NACFB Magazine - May 2018 by NACFB

Issue 58 May 2018

The magazine for the National Association of Commercial Finance Brokers

Women in Finance Charter

Challenging our industryâ&#x20AC;&#x2122;s gender imbalance In this issue

GDPR

Seven signs your business is ready

Asset finance trends

Market sentiment and the road ahead

PBSA

Helping your client enter the student accommodation sector

Finance expertise for healthcare professionals

ive months into the year and I suspect that we are all looking at our plans for 2018 to assess how we are performing. Having been in post for nearly a year, it is an appropriate time to think about where we are as an association and whether we are ticking the boxes for our Members and Patrons. Feedback is in plentiful supply, and my interpretation is that we have managed to get a number of things right, but the journey continues and there are still Members who are not fully engaged or understand how membership of the Association delivers material benefits to their business. This despite delivering a significant number of events already this year. So maybe we are still behind the curve in sharing some of the things we are doing on your behalf. While this is not a comprehensive list, we have taken up matters such as broker agreements, where we have seen clauses which put our Members in an unfair situation with regard to respective liabilities and responsibilities in a broker-lender relationship. We have also backed our Members where vehicle dealers refuse to accept third party invoices. Our legal partners have advised us of the appropriate wording to combat this protectionist approach. I am not saying that this has proved to be a perfect solution, but we are endeavouring to redress the balance where an individual broker is seeing their business being diluted on a regular basis.

As a provider of finance to the healthcare sector for over 20 years, we tailor funding for medical and non-medical assets to help your customers meet the demands of today and prepare for a successful future. Whether your customer needs finance for a retinal scanner, a practice refit, HMRC bills or a partner buy-out, speak to our dedicated healthcare broker team today.

Welcome | NACFB

Together

0345 604 0984 healthcare@shawbrook.co.uk shawbrook.co.uk/healthcare

THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS

For both these cases it is fair to say that they are still work in progress, but we are working hard to be your voice and create a level playing field where we can. Until next month, Graham Toy, CEO, NACFB

Graham Toy CEO NACFB

In this May issue NACFB News 4-6 6 8-9

In the news Notes from our sponsor Six reasons to attend the CFE this year 10-12 Women in Finance Charter

Compliance Update 14-15 Seven signs your business is GDPR-ready

Commercial Finance 16-17 Essential news bites

Top Story 18-19 Commercial lending suffers surprise drop as fallout from Carillion collapse continues

Introducing 20

Hampshire Trust Bank launches increased LTV on buy-to-let and HMO products

Ask the Expert 30

Paul Harrison

Special Features 32-34 Can SME positivity continue in asset finance? 36 Tech adoption: how fast should you go? 38-40 The sculptor of finance

Industry Guides 42 44

Clearing up confusion around invoice finance Helping your client enter the PBSA market

Opinion & Commentary 46 48 50

The challenges of expanding a business Innovation doesnâ&#x20AC;&#x2122;t just mean radical change How weâ&#x20AC;&#x2122;re drastically reducing decision times

Case Studies 22

Fast funding for toy manufacturer after unexpected order 24-25 20-year auction loan in less than 20 days 26 Leaping guarantee hurdles for fast development repayment

Patron Profile 28-29 Kingsway Asset Finance

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

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

SB/BF/HF/BROKER/210318/01

NACFB Magazine | 3

Finance expertise for healthcare professionals

Welcome | NACFB

Together

0345 604 0984 healthcare@shawbrook.co.uk shawbrook.co.uk/healthcare

THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS

Graham Toy CEO NACFB

In this May issue NACFB News 4-6 6 8-9

In the news Notes from our sponsor Six reasons to attend the CFE this year 10-12 Women in Finance Charter

Compliance Update 14-15 Seven signs your business is GDPR-ready

Commercial Finance 16-17 Essential news bites

Top Story 18-19 Commercial lending suffers surprise drop as fallout from Carillion collapse continues

Introducing 20

Hampshire Trust Bank launches increased LTV on buy-to-let and HMO products

Ask the Expert 30

Paul Harrison

Special Features 32-34 Can SME positivity continue in asset finance? 36 Tech adoption: how fast should you go? 38-40 The sculptor of finance

Industry Guides 42 44

Clearing up confusion around invoice finance Helping your client enter the PBSA market

Opinion & Commentary 46 48 50

The challenges of expanding a business Innovation doesnâ&#x20AC;&#x2122;t just mean radical change How weâ&#x20AC;&#x2122;re drastically reducing decision times

Case Studies 22

Fast funding for toy manufacturer after unexpected order 24-25 20-year auction loan in less than 20 days 26 Leaping guarantee hurdles for fast development repayment

Patron Profile 28-29 Kingsway Asset Finance

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

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NACFB Magazine | 3

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

Selected news, straight to your inbox The NACFB now provides all Members and Patrons with a daily round-up of news, relevant to your business and the wider commercial finance community. The free daily summary is delivered to your email inbox first thing every weekday and is an excellent way to keep abreast of developments throughout the sector. We all know that receiving multiple news emails throughout the day clogs up your email inbox, so the

Tackling concerns over third-party invoicing NACFB Members and Patrons operating in the vehicle finance space have informed the Association that some vehicle dealerships have been refusing to issue invoices unless the customer uses either their in-house finance, captive finance, or another lender who has been specifically approved by the car dealership. On behalf of our Members, the NACFB approached and opened dialogue with both the Competition and Markets Authority and the FCA, outlining that such a restriction of competition by any dealership is reducing choice and, more importantly, increasing costs for consumers. It is also our belief that some dealers are misleading customers that the practice in question is in some way driven by, or in adherence with, FCA rules. While the dialogue continues, the NACFB has now produced bespoke communication in conjunction with our lawyers for Members to submit to dealerships alongside existing TOBAs. This letter can now be downloaded from the NACFB Compliance portal’s model office. If a dealership informs the customer that they are unwilling to invoice their preferred finance provider or

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NACFB Morning Briefing collates the latest industry updates from throughout the commercial finance sector and provides you and your team with a concise overview – the ideal way to kick-start your working day. The free round-up is available exclusively to NACFB Members and Patrons. You can opt in to the daily distribution by emailing Kieran at kieran.jones@nacfb.org.uk

pay by cash, the letter can be used to state that cash is not the customer’s preferred funding route and they want to purchase the asset using finance. It also draws attention to the areas where such practices do not meet FCA requirements, and clearly states areas where breaches occur.

consumers use their services, which in turn could change the way that the traditional broker model works.

We are keen to ensure that those operating in the asset finance space can conduct their businesses in a fair manner.

With little more than a month to go until the Commercial Finance Expo of 2018, the full agenda for the day has taken shape. The day will see a series of expert speakers, as well as panel and interactive discussions.

Royal Bank of Scotland hosts first NACFB event The Royal Bank of Scotland hosted its first event with the Association in Edinburgh on 28th March. The event provided an opportunity for brokers to ask questions and expand their knowledge in several key areas. The day saw insight on a number of topics from in-house experts, including the economic outlook in Scotland, the impact of GDPR and the developing partnership with the NACFB. Since the Royal Bank of Scotland reentered the broker market two years ago, it has focused its efforts on developing the right proposition for customers while strengthening relationships. One of the key issues discussed on the day was the anticipation of disruption to the marketplace from the introduction of open banking. The team shared how they are seeing changes in the way that

A full house.

Full CFE agenda now available

Among the speakers will be Rhys Herbert, economist at Lloyds Bank, offering his expert view on what lies ‘Beyond Brexit’ for the commercial finance industry. Elsewhere, Ben McBean, a 30-year-old double amputee who survived stepping on a Taliban landmine in 2008, will share his insight on building a £4m property portfolio in just four years. The full range of topics can be found on the Expo website – of which one of the most important will be the changing dynamics of the lender-broker relationship. With the commercial finance landscape evolving at pace, how will modern finance professionals balance the increasing use of technology while safeguarding traditional, personal relationships? To join this debate and have your say, register for this year’s event via www.commercialfinanceexpo.co.uk

Give yourself the best hand to play with our extensive range of property finance.

Call us on 0203 846 6809 or visit intermediaries.lendinvest.com. LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). ICO number ZA179467. Your client’s property may be repossessed if they do not keep up repayments on their mortgage. For intermediaries only.

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

4 | NACFB Magazine

consumers use their services, which in turn could change the way that the traditional broker model works.

We are keen to ensure that those operating in the asset finance space can conduct their businesses in a fair manner.

A full house.

Full CFE agenda now available

Give yourself the best hand to play with our extensive range of property finance.

NACFB NEWS

What’s included in your PI cover?

n general terms, your professional indemnity (PI) insurance covers claims brought by clients against you, the broker. The claims cover any financial losses the client suffers as a result of any incorrect advice provided by the broker. PI cover for IFAs, mortgage brokers and commercial finance brokers routinely excludes claims brought by lenders – the reason being that any losses sustained by lenders should be at their own risk and they should mitigate this through their own proper due diligence with potential customers. The NACFB PI policy included a similar exclusion – however, we have now negotiated enhanced cover from which all Members will benefit as they fall due for renewal through 2018. In its essence, the NACFB PI policy will now cover claims brought by lenders, if the loss suffered by the lender was due to the advice given by the commercial finance broker to the client.

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

he latest results from the March 2018 Lloyds Bank business barometer have shown an increase in both business confidence and economic optimism among UK companies since Q4 2017. This has perhaps been driven by progress on Brexit negotiations after agreement to a transitional period for the EU and the UK that will last until the end of 2020, providing greater certainty for businesses after the UK leaves the EU.

NACFB Members are welcome to arrange their own insurance and provide evidence that they have done so, or we can arrange it for you through our competitively priced NACFB Insurance Services.

However, fluctuations in confidence remain, and this uncertainty reiterates the need for us to work closely with commercial finance brokers to ensure your clients can access the products, services and banking relationship that best support their business ambitions in the months and years ahead. That’s why, in Q1 alone, we sanctioned over £350m in new lending for SME businesses through commercial finance broker referrals, and increased invoice finance deals by over 30% year-on-year. Furthermore, despite the market contraction of 1% in asset finance lending in February compared with the same period in 2017, we have grown our asset finance lending by 25% year-on-year. In 2018, Lloyds Banking Group remains committed to providing £2bn in net lending growth to SMEs and mid-market businesses, and since 2011 it has grown its net lending to SMEs by 32% while the market has contracted by 12%.

If you would like more information, please contact the team via admin@nacfb.org.uk

We are proud to be recognised for our willingness to lend and the breadth of product solutions we

There remains no cap on how much a compensation claim can be in the UK. This means any claim against a broker could be hundreds of thousands, even millions of pounds. Our block PI cover can protect you against claims for compensation for financial loss suffered by your customers. Even if a court case is unsuccessful, the policy covers you simply for the cost of defending yourself. The NACFB will always ensure its Members hold PI insurance up to an appropriate value for the business they write. This is one of the many reasons an SME will choose an NACFB broker, as it gives them the reassurance that their broker is covered if anything goes wrong.

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can offer brokers and clients, and are delighted that this continues to be acknowledged by the industry. The Lloyds Bank invoice finance team has recently been awarded the ‘Innovation in Market Development’ award for the invoice finance broker proposition in the Business Money Receivables 2017 awards. This is all part of the commitment we have made to supporting UK SMEs through stronger relationships with commercial finance brokers. To help enable this commitment, we are working closely with the NACFB this year to bring the extensive banking capability and experience of Lloyds Bank to its Members. Looking ahead to the Commercial Finance Expo in June, I’m delighted to announce that alongside Lloyds Bank product specialists in invoice and asset finance – as well as representatives from Lloyds Bank SME – we will also be joined by Rhys Herbert. As a senior economist at Lloyds Bank Commercial Banking, Rhys is responsible for analysing trends in the UK and other major economies, and will be presenting a keynote address entitled ‘Beyond Brexit’. Rhys will be sharing his thoughts on issues that brokers should be aware of following the UK’s separation from the EU. This will include a forecast overview of the economy, and how Brexit may impact the different sectors NACFB brokers work across – including bridging, commercial mortgages and development finance.

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

#CFE2018

130+ exhibitors & 1500+ attendees

Professional seminar and workshop series

UK’s largest commercial finance event

Exclusive NACFB Member’s lounge & networking area

NACFB NEWS

What’s included in your PI cover?

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

NACFB Members are welcome to arrange their own insurance and provide evidence that they have done so, or we can arrange it for you through our competitively priced NACFB Insurance Services.

If you would like more information, please contact the team via admin@nacfb.org.uk

We are proud to be recognised for our willingness to lend and the breadth of product solutions we

6 | NACFB Magazine

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

#CFE2018

130+ exhibitors & 1500+ attendees

Professional seminar and workshop series

UK’s largest commercial finance event

Exclusive NACFB Member’s lounge & networking area

NACFB NEWS

Six reasons to attend the CFE this year

he NACFB Commercial Finance Expo returns to the NEC in Birmingham for the ninth year on Wednesday 20th June 2018. Located strategically in the centre of the UK, the show is the largest in the industry, attracting visitors across the length and breadth of the nation. After the success of the 2017 event, the show is returning to Hall 3A and will be open from 9.30am until 4.30pm. The event is free to attend and open to anyone with an interest in commercial finance. This year’s event is bigger and better, with more exhibitors than ever before, and we welcome Lloyds Bank, LendInvest, Funding Circle, Shawbrook Bank, Just Cash Flow and LeaseTeam as our show sponsors.

The annual NACFB conference will take place in the show conference area – sponsored by Lloyds Bank – and boasts a comprehensive timetable. Expert insight and perspective will come from Rhys Herbert, senior economist at Lloyds Bank, who will be looking ahead at the commercial finance sector beyond Brexit. Lenders and brokers will also be discussing the future of the buy-to-let and peerto-peer sectors, alongside other key issues impacting the industry in 2018. In addition, we have the Meet the Expert sessions – this year provided by the NACFB support sponsors – covering all aspects of the commercial finance sector, including asset, bridging, buy-to-let, cash flow, commercial mortgages,

development and factor & invoice finance. Come along to meet with Aldermore, Barclays, Funding Circle, Hitachi Capital Business Finance, InterBay and Together. For the first time this year, we are introducing a dedicated show app and it will be your pocket assistant for the day. You will be able to view the full list of exhibitors and schedule appointments with lenders, as well as navigate around the show with the interactive floor plan. You will also be able to post questions for the panel discussions. The app is available to download now via the Apple App or Google Play stores.

Just in case this isn’t enough to tempt you, here are our top six reasons to attend the NACFB Commercial Finance Expo this year:

Build your business and network face-to-face with industry leaders

With over 130 exhibitors confirmed, representing all sectors of the commercial finance industry, the NACFB CFE is the best place to develop and enhance business relationships. We are welcoming a number of new faces to the exhibitor list this year, including some new NACFB Patrons attending for the first time. The full list of confirmed exhibitors can be found on the event website. The CFE is the perfect opportunity to introduce yourself and be re-acquainted with familiar faces.

Participate in the panel discussions and have your voice heard

With the introduction of the show app, you will be able to browse the full agenda and actively get involved in the discussions. Submit your questions 48 hours prior to the event and our panellists will discuss the issues raised by you. You can also view questions already submitted and vote for the ones you wish to be answered on the day.

Meet the NACFB team…

Visit stand B06 and meet the NACFB to discover how the industry’s flagship trade body can help you and your business. Find out about upcoming events, workshops and receive advice on how to make the most of your NACFB membership. The senior management team will be on hand all day and will be actively looking for your thoughts and input on how to best steer your association in the future.

#CFE2018 130+ exhibitors & 1500+ attendees

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

Professional seminar and ork op series UK’s largest commercial finance event

Exclusive NACFB Member’s lounge & ne orkin area

8 | NACFB Magazine

…and NACFB Compliance

The NACFB Compliance team will be attending alongside the NACFB team on stand B06 and will be available to chat to on the day. Gain access to information on a range of compliance and regulatory issues and hear about the full suite of services available to you as part of your membership package.

Do business and have fun!

While the primary purpose of the CFE is to conduct business and discover about new products, it’s also a place to engage with other brokers in the industry. The networking café in the centre of the hall, sponsored by Shawbrook Bank, provides you with an opportunity to relax and speak to your colleagues within the industry. As ever, our exhibitors are coming up with new ways to entertain you – look out for mocktails, ice cream and a bar, to name just a few.

Hear from market experts

Attend the NACFB conference and the Meet the Expert sessions to hear all the latest news and the issues impacting our industry.

Andrina Dhillon Events manager NACFB

NACFB Magazine | 9

NACFB NEWS

Six reasons to attend the CFE this year

Just in case this isn’t enough to tempt you, here are our top six reasons to attend the NACFB Commercial Finance Expo this year:

Build your business and network face-to-face with industry leaders

Participate in the panel discussions and have your voice heard

Meet the NACFB team…

#CFE2018 130+ exhibitors & 1500+ attendees

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

Professional seminar and ork op series UK’s largest commercial finance event

Exclusive NACFB Member’s lounge & ne orkin area

8 | NACFB Magazine

…and NACFB Compliance

Do business and have fun!

Hear from market experts

Attend the NACFB conference and the Meet the Expert sessions to hear all the latest news and the issues impacting our industry.

Andrina Dhillon Events manager NACFB

NACFB Magazine | 9

NACFB | cover story

Women in Finance Charter

Challenging our industry’s gender imbalance

n line with government regulation introduced in 2017 – the first of its kind in the world – businesses and public organisations with 250 or more employees were required to publish data on gender pay gaps within their firms by early April 2018. The release of the data is just one of the many signs that the discussions around creating a balanced workforce and gender diversity are intensifying. According to the data, the average gender pay gap in the construction and finance sectors are highest between 20% and 28% respectively. To ensure the conversation continues, business minister Andrew Griffiths wrote to the executives and chairs of FTSE 350 companies following the pay

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gap reporting deadline in April, urging them to tackle the lack of presence of women in corporate Britain – forming part of the government’s efforts to address the imbalance. The Women in Finance Charter The Women in Finance Charter was created following a governmentinitiated review into the representation of women in senior management in financial services. Based on the outcomes of this work, the charter has evolved into a pledge for gender balance across financial services. It is a commitment by HM Treasury and signatory firms to work together to build a more balanced and fair industry, and reflects aspirations to see gender balance at all levels across financial services firms.

The charter commits firms to supporting the progression of women into senior roles in the financial services sector by focusing on the executive pipeline and the mid-tier level recognises the diversity of the sector and that firms will have different starting points – each firm should therefore set its own targets and implement the right strategy for their organisation requires firms to publicly report on progress to deliver against these internal targets to support the transparency and accountability needed to drive change.

Over 200 major financial institutions – including a number of NACFB Patrons – have now signed up to the charter, with many of the biggest high street banks in the first tranche. Signatories are asked to commit to: nominating one member of the signatory firm’s senior executive team who is responsible and accountable for gender diversity and inclusion setting internal targets for gender diversity in senior management publishing progress annually against these targets in reports on the firm’s website having an intention to ensure the

pay of the senior executive team is linked to delivery against these internal targets on gender diversity.

Over 200 major financial institutions have now signed up to the charter, with many of the biggest high street banks in the first tranche

Since the launch of the charter, 120 signatories have committed to having at least 30% women in senior roles by 2021 and of these, 40 have committed to a 50/50 gender split in senior roles by 2021. Bold diversity targets are also being introduced by UK lenders. NACFB Patron NatWest announced a £150m fund in March, specifically for women-led SMEs throughout the UK to mark International Women’s Day 2018. The move is part of NatWest’s plan to boost female entrepreneurship and become the best bank for women-led companies.

NACFB Magazine | 11

NACFB | cover story

Women in Finance Charter

Challenging our industry’s gender imbalance

10 | NACFB Magazine

pay of the senior executive team is linked to delivery against these internal targets on gender diversity.

Over 200 major financial institutions have now signed up to the charter, with many of the biggest high street banks in the first tranche

NACFB Magazine | 11

NACFB NEWS

The NACFB Magazine approached several leading women in the commercial finance space for their thoughts on diversity in the industry, the initiatives they feel are working and what more can be done.

Rhiannon Carpio Commercial partnerships manager Merchant Money “Despite my first few years in finance being headed up by a strong female MD and senior management team, by the time I had moved into business development this didn’t translate to the wider market. “Out of 400+ brokers in 2008, less than a handful were women. As I progressed, fewer and fewer of my coworkers were female. The challenge is not making finance more attractive at the start of your career; it is creating an environment for growth. It’s changing cultures so that women are not systematically at a disadvantage after having children, or the further up the ladder they go.” Lynsey Hancock Strategic delivery manager Clydesdale & Yorkshire Bank “I have worked with CYBG for 14 years in a variety of roles. I really enjoy my job and one of the benefits of working for a large organisation has been the opportunities within different departments and areas of specialism, which has allowed me to develop my career. “At CYBG, we have a robust strategy in place to encourage more women

into senior roles, reaching a target of 40% of females in senior management roles by 2020, and we are also ensuring that inclusion is helping to shape the positive culture within the business.” Roxanne Goodman Relationship director Goodman Corporate Finance “While it may be intimidating to be in a room full of men at a conference or broker event, women definitely need to make their voices heard, as we often see things from a different angle – perhaps considering the personal side more, rather than just focusing on money. In my experience in the sector, there’s no difference between what women and men can do. We have a 50/50 split in our office and I would definitely say the women sometimes get the upper hand.” Jo Sutton Managing director, Empire Corporate Finance “I’ve worked in the financial services industry for 20 years now and I’ve always found it a challenging but rewarding place to be. I have always been very committed to my career but having a family and a career that required extensive travel and long hours wasn’t a good mix –

which led me to set up my own business, so I could enjoy the best of both worlds. “I still absolutely believe that there are strong opportunities for women in financial services. I particularly like the fact that, by running my own business in an industry that women may still be unsure about entering, I’m setting a ‘no limits’ example for my two girls.” Caroline Luxmore Head of commercial mortgages Aldermore “The sector has changed considerably over the last 10 to 15 years, largely thanks to initiatives such as the Women in Finance Charter, a greater focus on the gender pay gap and better-quality mentoring programmes being put in place. “At Aldermore, we’ve embraced such initiatives, helping to increase our representation of senior females from 21% to 26.5% and have plans in place to exceed the 30% target we’ve set ourselves by 2020. My advice to fellow women looking to progress would be: don’t be afraid. If you have the knowledge and drive, just go for it!”

We’re redefining standard

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

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

Prime Bridging Standard Bridging Light Development Development Commercial

Are you ready to rethink what standard means?

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

12 | NACFB Magazine

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

NACFB NEWS

The NACFB Magazine approached several leading women in the commercial finance space for their thoughts on diversity in the industry, the initiatives they feel are working and what more can be done.

We’re redefining standard

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

Prime Bridging Standard Bridging Light Development Development Commercial

Are you ready to rethink what standard means?

12 | NACFB Magazine

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

Compliance | update The latest from our in-house compliance team

Seven signs your business is GDPR-ready

Nicholas Murphy Compliance officer NACFB Compliance

he countdown has finally ended. This month, the new General Data Protection Regulation (GDPR) takes effect and, more importantly, is now enforceable. For many months, the NACFB has been focusing compliance support on the coaching and training of our Members specifically for GDPR, ensuring you have the right tools to welcome in this new data protection regulation, which affects us all. We too, at the NACFB, have been getting our internal house in order. Engagement levels with the membership has never been higher and we have been encouraged by the sheer numbers of those who have attended our workshops. Our regional

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GDPR workshops have so far held host to over 200 broker firms. Many of you have already registered for our compliance support and are taking advantage of our online knowledge base and document repository – updated for GDPR – as well as, of course, our telephone support. We have full confidence that our brokers are among the best prepared in the market. But if you’re not sure yourself whether you meet all the requirements, here are seven signs your business is GDPR ready: 1. ICO Your brokerage should already be registered with the Information Commissioner’s Office (ICO), the UK’s official body for the implementation of GDPR. As part of a series of strict criteria for membership of the NACFB, Members must register with the ICO before joining.

2. The terminology You should now be aware that ‘personal data’ is information that could result in a person being identifiable. For you, as brokers, this can be names, email, home or even IP addresses. Both your clients and your staff make up the ‘data subjects’ and should be in scope for your GDPR policies and procedures. You should also be aware of the ‘data controllers’ – the organisation or company that dictates the use of data through policies – and the ‘data processors’ – the internal employee or external company which acts on these policies when handling data. 3. Data protection policy As a Member of the NACFB, we hope you have already made full use of NACFB Compliance support to download your data protection policy template and have already tailored this to your business. You should use your data protection policy to state your intentions and ensure your firm

complies with data protection laws, protects the rights of individuals and protects itself from data breaches. 4. Training for all staff As an engaged Member of the NACFB, you and your staff should already regularly complete mandatory training modules and record your CPD via MyNACFB. The most recent GDPR fast track module is available on this platform too, and completing this will ensure your team is informed and up to date with changes to data protection regulation. 5. Privacy notices By using the resources available to you as a Member, you should have downloaded the privacy notice template from NACFB Compliance and tailored this to your firm’s specific data handling requirements. You should use your privacy notice to state what information you gather from the data subject, how you will use this information and declare the

lawful basis for processing this data. You must present this to your clients separate to other documents. On your website, you should have this readily available for users to read. 6. Consent When seeking consent, you must remember to always use clear and plain language. You should ensure the data subject (eg your client) clearly provides consent via an opt-in method and you should state exactly what data you seek and what you will do with it. You should also keep an up-to-date record of when and how you gained consent. From the NACFB Compliance website, you should have already downloaded the consent checklist – we suggest you share this with your team as appropriate and embed it into your practices. 7. Data breaches You must make sure your business has effective processes to identify, report, manage and resolve any

personal data breaches. Using the breach notification form available to download from the NACFB Compliance website, you will be able to report clearly the nature of any personal data breach, the likely consequences, the measures you have already taken and what further steps you might take to mitigate and to prevent further breaches. Remember that a data breach must be reported to the ICO within 72 hours of discovery. As part of your extensive membership benefits package, you have full access to a bespoke compliance support function from our in-house team. Please get in touch with us to have each of these seven steps explained in greater detail, and to find out more about embedding the new regulation into your existing business practices. If you haven’t yet registered for NACFB Compliance, please do so at www.nacfbcompliance.co.uk

NACFB Magazine | 15

Compliance | update The latest from our in-house compliance team

Seven signs your business is GDPR-ready

Nicholas Murphy Compliance officer NACFB Compliance

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Commercial Finance

Just 11% of business lending now fixed rate Just 11% of the £426bn in total stock of loans to businesses are now provided on a fixed rate, leaving businesses exposed to rising interest rates, according to Hadrian’s Wall Capital. The specialist debt adviser reported that the expected further rise in interest rates of 0.25% will cost British SMEs another £355m in interest payments in the first year alone.

ArchOver announces R&D funding bridge

£337m invested in UK shopping centres in Q1 Investment into UK shopping centres reached £337m across 11 deals in Q1 2018, according to Savills. The deal count was up on the eight recorded in Q1 2017, despite investment volumes being down 9% year-on-year. Savills felt that the lower levels were caused by a series of retailer administrations.

Aspen launches 0.65% bridging rate offer Aspen Bridging has slashed its rates as part of a special spring offer. The bridging lender has dropped its lowest rates from 0.85% to 0.65% per month, initially until the end of spring, across all of its existing product ranges. The offer comes as Aspen looks to demonstrate that it can deliver to a wider audience.

Chairman appointed for SME complaints and resolution review

ActivTrades PLC enters bridging market

Assetz Capital partners with Positive Lending Assetz Capital has announced a new partnership with specialist mortgage packager Positive Lending. The partnership will see the P2P lender feature on Positive Lending’s panel to expand the distribution of its commercial mortgage products. Positive Lending has structured more than £1bn worth of transactions and assists over 3,000 intermediaries per year.

Financial trade body UK Finance has appointed Simon Walker as independent chair for the SME complaints and resolution review. Simon will chair the review into the complaints and alternative dispute resolution landscape for the UK SME market. The independent review will include an evidencebased, comprehensive analysis of the scale and complexity of banking complaints from SMEs.

Commercial property capital values increase 0.9% in Q1 2018

UK commercial property capital values were up 0.9% on average during Q1 2018, according to CBRE. The CBRE monthly index has revealed that commercial property rental values in the quarter rose 0.5%, while total returns stood at 2.2%. The industrial sector led the way in terms of both capital and rental value growth, while the office market also showed an increase. .

ActivTrades PLC has announced its launch into bridging lending with rates from 0.49% per month. The new lender is headed up by Stephen Brennan, director of credit at ActivTrades, who previously worked at specialist lenders Masthaven and Credit & Mercantile. With loans ranging between £250,000-5m and terms of up to 18 months, the lender will also offer longer-term interest-only solutions in certain cases. Fortwell Capital acquired in MBO Fortwell Capital has been acquired by its current management, executive director Dan Smith and head of real estate finance Arthur Jennings. The specialist development lender was owned by CPC Group and has lent in excess of £1.2bn since launching in 2011. As part of the deal, the Fortwell Capital team will continue to manage CPC Group’s existing loan book of around £120m.

Shawbrook hires new lending manager Shawbrook Bank has appointed Stewart Paine as lending manager for its commercial property team. Stewart joins the specialist lender after spending the past six years at Coutts, where he was lending risk manager. At Shawbrook, Stewart will specifically be looking after specialist BTL mortgage applications.

ArchOver has launched a bridging product for businesses waiting for their research and development (R&D) tax claim to be repaid. The R&D advance service will provide businesses with funding advances upwards of £100,000. The funding enables organisations to use their pending R&D tax credit – based on two years of successful claims – to raise funds from ArchOver’s community of lenders.

SME confidence reaches highest level since 2015

Confidence among UK SMEs has rebounded to 2015 levels, according to recent data. Bibby Financial Services reported that the number of SMEs expecting sales to increase between April and June jumped by 13% compared with the first three months of 2018, with 50% now expecting a rise. The overall confidence index rose to 64 in Q1 2018 – the highest since Q2 2015..

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Commercial Finance

ArchOver announces R&D funding bridge

Chairman appointed for SME complaints and resolution review

ActivTrades PLC enters bridging market

Commercial property capital values increase 0.9% in Q1 2018

SME confidence reaches highest level since 2015

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Top | story Our pick of the latest Patron news

Commercial lending suffers surprise drop as fallout from Carillion collapse continues Liam Brooke Co-founder Lendy

ow far will the shockwaves from the collapse of Carillion, rippling through the construction industry and beyond, extend? While the impact on direct stakeholders – suppliers, employees, clients, shareholders, banks – is still emerging, in such situations the indirect effects on the wider economy often take longer to become clear. Startlingly, however, we can identify at least one significant indicator of wider adverse impact already: a noticeable fall in lending to the commercial property sector. Bank of England figures show that lending to the sector dropped in January this year by 4% compared with December 2017, from £4.24bn to £4.1bn. This fall is significant because it is so unexpected - the new year period is when the construction sector traditionally sees an increase in lending and investment, as new commercial building projects come on stream.

There are several reasons why the demise of the UK’s biggest construction and outsourcing company, the liabilites of which have now been put at almost £7bn, can be attributed as a key cause. One is that it made many mainstream lenders nervous about the health of the construction sector, re-evaluating their risk profile and dampening their appetite to lend. Concerns about whether smaller construction firms, which worked with Carillion as a main client, would be able to stay in business have been particularly prevalent – as has the potential impact further down the supply chain. Banks were also among those directly impacted, with Royal Bank of Scotland, HSBC, Santander, Lloyds and Barclays among those most heavily exposed after providing £140m of emergency loans in September 2017. With loan books severely affected and confidence badly hit, it’s no surprise that mainstream lenders may be thinking twice about advancing loans for some future projects. That’s a real shame for the commercial property sector, not least because the reduction in lending to it comes on the back

of a decade of tough financial conditions, when banks and investment funds restricted financing to the commercial property sector following the financial crisis. It’s also shortsighted on the part of lenders, because the fundamentals of the highly profitable commercial property market remain strong. However, traditional institutions’ reluctance to lend provides a major opportunity for alternative finance providers, such as P2P platforms, to step up our lending to businesses in this space and help fill the gap. There are still many good opportunities for both traditional and non-traditional lenders to get involved in financially sound construction projects.

Monthly amounts outstanding of UK resident monetary financial institutions’ sterling net lending to companies involved in the construction of commercial buildings (in sterling millions) not seasonally adjusted – Source: BoE 4,450 4,400 4,350 4,300 4,250 4,200 4,150 4,100 4,050 Feb

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After all, market demand is there: housebuilding targets must be met, demand for good commercial property development is robust and infrastructure projects continue to come through the pipeline. Carillion may have sunk, but the construction sector as a whole remains buoyant. It may be up to alternative finance providers to keep it that way.

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Top | story Our pick of the latest Patron news

Commercial lending suffers surprise drop as fallout from Carillion collapse continues Liam Brooke Co-founder Lendy

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Introducing

F R O M

T H E

P E O P L E

W H O

B R O U G H T

Y O U . . .

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

Hampshire Trust Bank launches increased LTV on buy-to-let and HMO products

THE AFS GROUP

A R E R EC RU I T I N G ! We need experienced Asset and Commercial Finance professionals to join the successful broker networks of Asset Finance Solutions and Synergy Commercial Finance. Are you an existing broker looking for further support to grow your business?

Vera Sugar Editor NACFB Magazine

ampshire Trust Bank (HTB) has announced it is increasing the LTV ratio on its buy-to-let and houses in multiple occupation (HMO) five-year fixed-rate products to 75%, following feedback from brokers. The specialist bank has also increased the maximum loan size to £5m, enabling it to cater to larger loan requirements. Funds for these products are now available from £100,000 to £5m. “Hampshire Trust Bank has once again listened to its brokers and launched a product that meets the needs of our customers and introducers,” said Tony Sutton, managing director at Specialist Financial Services.

In addition, HTB has introduced a valuation refund of up to £1,000 for loans over £1m, with the option of adding full arrangement fees to the loan. The products are available without an administration fee, and the interest cover ratio is stressed at a fixed rate.

and loan size accordingly. We are committed to continuing to enhance our service and products to support our broker partners.”

The updated rates for the fiveyear, fixed-rate buy-to-let and HMO products are:

In addition to buy-to-let and HMO, HTB provides a range of specialist mortgage solutions including bridging and development exit finance with loan amounts of up to £5m, and commercial and semi-commercial mortgages, with loan amounts of up to £2.5m.

LTV: 65% - rate: 4.19% LTV: 70% - rate: 4.35%

Tony added: “We are looking forward to continuing to work together now and in the future.”

LTV: 75% - rate: 4.39% Anna Lewis, head of sales, specialist mortgages at HTB, said: “We are delighted to be able to launch such a competitive product. “We have listened to feedback from our brokers and have increased our buy-to-let and HMO LTV

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

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

visit brokerinabox.finance for more information

The news follows after HTB unveiled Specialist Mortgages as the new name of its commercial mortgages business, reflecting how the business had evolved to provide a wider range of specialist mortgage solutions. WE’VE GOT YOU COVERED

STRONGER TOGETHER

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

20 | NACFB Magazine

Introducing

F R O M

T H E

P E O P L E

W H O

B R O U G H T

Y O U . . .

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

Hampshire Trust Bank launches increased LTV on buy-to-let and HMO products

THE AFS GROUP

Vera Sugar Editor NACFB Magazine

and loan size accordingly. We are committed to continuing to enhance our service and products to support our broker partners.”

The updated rates for the fiveyear, fixed-rate buy-to-let and HMO products are:

LTV: 65% - rate: 4.19% LTV: 70% - rate: 4.35%

Tony added: “We are looking forward to continuing to work together now and in the future.”

visit brokerinabox.finance for more information

STRONGER TOGETHER

20 | NACFB Magazine

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

Fast funding for toy manufacturer after unexpected order Martine Catton Chief operating officer Catalyst Business Finance

key focus for us here at Catalyst is the difference we can make to SMEs that are looking for dynamic, short-term funding to help them bridge their – often almost immediate – cash flow needs. This was just the case when we were approached by one of our regular introducers with an enquiry. Building a relationship with a client and understanding their needs is of paramount importance. Since we don’t operate long-term contracts, our clients have a choice when they use the service – therefore the relationship we offer is often the glue between their cash need and Catalyst being the preferred lender. The client is a very profitable toy manufacturer and distributor with large contracts with a number of high street retailers. As you might expect, toy manufacturing is highly seasonal, and cash flow gaps often occur either prior to manufacture – as they will often need to pay in advance – or post-delivery, when the order lands at the dock and has yet to be invoiced. Being profitable, this business had an exceptionally short-term cash flow gap. The need for funding emerged quickly after a large, unexpected order was won. They immediately accepted the order and then faced the question many SMEs face daily: how do we fund this? The client had negotiated with their bank to provide all the funding for the anticipated orders and to cover the duty for importing goods to the UK. However, the new order needed another £425,000 in four days and it was only required for three weeks.

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A visit was organised, and we took the time to understand the client’s business, the order-to-invoice cycle and the payment terms of the debtor. On paper we looked more expensive than our competitors – a good business has choices, remember. However, since we understood the business cycle and the payment terms, we could evidence that, in fact, we were the most competitive. We worked alongside the bank – which we often do – and between us ensured the client could fund the orders, pay the duty and, more importantly, take advantage of the opportunity that had presented itself. This meant they increased their turnover and profitability significantly in 2016. Leap forward seven months and in mid-2017 the client contacted us once again to see if we could assist. This time the funding would be increasing to £750,000. The structure of the deal needed to change as they required the facility

to purchase the stock from China, with the order having increased twofold since the previous year. Again, the finance was only needed for a three-week period. After meeting again, we ascertained that there was still a gap. A sum of £750,000 would not enable them to pay the supplier to the short terms they had negotiated and benefit from some great discounts. We identified that another £150,000 would be needed. Evidence of the clear exit strategy was made available, and we proceeded to pay out. Transactions rarely run smoothly, however, no matter how hard we try. This one was no different. One of the new suppliers had decided they needed a payment of £200,000 three days before the well-managed bank account had expected it to be paid. We stepped into the breach, and provided the funds within 24 hours. The client was delighted as the loan enabled them to benefit financially and enhance the relationships they were cultivating with the new suppliers. We received full payment within the timeframe agreed, and I’m delighted to say they are now a regular user and their cash requirement has increased three-fold since we funded their first application. We are now working on identifying their future requirements and the options available to meet their needs. This case proves that experience and human interaction wins the day. Short-term funding is a facility that needs understanding and negotiation, and we take care to properly advise our potential clients. Our client could have applied online and gotten three or four offers, resulting in a 12-month burden of repayments that could have impacted his cash flow, the amount of interest he would have repaid and his profitability. It’s clear that experience gained over many years can rarely be replaced by technology.

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

Fast funding for toy manufacturer after unexpected order Martine Catton Chief operating officer Catalyst Business Finance

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CASE STUDIES

20-year auction loan in less than 20 days Auction purchases have traditionally been the domain of bridging lenders, with a long-term lender stepping in post-completion. At N&P, though, we can play to our strengths to remove the need for short-term finance, thereby saving the borrower time and money in the process.

Andrew Edwards Commercial lending manager N&P Building Society

ypically, auction purchases would have a six-week completion timeframe but we recently came across an application with a four-week deadline. The borrower was already known to us and the application was introduced by one of our top brokers. The proposal itself was relatively straightforward. The borrower had agreed to purchase a commercial property as an investment and required 60% LTV in order to complete. The property is subject to a 10-year lease to a local coffee shop, which expires in 2027. Based on this information, we were able to have an informal discussion with our inhouse credit team, and on the back of

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that we were quickly able to provide a decision in principle document, detailing the loan parameters: a 20year loan term at an interest margin of 3.99% above Bank of England base rate. An arrangement fee of 1.5% was applied with a 1% procuration fee paid to the introducing broker, an NACFB Member firm. The valuation fee was paid the following day and a valuer instructed immediately. We had already been in contact with the valuer to prime them for the instruction and had stressed the urgency of the case. The commercial lending team at N&P is relatively small, and everyone sits in the same open-plan office. The benefits of this come to the fore in auction scenarios as communication is key to meeting tight deadlines. Once the valuation was instructed, the lending manager was able to liaise directly with the completions

team in order to pre-instruct our solicitor. We ordinarily instruct solicitors at the point of offer, but we understand the need for swift action and have the ability to run several processes concurrently in order to meet deadlines. While awaiting the valuation report, the lending manager carried out a telephone interview with the customer to refresh the background information already held, as well as going through the loan terms in detail. This enabled the credit application to be written, ready for when the valuation would be returned. The valuation was returned within nine working days, by which point the credit application was ready to go and the solicitors were already working on the legal paperwork. Despite the short timescale, N&P’s solicitors complete full legal due diligence in all cases.

The application was formally approved by an underwriter on the same day that the valuation report was received, and the formal offer letter was emailed to all parties the following day. By maintaining contact with the borrower and the solicitors at all points of the process, we were able to complete the loan on the intended completion date. This was just nine working days from issuing the formal offer and just 19 working days from receipt of the initial application. This is a great example of how a lender can work closely with the broker, customer and solicitor in order to achieve a beneficial outcome for all concerned. By removing the need for potentially costly bridging finance, the customer was able to save money on valuation, legal and application fees.

the potential maximum of 25 years – the customer now knows that they will not have to refinance to another lender after a much shorter term.

The valuation was returned within nine working days, by which point the application was ready to go and the solicitors were already working on the legal paperwork

N&P places a great deal of emphasis on customer service and ensuring a smooth customer journey from start to finish. We are always eager to assist with meeting tight deadlines, whatever the reason may be for them.

Thanks to N&P’s ability to lend for over 20 years in this instance – with

NACFB Magazine | 25

CASE STUDIES

Andrew Edwards Commercial lending manager N&P Building Society

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the potential maximum of 25 years – the customer now knows that they will not have to refinance to another lender after a much shorter term.

The valuation was returned within nine working days, by which point the application was ready to go and the solicitors were already working on the legal paperwork

Thanks to N&P’s ability to lend for over 20 years in this instance – with

NACFB Magazine | 25

CASE STUDIES

Overcoming guarantee hurdles for fast development repayment

Adrian Moloney Sales director OneSavings Bank

upporting property developers can often seem a stressful undertaking for brokers. Many will recognise the scenario of a developer client looking for funding for a complex situation in a world that is, at times, sceptical of such propositions. Whether it is a bridging loan without personal guarantees, a high-value developer exit, a buyer with a complex income or a combination of multiple challenging circumstances, the appropriate funding options open to them may seem relatively thin on the ground. Just to add some pressure, speed is usually critical, as time is quite literally their clients’ money – so any delay adds more cost, placing even greater pressure on the broker. Bridging finance can often be one of the more complex and time-sensitive options for a lender and broker to deal with in this space. By definition, speed matters. Developers or builders will often need a rapid injection of cash in order to finish a project or allow them to start a new venture while waiting for property to be sold. However, this scenario is not as complex or daunting as it used to be and there are several financial options open to developers, housebuilders and landlords, and with the right lender relationships, brokers should be able to deliver the specialist funding their clients need, at the speed they require.

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Kingswood Associates were approached with a particularly complex developer exit case, and enlisted specialist lender InterBay to help. Broker John Phillips of Kingswood Associates was approached by his client in September 2017 looking for bridging finance on three new, high-end properties in Marylebone, central London. After looking into the lending arrangements needed, he knew he would require help to formulate a bespoke solution which also met the strict deadlines in place. Having worked complex cases through InterBay on previous occasions, John believed his client would benefit from its personalised and tailored approach. Its track record in understanding complex cases would, he recognised, be required on this occasion. The client was coming to the end of their development finance commitment, and despite being confident that the properties would sell quickly, they required fast funding to repay the development loan to enable them to move on to the next project. As an added complication, due to the company structure, the developer was unable to offer personal guarantees, so this fell outside of many lenders’ standard lending policy. However, InterBay has a twice weekly credit committee meeting to discuss large and complex cases, and was able to offer a quick decision by exception on this case, including accepting a corporate guarantee.

The combined value of the properties was almost £20m and an initial loan of nearly £13m was agreed over a term of 12 months. Within two months, two of the three properties had been sold, while the third is currently under offer at the time of writing. John added: “InterBay knew that time was of the essence as our client needed to release funds for another project, so it was encouraging that as soon as the case was submitted, there were a number of meetings with key areas of the business from BDM to underwriting to real estate, to ensure the complexity of the case was fully understood by the team. “This approach really worked in our favour as we were able to overcome a number of hurdles that other lenders may have been deterred by. The whole experience really helped cement my view that InterBay remains the ‘goto’ expert for complex commercial lending and this – coupled with their customer-focused approach – means they can’t be beaten in my book.” Finding specialist lending partners that can be flexible and offer bespoke funding solutions can be key to ensuring clients get the funding they require. In order to do so, it’s important that brokers both have an in-depth understanding of the needs and challenges of their clients’ business, and develop good relationships with lenders so that they can work closely together to find the right solutions.

SPEED MEETS FLEXIBILITY 020 7655 3388

FAST PROPERTY FINANCE At Commercial Acceptances speed alone is not enough. Speak straight to decision makers: a quick & personal service. No arrangement fees, no extension fees and no end fees. Interest charged from only 0.75% per calendar month.

Your property may be repossessed if you do not keep up on your mortgage repayments or any other debt secured on it. A rate from 0.75% will be chargeable on the amount borrowed every calendar month. However rates are subject to change and will increase or decrease in line with movements in 3m LIBOR (The London Inter-Bank Offered Rate For Three Month Sterling Deposits). Rates will be adjusted on each calendar month anniversary of the facility. The overall cost for comparison is 10.6% APR.

CASE STUDIES

Overcoming guarantee hurdles for fast development repayment

Adrian Moloney Sales director OneSavings Bank

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SPEED MEETS FLEXIBILITY 020 7655 3388

Patron | profile

Kingsway Asset Finance: plugging the funding gap for 21 years

The average lease/HP term is three years, however, we will consider up to five years and also payment in advance (up to 100% for strong suppliers). Professions loan terms are considered from 12 months for annual professional indemnity insurance and corporation tax, and up to five years for practice acquisition and refurbishment.

How have we achieved this? We don’t try to be all things to all men; we keep it simple by offering just four products: finance lease, hire purchase, sale and lease/HP back (for assets purchased up to three years ago) and professions loans.

The type of assets financed are wide and varied, including air conditioning, amusement arcade equipment, biomass boilers, catering and refrigeration equipment, office and restaurant refits as well as scaffolding. We also consider computer hardware and software, CCTV systems, EPoS, office machinery and traditional hard assets such as construction and engineering equipment, plant and machinery and vehicles of all types. We really are asset-agnostic, preferring to concentrate on the credit quality of the business.

Mike Day Sales manager Kingsway Asset Finance Ltd his year Kingsway celebrates 21 years of being an independent principal funder. We’ve seen many a funder come and go during this time – some more than once – and, in recent years, plenty of new alternative lenders and challenger banks entering the space that we operate in. Yet we’ve stood the test of time, and we’re currently enjoying our fastest growth phase for many years.

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Kingsway prides itself on traditional lending values; new finance proposals are not credit-scored, instead each proposal is genuinely considered on its own merits. Many of Kingsway’s brokers provide an extremely professional and comprehensive proposal, which in turn enables our underwriting team to make quick decisions (usually within four hours) and structure an acceptance with flexible terms. Our underwriting guidelines are fairly robust. We won’t consider adverse credit, but we will consider new starts with home-owning directors’ guarantees to support the proposal, and where the business owners have experience in the sector that they’re operating in. We also understand that many SMEs are either family or lifestyle businesses that often don’t have strong balance sheets; they withdraw

profit in dividends to invest into property, luxury goods etc. Who can blame them? Hence we’ll happily consider this type of business with suitable directors’ guarantees.

New finance proposals are not credit-scored, instead each proposal is genuinely considered on its own merits

And then there are long-established companies with a strong balance sheet and year-on-year profits; needless to say that these will be considered as being able to stand on their own two feet. Business is introduced through a network of finance and leasing brokers and professions loan specialists. I head up broker development and I believe, from numerous conversations with broker principles, that Kingsway meets a funding gap for many brokers. I am always being told that Kingsway is an invaluable lessor that complements the services offered by the major bank-owned funders, virtually all of whom use credit scoring to drive their

volume processes. Brokers particularly like having the ability to speak to an actual underwriter in order to explore the viability of a prospective deal, or to discuss the structuring of mutually acceptable terms. Kingsway is a privately owned company, which works with a number of banks that provide us with our wholesale funding. In 2016, we were proud to be the first asset finance company to be backed by the government-owned British Business Investments Ltd’s expansion capital initiative. Please do contact our sales team for a more in-depth overview of Kingsway. Alternatively, we’ll be on stand number D09 on 20th June at the NACFB Commercial Finance Expo – please do come and say hello, and meet the team.

NACFB Magazine | 29

Patron | profile

Kingsway Asset Finance: plugging the funding gap for 21 years

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profit in dividends to invest into property, luxury goods etc. Who can blame them? Hence we’ll happily consider this type of business with suitable directors’ guarantees.

New finance proposals are not credit-scored, instead each proposal is genuinely considered on its own merits

NACFB Magazine | 29

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

What can Conister do for you... Wholesale Funding

Usership vs ownership Paul Harrison, head of strategic partnerships at ContractHireAndLeasing.com, on the changing needs of the vehicle finance market

Asset Finance Block Discounting Commercial Loans Premium Finance Personal Loans

Q A

What is ContractHireAndLeasing.com?

Many people in the industry often mistake us for a broker, but we’re not. We’re a leasing marketplace that allows consumers and businesses to compare deals in order to find the right offer for them. On our site, we operate a code of conduct and every advertiser must be authorised and regulated by the FCA.

Q A

What changes have you observed in the market so far in 2018?

Contract hire has been a popular choice for businesses for years, but more and more consumers are now waking up to the benefits of leasing. In fact, last year, personal contract hire (PCH) overtook hire purchase (HP) as the second most popular form of consumer new car finance. The growth of personal leasing is remarkable. Personal searches have accounted for 77% of all vehicle searches on our site so far in 2018. Just five years ago it was a 50/50 split between personal and business offers. The growth is down to two factors: changing consumer habits and product awareness. People increasingly want access to products or services, rather than owning them. The preference of usership over ownership is reflected in the recent success of media streaming platforms like Netflix

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and Spotify. We’re seeing more and more brokers offering one-month initial payment contracts, which is also helping to support this change. It means consumers looking to lease no longer have to pay large sums up front to enter into the contract – providing they pass all the relevant credit checks and affordability assessments of course. In terms of awareness, many motor manufacturers now lead with contract hire offers in their national advertising campaigns for their new models, and contract hire is becoming more commonplace in showrooms. Looking further ahead, vehicle manufacturers are also launching their own leasing subscription services that cover not only car payments, but maintenance and insurance all within one convenient monthly rental. Exciting times are ahead.

Q A

How can brokers take advantage of the growing leasing market?

As the personal contract hire market has grown, so has the number of brokers promoting leasing offers. Like other industry stakeholders, brokers have a vital role to play in the new car market through providing clear information to consumers on their options and ensuring they understand the terms of the agreement they are entering into. The wider motor finance market is currently under the microscope of the FCA to ensure consumers are suitably protected.

It is essential that brokers provide clear pricing for all products and services, are transparent about the availability of stock and only advertise vehicles and offers that are available. Any vehicle or offer that is no longer available must be withdrawn and/or amended as soon as possible. As the provision of vehicle finance continues to move online, data security will become increasingly important. From 25th May, it will also be essential that brokers are compliant with the new General Data Protection Regulation (GDPR) by safeguarding personal information provided by consumers and only retaining it as long as it is needed. Those found to be in breach of the new rules could face huge fines. Getting the basics right is also essential. Nobody likes to be kept waiting, so brokers should respond to enquiries in a timely manner and provide customers with clear information so that they understand the details of offers and any risks involved, and can make an informed decision. Finally, a decision to buy is rarely based on price alone. It’s all about ensuring there is trust and transparency with the broker. This is where TrustPilot or other third-party review services can really help brokers stand out from their competitors and help users decide that they are the one they would like to buy from.

Competitive rates - Quick Decisions For further details: telephone 01624 694694 email info@conisterbank.co.im or visit www.conisterbank.co.im Conister Bank Limited. Registered in the Isle of Man No. 000738C. Registered Office: Clarendon House, Victoria Street, Douglas, Isle of Man, IM1 2LN. Conister Bank Limited is licensed by the Isle of Man Financial Services Authority for its deposit taking activities and is authorised and regulated in the United Kingdom by the Financial Conduct Authority for its consumer credit activities and mortgage lending administration, firm registration number 619002.

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

What can Conister do for you... Wholesale Funding

Usership vs ownership Paul Harrison, head of strategic partnerships at ContractHireAndLeasing.com, on the changing needs of the vehicle finance market

Asset Finance Block Discounting Commercial Loans Premium Finance Personal Loans

Q A

What is ContractHireAndLeasing.com?

Q A

What changes have you observed in the market so far in 2018?

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Q A

How can brokers take advantage of the growing leasing market?

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

Market sentiment and the road ahead for asset finance

We’ve had a busy year so far at United Trust Bank. However, there is a feeling among many brokers that the growth we’ve seen in the asset finance sector over the last five or six years has started to lose a little steam.

ecent figures from the Finance and Leasing Association (FLA) show a mixed bag for the different sectors, with funding of plant and machinery in December 2017 just 1% higher than in December 2016, commercial vehicle finance down 14%, and the big assets – such as ships, planes or rolling stock – down by 41%. Stronger performances in IT and business equipment funding delivered an overall increase of 4% comparing the December 2016 and 2017 figures. There was some good news for brokers though, with broker-introduced business increasing by 14% from 2016 to 2017. Brokers account for around a fifth of new leasing business by FLA members and it’s promising to see that this is still the fastest-growing channel. It’s particularly pleasing to UTB as a broker-only lender.

Keith Sangwin Head of sales asset finance United Trust Bank

Another interesting statistic was the share of new asset finance business going to SMEs. This apparently grew by 12% in 2017, meaning that SMEs accounted for around 58% of the £31.7bn of finance provided by FLA members. Considering the uncertainty still surrounding the ultimate consequences of Brexit, it appears that, last year at least, SMEs were still keen to invest in their businesses. The question, with one year to go before we enter the Brexit transition period, is whether that positivity will continue. According to our own broker sentiment survey, carried out in February this year, more than two thirds of asset finance brokers with an opinion on the matter (67%) suggested that the spectre of Brexit was causing some companies to delay investing in plant, machinery,

vehicles and other equipment. Maybe confidence will be boosted now that negotiators David Davis and Michel Barnier have reached some agreement over the terms of the transition period. For those companies which, regardless of Brexit, are confident in their business plans, the market is extremely competitive – especially for strong credits. From UTB’s perspective, the rates we’re now able to offer customers with solid trading accounts and consistent credit histories are the lowest they’ve ever been. For businesses which don’t necessarily want to acquire new assets at present, but perhaps want to raise capital or extend the repayment term on an existing asset, refinance can be a quick and competitive solution. If brokers do

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

Market sentiment and the road ahead for asset finance

Keith Sangwin Head of sales asset finance United Trust Bank

SPECIAL FEATURES

Dec 2017

% change on prev. year

3 months to Dec 2017

% change on prev. year

12 months to Dec 2017

% change on prev. year

Plant and machinery finance (£m)

512

1,515

6,617

+12

Commercial vehicle finance (£m)

572

-14

1,934

-1

7,480

IT equipment finance (£m)

293

+19

726

+14

2,285

Business equipment finance (£m)

227

624

2,581

Car finance (£m)

629

-2

2,243

9,531

Aircraft, ships and rolling stock finance (£m)

-41

-50

549

+20

By asset:

By channel: Direct finance (£m)

1,153

-7

3,746

15,477

Broker-introduced finance (£m)

579

+24

1,620

+21

5,839

+14

Sales finance (£m)

752

-8

2,329

9,436

Source: FLA find enquiries to fund asset acquisitions slowing over this year, some proactive marketing to their existing customer base, extolling the benefits of refinancing, may be time and money well spent. It’s easy to forget that even smaller businesses might have tens or even hundreds of thousands of pounds of capital tied up in their existing assets, which refinancing can set free for all manner of uses. Brokers and customers also shouldn’t assume that an asset that’s been around the block a few times can’t be refinanced. A small number of specialist funders, UTB included, don’t have an aged asset policy, and this enables them to consider refinancing assets most other lenders would consider too old. For example, we were approached by a broker representing a client who had the opportunity to purchase a commercial property at a very advantageous price, but they needed to act quickly. The customer wished to fund the purchase over four years – a relatively short period for a property purchase, so the more traditional funding option, a commercial mortgage, didn’t really suit his requirements. He wanted a shortterm loan and a quick turnaround.

34 | NACFB Magazine

The customer wished to refinance five items of plant, mainly 2011/12 excavators. The oldest would be nearly 12 years old by the end of the term. Having received the proposal in the morning we agreed the deal in principle the same afternoon, and with inspections carried out and good title proven, we paid out £150,000 the day the scanned documentation was received by our administration team. That kind of speed of decision and pay-out is virtually impossible to match by most other forms of finance. In that particular case the assets being refinanced were unencumbered, but we do a lot of deals where there’s some outstanding finance to settle on top of the capital being released. If the paperwork is available quickly and you have a switched-on funder admin team, even with other finance to settle, a 24hour turnaround is very achievable. The next 12 months are going to be very interesting. While it may continue to dominate national news headlines, it’s worth remembering that many businesses will not be directly affected by Brexit. Some may have to contend with indirect challenges,

such as increasing prices of imported goods, or perhaps a shortage of labour if they’ve been dependent on workers coming in from the EU, but many will continue operating much as before, serving a UK – or even more local – customer base. UTB is one of those businesses. As a UK bank with UK customers, we’re confident that we’re ready to face whatever the future may hold, and we’ll continue to support brokers and our SME customers, helping them to seize opportunities with quick and competitive funding.

How do you know if you are getting it right? Just Cashflow certainly is, with 99% of their customers happy to recommend them to a colleague or another business associate.

they need quick and effective access to help them manage day to day transactions and cash flow. This means they also need access to a team who work alongside them to make things happen”.

Recently, Just Cashflow was announced as a runner up in the SME Financial Provider of the Year category at the Receivables Finance International Awards 2018. The awards are international in scale and open to all companies involved in receivables finance including banks, non-banks, technology companies, fintechs, consultancies and legal advisors.

This team is led by Wayne Martin, who understands how important it is to quickly provide Brokers and their business customers with the answers and solutions they need. The team’s personal attention, together with a dedicated broker portal, provides total transparency allowing cases to be tracked and any hold ups identified and quickly resolved. This joint approach is designed to deliver excellent service to Brokers so in turn they can show their business customers everything is being done to get deals completed.

John Davies, Director Just Cashflow says “We were delighted to be nominated and of course external recognition is always welcome but the real accolades we are looking for come from our customers”. “It is not enough to simply provide SMEs with much needed funds -

The Just Cashflow team know it is important to provide all their

customers, whether Brokers’ or direct, with a fast and flexible service and they work hard to make sure they get things right. They constantly track this and can report that 99% of their customers say they would recommend them to a colleague or another business associate.

99% To find out more about Just Cashflow and how, through partnership with them, they can support your clients’ business growth in the longer term, give Wayne a call on 0121 2276450 and he will be happy to help get your clients’ across the finishing line.

Get your clients across the finishing line As a professional broker or intermediary you’ll be used to seeking fast and flexible funding for your clients. Just Cashflow knows that every business is different and we are able to offer you tailored financial solutions to meet the requirements of your clients. Our Revolving Credit Facility gives you access to funds from £10,000 to £500,000, for ambitious businesses, to support their continued growth. You will find the application process really simple and straightforward and our underwriting team will support you, to help ensure you get even more clients across the finishing line.

Just call us now

0121 418 5037

Alternatively, find out more

justcashflow.com/partner

Patron Member FS668057

BCMS668054

Just Cash Flow PLC is registered at 1 Charterhouse Mews, Farringdon, London EC1M 6BB under Company number 08508165 © Just Cash Flow PLC 2017

SPECIAL FEATURES

Dec 2017

% change on prev. year

3 months to Dec 2017

% change on prev. year

12 months to Dec 2017

% change on prev. year

Plant and machinery finance (£m)

512

1,515

6,617

+12

Commercial vehicle finance (£m)

572

-14

1,934

-1

7,480

IT equipment finance (£m)

293

+19

726

+14

2,285

Business equipment finance (£m)

227

624

2,581

Car finance (£m)

629

-2

2,243

9,531

Aircraft, ships and rolling stock finance (£m)

-41

-50

549

+20

By asset:

By channel: Direct finance (£m)

1,153

-7

3,746

15,477

Broker-introduced finance (£m)

579

+24

1,620

+21

5,839

+14

Sales finance (£m)

752

-8

2,329

9,436

34 | NACFB Magazine

How do you know if you are getting it right? Just Cashflow certainly is, with 99% of their customers happy to recommend them to a colleague or another business associate.

they need quick and effective access to help them manage day to day transactions and cash flow. This means they also need access to a team who work alongside them to make things happen”.

The Just Cashflow team know it is important to provide all their

Just call us now

0121 418 5037

Alternatively, find out more

justcashflow.com/partner

Patron Member FS668057

BCMS668054

Just Cash Flow PLC is registered at 1 Charterhouse Mews, Farringdon, London EC1M 6BB under Company number 08508165 © Just Cash Flow PLC 2017

SPECIAL FEATURES

Tech adoption: how fast should you go? Shahil Kotecha CEO & principal Pivot

rom benchmarking and analysis to asset selection, loan management and peer-to-peer (P2P) lending, real estate finance (REF) technology is continuing to disrupt the finance sector. Yet the take-up of new technology in the short-term specialist property market has been limited, and this comes against a backdrop of industry pressure to improve processing times, decision making and transparency. Rapid advancements in technology and innovation means that the financial services industry has seen disruption in delivery processes ranging from automation in insurance, trading and risk management. According to Deloitte’s 2018 Real Estate Outlook, global real estate fintech startups increased by 18% from 246 in 2008 to 1,372 by 2017, with advancements across transaction services, digital lending platforms and online investment options for individuals. Lloyds has gone as far as sharing energy data to provide green loans and Barclays has recently announced the same – utilising EPC data in developing both the green bond and now its green mortgage. Industry data suggests that bridging lender annual completions are up by almost a quarter (24.6%) to over £3.5bn, yet the uptake of technology in this sector has been limited. There are loan management system providers, as well as lenders offering their loans for sale either through bond issuances

or P2P. However, product innovation and process enhancements are being left behind by other areas of financial services. The arguments for limiting the takeup of technology have centred on the relationship-based nature of origination and the uniqueness of each case requiring expert judgement from underwriters and not machines. But are we just stuck in our ways? Or can short-term lenders better leverage technology to help us and our customers? Our view is that those lenders who take a sensible approach to technology adoption will not only be able to provide a more customer-centric offering, but will be better able to price risk and mitigate losses. As a management team, we have acted in advisory capacities across a range of financial services institutions and have witnessed first-hand the potential scale of change that can be made. For instance, in the insurance industry, we have advised on how wearable technology can improve the ability to underwrite, how loss adjusters can use technology such as Google Glass to provide real-time information to insurers, and how social data can be used to predict the propensity to claim.

However, one of our key learnings – prior to adopting machine-based systems – has been to start by implementing simple process enhancements, and to engage with and educate stakeholders on the likely benefits (for example, applying lean techniques to reduce non-customer value adding activities and capturing more client information up front to reduce end-to-end process times). Industry bodies such as the NACFB and the ASTL have been good to aid collaboration between lenders and introducers, and we believe that technology can take this further. Organisations such as Cifas are already providing a cross-sector fraud sharing database, which can be integrated into lenders’ loan management systems. Working within the boundaries of new GDPR rules, big data and data analytics intelligence can also help to match lender and borrower requirements.

A LL UNDE R ONE ROOF We’re more than just a principal lender. We are part of a larger property group that includes a developer, a digital fund manager, a construction company and a block manager.

Working across all aspects of the property lifecycle enables us to truly relate to our borrowers’ needs.

There has been much talk about brokers needing to shop around to find the right lender, the excess time it is taking to complete even the most vanilla case, and not having access to decision makers. Technological solutions can help alleviate each of these concerns –aggregator platforms can provide transparency about different lender offerings, client-friendly smartphone apps can help submit enquiries, and integration of third-party sites can provide greater information to credit teams to be able to make quicker decisions. But this is just the start. Don’t be surprised if we start seeing automated generation of terms for simple cases, valuation firms providing real-time video evidence to lenders and the use of roboadvice in the selection of lenders.

At Pivot we are passionate about providing our clients with the financial independence they require to meet the business objectives they desire – providing finance to enable progress. For more information please contact +44 (0)20 3695 5511 or visit pivotfinance.co.uk

FI N AN C E TO E N AB L E PR O G R E SS 36 | NACFB Magazine

SPECIAL FEATURES

Tech adoption: how fast should you go? Shahil Kotecha CEO & principal Pivot

A LL UNDE R ONE ROOF We’re more than just a principal lender. We are part of a larger property group that includes a developer, a digital fund manager, a construction company and a block manager.

Working across all aspects of the property lifecycle enables us to truly relate to our borrowers’ needs.

FI N AN C E TO E N AB L E PR O G R E SS 36 | NACFB Magazine

SPECIAL FEATURES

The sculptor of finance With a career in finance spanning over 45 years, including building two successful asset finance companies from the ground up, Tony Captain, chairman of Liberty Leasing, has truly carved out a niche for himself as a leading expert.

is unconventional approach to recruiting, endless enthusiasm and in-depth knowledge of the industry have helped him gain a unique insight into the market - here, he shares some of his career highlights, insights and advice to the next generation of asset finance professionals. Humble beginnings My career in finance started in 1971 when I was recruited by North West Securities Ltd as a trainee industrial representative. It provided excellent training and I learned about finance for non-motor assets, from agricultural machinery to printing presses. They were good at incentivising staff and maximising deals, and one of the first to offer keyman insurance. I discovered a real buzz for sales, but in the back of my mind I knew I wanted to be my own boss. An entrepreneur at heart In 1983 I joined my business partner, Greg Randall, at State Securities to focus on underwriting and sales. Having been friends since the age of five, I trusted Greg implicitly – and 66 years on, we are still business partners and close friends.

38 | NACFB Magazine

We initially dealt with short-term loans between £100-500 and collected money “on the knocker”, as we used to say. Having advertised in the local newspaper, business flooded in. Back then, a client would give a second charge on their property for a £500 loan. How times have changed! As State evolved we moved into hire purchase and leasing with an initial average deal of £1,000.

A time to sell After 15 years of trading at State, with a profit of circa £2.25m a year and approximately £35m of receivables, we decided to sell, having received a fair amount of interest in the business. Following some delays due to Y2K fears, Greg and I eventually travelled to London to sign the deal, celebrating with a few drinks at the Savoy afterwards.

People first, finance second Throughout my career, we made a point of selecting the right people for the job and helping them realise their potential. At State I recruited individuals from all sorts of backgrounds: building, plumbing and even a shipping company director. Being a good fit for our business was priority and I was convinced if they held the right people skills and received some training, they would successfully sell finance. This unconventional recruiting style has served us well and the fact that the staff we recruited didn’t come from traditional finance backgrounds meant they didn’t join with preconceived ideas or negativity.

However, on the train home, the mood shifted to a somewhat sombre one; it was bittersweet knowing something we had spent years building was no longer ours and I questioned what we had done. I was about 50 – too young to retire and not wanting to waste the experience and knowledge I had acquired, I discussed with my wife about starting over again with a new company, but on a part-time basis. This led to the incorporation of Liberty Leasing in 2001. A model for success While Greg and I were keen to replicate our achievements at State, we also wanted to step back. We saw Allan Clegg and Paul Sheedy as the future and they joined in 2004. Allan had the qualities for a solid managing director;

NACFB Magazine | 39

SPECIAL FEATURES

38 | NACFB Magazine

NACFB Magazine | 39

SPECIAL FEATURES

Assetz Capital, more than a partnership Our fast and flexible approach to lending will enable you to support existing borrowers and identify new clients

Left to right: Michael Wilkinson, Tony Captain, Greg Randall, Paul Sheedy, Allan Clegg trustworthy, hardworking, likeable and reliable. Paul had a flair for the sales and operations side, along with his great sense of humour and likeability. Having the support of a business partner and friend is one I’ve never underestimated or taken for granted, and I couldn’t be prouder of Allan and Paul’s achievements. Having seen their potential many years ago, they’ve proven me right. I’ve never had to question their actions and was confidently able to relinquish various parts of the business and day-to-day running to them. We subsequently recruited two trainee account managers, Lewis Banford and Joe Hadfield, and 14 years on, both are now area managers with their own teams. Looking ahead Technology and regulation are two aspects that have massively impacted on our industry and will continue to do so. Before mobiles, I would hand Greg my list of visits for the day; he would ring ahead to confirm each meeting and I would then have to ask the client if I could use their phone to check in with him.

40 | NACFB Magazine

Although FCA regulation and compliance is likely to increase, it ensures a fairer deal and protection for the parties involved. We’re lucky to have Lara James, our compliance officer and Laura Roberts, our legal director to make sure Liberty is compliant and legally watertight. For those entering the market today, it’s far more competitive and requires considerable capital. To give some context, in 1980 State started with £700 – in 2001 Liberty started with £800,000. Today, I estimate one would require about £5m, and that is being modest. It takes a lot to establish credibility in the asset finance industry with block discounters and the involvement of brokers alongside finding the right calibre of people to employ. I believe there are many routes to success, but a few common aspects have been vital during my 45-year career. You must be motivated and enthusiastic for what you do, as this fuels the drive to succeed. Having an entrepreneurial spirit has always spurred me on. Money is a wonderful by-product of success, but if it was purely about money I would have retired long ago.

Choosing the right people who are a good fit for the business and retaining those people is also key. Ordinarily we spend more time at work than anywhere else so it’s important to create an environment where people want to come to work and are happy. I’ve been fortunate to work with people I consider friends, and watched many realise their potential and achieve success in their own right. It’s hard to believe we set up State with £700 capital put up by Greg’s older brother, a postman in Southampton. I’m not sure I could have predicted the level of success, especially the second time round with Liberty – which, my wife reminds me, was only meant to be a small, part-time venture. With Liberty’s book size at over £100m with an additional credit line of £43m available, this is an incredible achievement which we can all be proud of at Liberty. I can honestly say (maybe to my wife’s dismay), if I was 10 years younger, I wouldn’t hesitate to do it all again!

Over £440m lent to date

Our lending solutions include SME business term loans, commercial mortgages, development finance, bridging finance, buy-to-let for landlords, renewable energy loans, property investor hunting licence and residential refurbishment. Find out more at assetzcapital.co.uk/borrow or call 0800 470 0432 Assetz SME Capital Ltd is a company registered in England and Wales with company number 08007287. Assetz SME Capital Ltd is authorised and regulated by the Financial Conduct Authority (Reg No: 724996). ‘Assetz Capital’ is a trading name of Assetz SME Capital Ltd. Assetz SME Capital Ltd is registered with the Office of the Information Commissioner (Reg No: Z3338899) for data protection purposes.

SPECIAL FEATURES

Assetz Capital, more than a partnership Our fast and flexible approach to lending will enable you to support existing borrowers and identify new clients

40 | NACFB Magazine

Over £440m lent to date

THE TEAM FOR BRIDGING LOANS

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

Clearing up confusion around invoice finance Ross McFarlane Director - invoice finance Aldermore

nvoice finance, put simply, allows a business to release working capital tied up in outstanding invoices. Factoring and invoice discounting are the two most common forms of invoice finance, usually used to fund the growth aspirations of businesses, where more traditional forms of funding are not appropriate or unavailable. According to Aldermore’s latest Future Attitudes research, poor cash flow is the biggest concern over the next 12 months for more than a quarter of UK business leaders (27%). To resolve this concern, invoice finance is regularly used by a diverse range of businesses to bridge their cash flow gap. What’s the difference between invoice discounting and factoring? The main difference is whether the invoice finance company or the business undertakes the administration and collection of the sales ledger. Invoice discounting allows the business to enjoy the benefits of releasing cash but at the same time retaining the administration and collection of their sales ledger. Customers will continue to pay the business and, as a result, it can be provided confidentially, so that the customers are unaware that the business is using invoice finance. In the case of factoring, the invoice finance company provides sales ledger administration and credit control support. This has the added benefit of allowing businesses to concentrate on growing their business not only through improved cash flow but also without the added worry of

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chasing customers for payment. Given the invoice finance company collects payment direct from the customers, factoring facilities are predominantly provided on a disclosed basis. What are the typical terms of invoice finance facilities? Terms tend to vary from business to business, although typically invoice finance companies provide businesses with access to up to 90% of outstanding invoices within 24 hours. The business can then choose how much of this they wish to use. Interest (discount) is only charged on money that is actually used, and is typically similar to bank overdraft rates. In addition, there is a service fee charged, which is usually expressed as a percentage of the invoice value. This fee will vary depending on the type of facility provided and, in the case of factoring, the activity of the sales ledger. Which is the right service for your client’s business? This often depends on the stage your client has reached in their

development, the nature of their business and what they are trying to achieve. The funding element is the same across both facilities. Invoice discounting is usually more appropriate for established businesses that can demonstrate the ability to effectively administer and collect its sales ledger on behalf of the invoice finance company. This ability to retain control of the collections, and the fact the facility can be provided confidentially, makes this a very attractive proposition for growing businesses. Factoring is predominantly used by developing businesses which not only need access to working capital, but would also benefit from the sales ledger administration and credit control. Reduced collect days and saving management time on chasing customers for payment make factoring a real value-add facility for many businesses.

CMY

FACTORIES

OWNER OCCUPIERS

Let’s Talk! COM M ERCIAL

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020 8349 5190 sayhello@alternativebridging.co.uk @ABC_Bridging

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A PRINCIPAL LENDER 42 | NACFB Magazine

DEVELOP ME N T

THE TEAM FOR BRIDGING LOANS

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

Clearing up confusion around invoice finance Ross McFarlane Director - invoice finance Aldermore

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RETAIL

INDUSTRIAL

SHOPS

ASTs

INVESTMENT

RESIDENTIAL

HOTELS

OFFICES

INVESTORS

ALL!

CMY

FACTORIES

OWNER OCCUPIERS

Let’s Talk! COM M ERCIAL

•

020 8349 5190 sayhello@alternativebridging.co.uk @ABC_Bridging

RESIDENT I AL

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A PRINCIPAL LENDER 42 | NACFB Magazine

DEVELOP ME N T

GUIDES

Helping your client enter the PBSA market Student housing is an important and growing market for investors. According to Knight Frank, although the total stock of purpose-built student accommodation (PBSA) is due to lift by 4.3% by the start of the 2018/19 academic year, full-time student numbers still outweigh current PBSA bed spaces by 3:1.

Steve Larkin Director of development LendInvest

his is just one of the reasons why more developers should turn their attention to this market. There is a clear, structural undersupply of student properties. Student numbers have doubled since 1992 according to the Office for National Statistics, with approximately one in every three people aged 18-24 in fulltime education. But as with residential properties, construction of new homes to cater for the UK’s significant student population has failed to keep pace with demand.

University of Edinburgh

44 | NACFB Magazine

Rather than becoming a more mainstream topic, the conversation around student accommodation ebbs and flows with the seasonality of the market. Students tend to begin hunting for the next year’s accommodation from January up until the summer months, so it’s important that borrowers have their development progressing by then in order to attract potential tenants. If they don’t manage that, then they face the prospect of extended void periods – months of sitting on an asset that isn’t actually bringing in any money. But what should you consider when dealing with a client who wishes to move into this area of the market?

University of Nottingham

First, as I have already pointed out, timing is everything, therefore ensuring the borrower has a robust development plan is absolutely vital. There need to be contingency plans in place to deal with any unexpected delays, to ensure that the properties are ready for student viewings at the right time. A quality project manager may be worth their weight in gold when it comes to student accommodation projects.

The fundamentals of taking on student accommodation projects are very much aligned with traditional buy-tolet, meaning location is absolutely crucial. We have lent against student accommodation projects in places like Edinburgh, Sheffield and Nottingham – areas with large student populations and often more than one university. Of course, setting up in a city with a large student population isn’t enough for a successful

development. They’ll need to pinpoint an area with excellent transport links to the university campuses and the city itself. Within walking distance of both is ideal, but it’s worth making sure your client has done their research around public transport options.

On a more granular level, it is important to know what the borrower’s likely exit will be. That’s especially true when developing student accommodation, as the size of the development will dictate exactly who is likely to be interested. If the development encompasses less than 50 units then the borrower’s options are rather more limited, and they may need to be sold individually. Developments above 100 units are more likely to attract the interest of pension funds and institutional investors.

The fundamentals of taking on student accommodation projects are very much aligned with traditional buy-to-let, meaning location is absolutely crucial It is crucial to consider all these aspects when sourcing a student accommodation deal, as each factor will determine the success of the project. Taking the time to educate yourself on all areas of any development can be extremely useful when dealing with a client.

NACFB Magazine | 45

GUIDES

Steve Larkin Director of development LendInvest

University of Edinburgh

44 | NACFB Magazine

University of Nottingham

NACFB Magazine | 45

Opinion | & commentary Thought leadership from our Patrons and Members

MFS

Specialists in fast, flexible, bespoke bridging loans We can deal with a wide range of complicated financial circumstances. MFS helps borrowers who... Are employed, self-employed, limited companies or LLPs

The challenges of expanding a business

Are facing non-renewals from an existing lender Have declared bankruptcy or have an IVA Need to replace existing finance

Paresh Raja CEO MFS

hile international markets can provide businesses with a plethora of new opportunities and, more importantly, huge growth potential, there are undoubtedly significant risks and challenges associated with expanding internationally – especially overseas. Having established itself as a leader in the UK bridging market over the last 10 years, in March 2018 Market Financial Solutions (MFS) expanded to the Asian market after launching its subsidiary company, Market Bridge Solutions (MBS), in Singapore. After establishing deep-rooted foundations in a certain region and building the company’s presence as a market leader, the next logical step for many businesses is to seek to replicate the same growth elsewhere. But in expanding to a different market, businesses must understand the nuances between their existing and new markets. Extending operations or creating a subsidiary company in a foreign market can often seem like a daunting task. Indeed, without extensive market research and some reliable local experts – feet on the ground – businesses can often fail before they even get started. As London-based

46 | NACFB Magazine

MFS expanded its services into Singapore, we took the time to develop an in-depth understanding of the differences between the two countries’ bridging sectors, as well as their borrowers, brokers and investors. Over the past decade, bridging loans have become a fundamental source of capital for UK property buyers in need of fast, flexible loans – in 2017, annual completions from members of the Association of Short Term Lenders (ASTL) increased by 24.6% to exceed £3.5bn. By comparison, the Singaporean bridging market is still in its relative infancy, with the industry limited by the absence of specialist bridging lenders. But as borrower appetite increases and the nation’s property market continues to grow, the need for alternative finance solutions outside of traditional, mainstream lenders is also rising. For bridging lenders, interest in and knowledge of alternative finance solutions is vital for growth. What’s more, there also needs to be a strong property market and financial sector to encourage the use of loans. Singapore ticks these boxes. First, Singapore has experienced rapid growth in finance, business and investment, cementing itself as a global economic hub. Furthermore, the Singaporean property market is also favourable for lenders as sales in residential and commercial property rose by 50% in the first half of 2017 amidst high demand. Fundamental for a bridging lender – or indeed any business – seeking opportunities

abroad, there needs to be an assessment of the market you are interested in entering. In the case of MFS’ expansion into Southeast Asia, the company had to develop an understanding of the regulations and practices governing both the financial and property markets; the next step was to then decide how processes, operations and services must be altered to fit this different model. But central to the process of expanding internationally was equally to ensure the company did not deviate from the core principles and skills that have made MFS successful in the UK over the past decade. Thorough due diligence, strong funding lines, an ability to handle complex cases and ensuring maximum speed when dealing with enquiries from brokers or individual clients; these all remain integral to both MFS and MBS. And maintaining this brand identity across each business, regardless of the two different geographies they are operating in, is of utmost importance. Replicating domestic success and becoming a market leader abroad is not simple. It means becoming an expert in an entirely new, foreign market and, of course, only time will tell how successful MBS will be in Singapore. But by using trusted experts, calling upon the management’s existing experiences and committing to a lot of hard work, the opportunities exist for successful businesses to grow on a global stage.

Struggle with adverse credit

Our terms in brief: Loans from £200,000 to £10 million Rates from just 0.75% per month, with 75% LTV Free valuations on properties £500,000 to £1.5 million Simple application process and no hidden costs

+44(0)20 7060 1234

www.mfsuk.com

info@mfsuk.com

Opinion | & commentary Thought leadership from our Patrons and Members

MFS

The challenges of expanding a business

Are facing non-renewals from an existing lender Have declared bankruptcy or have an IVA Need to replace existing finance

Paresh Raja CEO MFS

46 | NACFB Magazine

Struggle with adverse credit

+44(0)20 7060 1234

www.mfsuk.com

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OPINION & COMMENTARY

We don’t like to blow our own trumpet but...

Innovation doesn’t just mean radical change

ith fintech companies paving the way for innovation in the financial services sector, it seems that the asset finance industry has been left behind and remains archaic in the way it is considered. The industry is calling out for a fresh and innovative approach – although it should be careful to not lose sight of the relationship-led foundation it was built on. There is a fundamental misconception around innovation as the term is often associated solely with technology and automated processing. Innovation should be recognised as challenging the norm and doing things differently, which the asset finance sector is in desperate need for. The entire process of innovation starts with challenging old-school thinking and ultimately finding the answer to the question: what is our purpose as a brokerage in the economy and how do we add value in an effective and efficient manner? The asset finance market presents a significant opportunity for disruption and innovation: to make the environment of finance more personal, simple and straightforward, seeking to cut out the complexity for the customer. Technology should be used to enhance service to improve the customer journey, rather than detracting from human interaction and communication.

Customers require solutions, and innovation needs to anticipate them. An effective CRM is an essential requirement to enhance customer relationships and ensure regular and relevant engagement. Many companies focus too heavily on increasing their customer numbers and forget to maximise the opportunities within their existing database. With an effective and intelligent CRM system we can maintain regular contact with existing customers, allowing us to benefit from organic, focused growth. As an industry we should look to harness the power of new, emerging solutions to spark business transformation, and explore and embrace leading-edge technologies that will help us drive process efficiencies and support customers to make informed decisions. We are already looking into the benefits of artificial intelligence within our own CRM systems, not only to track activity within our client base, but also to integrate industry trend data dynamically in real time. Agility in this market has never been more necessary. Particular areas of the industry are becoming more commoditised, reinforcing the importance of exploring new markets and recognising where our services provide the greatest value. The broker market has always been built on a customer-focused foundation, based on the SME sector that we commonly support, therefore the industry cannot accommodate a fully automated ‘self-serve’ environment.

sustainability in the broker market. We are also firm believers that businesses don’t make decisions – people do. That leads us to reject the traditional B2C or B2B models in favour of more authentic P2P (person-toperson – or human-to-human) interactions. At Charles & Dean, we place equal importance on both our IT and digital investment, and more traditional, customer-focused methods. To lose the human touch would be to lose the reason for our existence. Our customers come to us for our transparent, impartial and consultative approach to business and remain with us as our processes protect them and their data through the digital age. The IT we implement is introduced to protect the customer and make their experience with us as favourable as ever. The specialist and alternative lending community has most definitely grown over the years, which inevitably has provided greater opportunity and access for SMEs to borrow. While we notice this ever-growing community of funders, I strongly believe that the majority of SME customers are unaware of these alternative forms of lending and their suitability to their business, creating a natural divide through lack of education and awareness. Charles & Dean aims to innovate this space through bridging the gap in their knowledge while offering a service that is driven through genuine relationships and enhanced through intelligent technological innovations.

...we’re proud of our 30 years’ expertise in bridging. See how our team can help your clients. Call us on 0161 933 7103, or visit togethermoney.com/intermediaries

AWA R D S 2 0 1 7 BRIDGING LENDER OF THE YEAR

We believe that relationships and the lifetime value of a customer will become even more important drivers of

WINNER

AWA R D S 2 0 1 7 O U T S TA N D I N G CONTRIBUTION TOGETHER

WINNER

Tom Perkins Co-founder and director Charles & Dean

BEST SHORTTERM/BRIDGING LENDER 2017

For professional intermediary use only 48 | NACFB Magazine

WINNER BUSINESS LEADER BRIDGING LENDER

MARC GOLDBERG TOGETHER

100 BEST COMPANIES TO WORK FOR

2018

OPINION & COMMENTARY

We don’t like to blow our own trumpet but...

Innovation doesn’t just mean radical change

...we’re proud of our 30 years’ expertise in bridging. See how our team can help your clients. Call us on 0161 933 7103, or visit togethermoney.com/intermediaries

AWA R D S 2 0 1 7 BRIDGING LENDER OF THE YEAR

We believe that relationships and the lifetime value of a customer will become even more important drivers of

WINNER

AWA R D S 2 0 1 7 O U T S TA N D I N G CONTRIBUTION TOGETHER

WINNER

Tom Perkins Co-founder and director Charles & Dean

BEST SHORTTERM/BRIDGING LENDER 2017

For professional intermediary use only 48 | NACFB Magazine

WINNER BUSINESS LEADER BRIDGING LENDER

MARC GOLDBERG TOGETHER

100 BEST COMPANIES TO WORK FOR

2018

OPINION & COMMENTARY

How we’re drastically reducing decision times Sue Chapman FHD Managing director Midlands Asset Finance

o remain relevant in such an advancing economy, firms are having to take their businesses online to stay ahead of their competitors and remain an attractive service to their customers. Today, with over 42% of digitally active adults utilising the services of at least one fintech firm, the demand for online services is at an all-time high. After years of SMEs struggling to obtain the finance they require from high street banks, fintech firms are now allowing these smaller businesses to access the funding they need, when they need it, with total ease of access. By targeting businesses that larger banks tend to overlook, fintech firms have generated essential economic growth in the country, with EY estimating that the UK fintech sector generated £6.6bn of revenue in 2015, while also attracting circa £524m in investment. With many high street banks culling their branch networks and reducing

their dominance across the UK, there are significant opportunities out there for SME businesses to use online sources to access finance. Some 61,000 people are now employed in the fintech sector – clearly, more and more firms are taking advantage of the increasing capital generated from online services. Moreover, the online sector now accounts for approximately 5% of the total financial services workforce. As a result of this, Midlands Asset Finance (MAF) has recently launched its supplier partnership programme to aid suppliers, manufacturers and vendors improve their sales processes by giving their customers the opportunity to obtain finance quickly through its online tool, Asset Finance Compared.

for us to meet the client in person, catering entirely to how the client wants to proceed. The team then arranges all documentation, right through to pay-out, giving the customer more flexibility and time to get on with running their business. The programme has been developed to enable end customers to access a fast pricing engine and an immediate credit decision process to increase the suppliers’ volume of sales. By launching the partnership programme, Asset Finance Compared and vendors will be working together to create a seamless process for end users, ensuring that they can get quicker and easier access to finance for their purchase. MAF is proud to have a blend of innovative insights into the industry, mixed with traditional values, whereby we listen to what our customers want. With our new online presence, we are giving customers a choice of how they want to deal with us.

The biggest difference between Asset Finance Compared and other online broker platforms is that it is the first in the country to provide a decision in principle in 60 seconds – it doesn’t refer the customer anywhere else and it won’t say that the team will ‘get back to them shortly’.

Asset finance remains an essential part of the UK’s investment strategy and it is crucial that businesses are supported every step of the way to increase their capacity to invest, grow and move the economy, their business and this country forward.

Once the customer receives their decision in principle, MAF’s in-house team will get in touch immediately to verify ID electronically, meaning that it can all be done from the office and there’s no need

Putting the customer first should be at the heart of any broker, and at MAF, we have an ethos – an ‘appetite for yes’ – ensuring that we do everything we can to find a way to say yes to a business.

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precisemortgages.co.uk

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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.

01848 (3)

OPINION & COMMENTARY

How we’re drastically reducing decision times Sue Chapman FHD Managing director Midlands Asset Finance

Introducing our lowest ever range Bridging Finance rates from only

0.49%

Available for standard and light refurbishment Rates cut by up to 0.40% Through all distribution channels Call us

0800 116 4385

Visit us

precisemortgages.co.uk

FOR INTERMEDIARY USE ONLY. 50 | NACFB Magazine

01848 (3)

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