bringing all platforms within the same regulatory framework is good for the sector, across advisers, borrowers and investors. Indeed, many NACFB members also have connections with investor groups, and would only be prepared to recommend P2P through a fully regulated platform that operates in a similarly disciplined manner to their own approach to business.

It is important to recognise that there is huge scope for the expansion of P2P business lending. If private investor confidence and understanding towards the sector increases, regulation should help reinforce and boost confidence. Similarly, the introduction of products such as invoice finance and the Innovative Finance Isa to private investors should offer opportunities to make the sector more relevant and appealing. Tony Hedger, sales director at Peer Funding, stated: “It is policy within Peer Funding to only deal with introductions from NACFB-registered and FCA-authorised brokers. This means we know the adviser is always acting in a responsible and consistent way towards their clients, and we understand the importance to NACFB members of working with a platform authorised by the FCA.” Peer Funding Limited is a business debt platform and gained full authorisation from the FCA in summer 2016. It offers a full range of property, business and invoice finance facilities at www.peerfunding.co.uk

It’s time for P2P lenders to embrace change John Clifford Managing director Central Bridging Having run successful finance companies across a wide range of regulatory environments for over 30 years, my attitude towards regulation has been unstinting across those three decades. Especially having worked more recently as a compliance officer under first the Financial Services Authority (FSA) and then the Financial Conduct Authority (FCA), my philosophy can be encompassed in just two simple words: embrace change. The journey of P2P Since the launch of the first peer-topeer (P2P) lender in 2005, the P2P and crowdfunding sector has seen rapid growth, first really taking off as banks withdrew lending during the financial crisis. The government was quick to spot the potential for P2P to fill a funding gap and has proactively encouraged first P2P lenders and then investment-based crowdfunding platforms as an additional source of capital for new businesses. In 2014, the year when the FCA’s current rules on loan- and investmentbased platforms first came into force, we saw P2P and crowdfunders account for loans, investments and donations totalling £1.7bn. By 2015 this number had all but doubled to £3.2bn. Perhaps anticipating this impressive growth, the FCA had made it clear from the point of implementation that it planned to review the new regulatory framework as early as 2016 to see whether any further changes would be needed.

Any possibility that this provisional timetable might be subject to slippage were effectively erased in February 2016 when Lord Adair Turner, former chairman of the FSA from 2008 until its abolition in 2013, made a suggestion on the future of the sector: “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the worst bankers look like lending geniuses.” If this statement was intended to force the FCA’s hand, it certainly had the desired effect with an announcement being made as early as July 2016 that the regulator was making good on its earlier commitment to review the market. Anticipated changes With the recent conclusion of this sixmonth review, it is little surprise that the FCA is proposing tougher rules on disclosure and transparency for both P2P loan providers and crowdfunded equity schemes in 2017. The likely changes can be summarised: It will be made easier for investors to understand the risks and returns of crowdfunding (the term the FCA tends to use to cover both P2P and crowdfunders) It will be made easier for investors to compare different platforms Financial promotions will always need to be “clear, fair and not misleading” Complex structures introducing new risks and potential conflicts of interest will need to be better explained

Tighter rules will be laid down to cover how lenders handle clients’ money Wind-down plans, in the event that a lender goes bust, will be made more resilient Consequently, the crowdfunding industry as a whole waits to hear the FCA’s precise next steps in 2017, but it need not fear change. It simply has to embrace it. What’s next? Lord Turner’s apocalyptic vision can be averted. The crowdfunding industry has been a tremendous force in the UK economy for hard-pressed savers and small businesses alike. Of nearly 400 applications to the FCA, less than 20 lenders are fully authorised, suggesting that entry requirements since 2014 are already pretty stringent. With the launch in early 2016 of the Innovative Finance Isa, the opportunities for fully authorised lenders to attract a new wave of investors are significant, but it’s vital those trusting in the Isa brand are not let down. Now is the time for P2P and crowdfunders with their undoubted IT, technical and innovative strengths to ensure they have the lending and compliance professionals to complement existing in-house skill sets. Enhanced regulation with stronger investor protection at its core should be seen as the ultimate stamp of approval. Those that embrace the new regime will thrive; those that fail to do so will not be missed.

It will have to be made clearer to investors that provision funds are not being covered by the government’s deposit protection scheme – risks will need to be adequately disclosed and understood by investors

NACFB Magazine | 43

Debate | the burning issues Two Patrons discuss the hot topics affecting the industry

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NACFB Magazine | 43

Opinion | & commentary Thought leadership from our patrons and members

Credit crunch: surviving uncertainty a decade on Noel Meredith Executive director United Trust Bank This year marks the 10th anniversary of the start of the credit crunch. On 9th August 2007, the European Central Bank and the US Federal Reserve took emergency action and injected a combined $90bn into financial markets in an attempt to encourage more lending between banks. Just over a month later, Northern Rock sought and received liquidity support from the Bank of England and we saw the first run on a UK bank in 150 years. A year later, on 15th September 2008, Lehman Brothers filed for Chapter 11 bankruptcy protection in the US. Looking back, 2007 was the first of several years of significant economic and political uncertainty for banks, businesses, governments and individuals. Ten years later the formal start of the Brexit process heralds a new period of uncertainty. Whatever your position on Brexit, it has become apparent that the more extreme predictions for the aftermath of a leave result have not materialised; not yet, anyway. There was a brief period immediately following the referendum when activity stalled, almost certainly caused by people taking stock of what was a surprise result. However, the lull did not last for long. From a United Trust Bank (UTB) perspective, within just a few weeks we were back to pre-referendum enquiry levels and not long after that our

development finance team was busier than we’ve ever been before. We deduced that some lenders had either withdrawn from the sector or become significantly more cautious. This resulted in those lenders that assessed and acknowledged the new risk – and like UTB remained open for business – taking a bigger share of the market. Subsequently we completed another record year. Demand still outweighs supply Although Brexit will create uncertainty, there are some fundamental factors which have not been negatively impacted by the leave result. There’s still a chronic shortage of new homes being built in the UK, mortgage interest rates remain low and the government continues to encourage new home ownership through the Help to Buy equity loan scheme. There are now more than 30 mortgage lenders offering loans of up to 95% LTV without government backup, hence the recent closing of the Help to Buy mortgage guarantee scheme, which the Bank of England no longer deemed necessary. In terms of market confidence, most house price experts seem to predict modest price growth in mainstream markets for the next few years, and the recent announcement by housing minister Gavin Barwell of plans for three new garden towns and 14 new garden villages suggests that the government will not leave the housing shortage unchecked. If further improvements to the dysfunctional planning system materialise, there will be even more reason to celebrate – particularly for SME developers.

There is, however, an element of the development process that will need careful attention. Build costs will almost certainly rise due to the weaker pound increasing the cost of imported materials, and a possible tightening of immigration restrictions could exacerbate the shortage of construction labour, leading to higher wages. Although developers have some say over their pricing, they are ultimately governed by what the market will pay for their product, so a tight control of costs is paramount. This should not, however, become an excuse to stop building. An opportunity As the credit crunch presented challenges to banks and businesses, so will Brexit. Those who accept that uncertainty is part and parcel of change and have the confidence in their own experience and judgement to maintain their course – unfazed by the doomsayers – can prosper. Despite the economic turmoil brought about by the credit crunch, UTB continued to support developers, businesses and individuals by lending throughout. It has, in fact, increased its lending every year since 2007. Ten years on, and with a new set of challenges ahead, we stand side by side with those who see opportunity rather than threat.

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Opinion | & commentary Thought leadership from our patrons and members

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BRIDGING FINANCE OPINION & COMMENTARY

Maximising portfolio value while adapting to buy-to-let changes Gareth Lewis Director of bridging Precise Mortgages The introduction of comprehensive interest coverage ratio (ICR) and affordability tests by the Prudential Regulation Authority (PRA) to ensure more robust underwriting standards will, I believe, have far-reaching implications for the buy-to-let (BTL) market.

Short term financing to bridge the gap

These, coupled with the introduction of a stamp duty surcharge and the announcement that tax relief on BTL mortgages will be cut back to 20% by 2020, means 2017 will be a challenging year.

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Although it’s difficult to say with any certainty what the long-term effects of the changes will be, I believe that enterprising landlords and their brokers working together can still find ways to maximise the value of a property portfolio. It will be more important than ever for brokers to really get to know their customers and find out all they can about their income position and what they want to achieve in the future.

Our bridging finance could help your customer get a quick solution to their short term borrowing needs. Regulated and Property Investor bridging products available mortgages based on the enhanced value of the property. We provide products for experienced landlords who want to improve or extend their portfolio, as well as for customers who want to use their residential property as security to raise funds.

As one door closes, another one opens. With the BTL market set to contract, I think more and more customers will explore houses in multiple occupation (HMO) as an alternative to the more traditional BTL property. Bridging loans are ideal if a customer needs a flexible, short-term solution, particularly if they want to convert an existing property into an HMO. Our use of automated valuation models can help to provide a quick turnaround, which could be crucial when trying to buy a property at auction while waiting for another to sell. Precise Mortgages offers a wide range of bridging products, all of which offer the opportunity to move on to long-term

46 | NACFB Magazine

With the BTL market set to contract, I think more and more customers will explore houses in multiple occupation (HMO) as an alternative to the more traditional BTL property

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Landlords should consider how they can add value to the portfolio they’ve got. They should look at where their properties are located and explore the local demographic. Is it an area where there are a lot of students, or is it somewhere that professionals might look to rent a room in a house, rather than a whole house or a flat? Whether it’s a light refurbishment or something more extensive – for example, turning a single residence into multiple units – the more value they can add to a property the better.

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Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549). Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

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We could see an increase in the number of bridging loans taken out in 2017 as canny landlords start looking at properties they already own, to see if there is an opportunity to convert or refurbish them to maximise their rental returns.

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BRIDGING FINANCE OPINION & COMMENTARY

Short term financing to bridge the gap

These, coupled with the introduction of a stamp duty surcharge and the announcement that tax relief on BTL mortgages will be cut back to 20% by 2020, means 2017 will be a challenging year.

We have a product for that

46 | NACFB Magazine

With the BTL market set to contract, I think more and more customers will explore houses in multiple occupation (HMO) as an alternative to the more traditional BTL property

0% facility fee products Joint legal representation

Call us

0800 116 4385

Visit us

precisemortgages.co.uk

FOR INTERMEDIARY USE ONLY.

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AVMs (Automated Valuation Model) save time and money

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