NACFB Magazine - May 2017 by NACFB

Issue 46 May 2017

The magazine for the National Association of Commercial Finance Brokers

The NACFB renaissance The Association’s new horizons

Plus +

Feature The broker’s role in translating financial lingo see page 36

Top Story Funding Circle refocuses on supporting UK SMEs see page 10

In this issue

P2P: a stimulus for the economy How direct lending contributes to stabilising the financial ecosystem

Working with vulnerable customers

A guide to the FCA’s rules on approaching vulnerability

Seeing eye to eye in Gatwick

We join the NACFB and Members at the inaugural compliance workshop

LOGO

SPECIALISTS IN GOOD SENSE

REGULAR SHAWB ROOK B ANK LIMITED SHAWB ROOK GROUP PLC

Our business is built on relationships, and we rely on the support of our Broker Partners to deliver transparent lending solutions to the professional investor, landlord and SME community. A flexible approach to both client and security: n

Short Term lending from 0.59%

Term lending from 2.99% above 3 month LIBOR*

Ltd companies, LLPs & Individuals

Broad range of security including HMOs & multi-lets

Welcome | NACFB OFFSHORE

he six months of my tenure as CEO have flown past and by the time you read this edition of the NACFB Magazine I will have moved on to pastures new. What I have found so refreshing from my meetings with the Association’s board of directors over this time is a strong appetite and passion for equipping the Association to take the next steps to capitalise on the many opportunities the future holds for it. I N T E R N AT I O N A L ( J E R S E Y

In this May issue NACFB News 4-6 7 7

In the news Notes from our sponsor Dates for your diary

Commercial Finance SUBSIDIARY )

Essential S H A W B R O O K I N T E R N A T I O N8-9 AL LIM ITED

S TA C K E D ( S M A L L U S E ) SHAWB ROOK B ANK LIMITED SHAWB ROOK GROUP PLC

*Shawbrook Bank applies a minimum floor of 0.75% to the LIBOR rate

D I S C U S S YO U R C A S E S TO DAY

0330 123 4521 or email cm.broker@shawbrook.co.uk

From the moment I was invited to step in as CEO I had one core goal: to best position the Association to leverage better governance and thereby provide a springboard from which a future CEO can move the Association positively forward. I’m delighted to report significant progress has been made and you can read all about this renaissance of the Association in my cover story, which transparently sets out the vision the board has for the Association. A 25th anniversary year is a great time to look in both directions – to see how far we have come, and to make the changes which ensure we’re going to play a more pivotal role in the next 25 years.

The next six months will be an exciting time for the Association: a bigger Expo and an amazing gala dinner, not to mention the build of our new compliance business and undoubtedly a new CEO! In closing, I would like to thank the NACFB board, especially the chairman and vice chairman, for their unwavering support and confidence in my leadership. It would be completely remiss of me not to thank Norman Chambers, without whose stalwart and gritty determination I would not have been able to be interim CEO. And, of course, the busy, faithful and talented Hamilton House team who have had to get used to someone new at the top. I look forward to seeing many of you at NACFB events in the future, and I would like to thank you for supporting me. It’s been a privilege to be involved!

www.shawbrook.co.uk

Rob Lankey Chief Executive

Rob Lankey CEO NACFB

news bites

Top Story 10

Funding Circle refocuses on supporting UK SMEs

Introducing 12

MarketInvoice announces partner incentives for commercial finance brokers

Case Studies 14-15 Why trust is key to a successful deal 16 Flat roof a platform for luxury 18 How flexibility and expertise enable successful bridging finance

Cover Story 21-23 The NACFB renaissanceThe Association’s new horizons

Spotlight 28

Special Features 30-31 P2P: a stimulus for the economy 34 Creative funding for challenges in manufacturing 36-37 The broker’s role in translating financial lingo 38 Invoice and trade: a perfect match

Industry Guides 40-41 Working with vulnerable customers 42 An in-depth loan grading system

Debate 44-45 Cutting back on investment – the right approach to reduce risk?

Opinion & Commentary 46 48

Patron Profile 24-25 Peninsula Finance PLC: punching above our weight

Seeing eye to eye in Gatwick

Financing, planning and building for the future The benefits of refurbishment are worth unlocking Don’t skimp on the detail

Ask the Expert 26

David Tomkinson, andpartnership

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

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

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

NACFB Magazine | 3

LOGO

SPECIALISTS IN GOOD SENSE

REGULAR SHAWB ROOK B ANK LIMITED SHAWB ROOK GROUP PLC

Short Term lending from 0.59%

Term lending from 2.99% above 3 month LIBOR*

Ltd companies, LLPs & Individuals

Broad range of security including HMOs & multi-lets

Welcome | NACFB OFFSHORE

In this May issue NACFB News 4-6 7 7

In the news Notes from our sponsor Dates for your diary

Commercial Finance SUBSIDIARY )

Essential S H A W B R O O K I N T E R N A T I O N8-9 AL LIM ITED

S TA C K E D ( S M A L L U S E ) SHAWB ROOK B ANK LIMITED SHAWB ROOK GROUP PLC

*Shawbrook Bank applies a minimum floor of 0.75% to the LIBOR rate

D I S C U S S YO U R C A S E S TO DAY

0330 123 4521 or email cm.broker@shawbrook.co.uk

www.shawbrook.co.uk

Rob Lankey Chief Executive

Rob Lankey CEO NACFB

news bites

Top Story 10

Funding Circle refocuses on supporting UK SMEs

Introducing 12

MarketInvoice announces partner incentives for commercial finance brokers

Case Studies 14-15 Why trust is key to a successful deal 16 Flat roof a platform for luxury 18 How flexibility and expertise enable successful bridging finance

Cover Story 21-23 The NACFB renaissanceThe Association’s new horizons

Spotlight 28

Industry Guides 40-41 Working with vulnerable customers 42 An in-depth loan grading system

Debate 44-45 Cutting back on investment – the right approach to reduce risk?

Opinion & Commentary 46 48

Patron Profile 24-25 Peninsula Finance PLC: punching above our weight

Seeing eye to eye in Gatwick

Financing, planning and building for the future The benefits of refurbishment are worth unlocking Don’t skimp on the detail

Ask the Expert 26

David Tomkinson, andpartnership

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

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

NACFB Magazine | 3

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

In the press The NACFB has written features in March and April which have been picked up in the Telegraph Business section, Business Advice and the FT Weekend.

n all these cases, journalists approached us for commentary. The formation of our operations board and the targeted press strategy that we have implemented over the past nine months has enabled us to respond quickly with immediate access to the right industry expert in the field being discussed.

We’ll pay 50% of the valuation fees. Fast-track their application with LendInvest giving them peace of mind and you another deal well done.

findSMEfinance holds strong Leads received from SMEs show that findSMEfinance funding enquiry numbers remained stable pre- and post-Budget. The figures show an East/West divide as average enquiry figures declined in the South East and North East, and increased in the South West and North West as well as in East Anglia and Scotland.

Welcome to our new Members

Accelerate your client’s auction purchase today.

Compliance update We have passed the milestone of our 400th compliance visit as we continue in our bid to see every single NACFB Member by the end of the year. Compliance visits are free of charge and serve as a reassuring ‘bill of health’ for the compliant commercial finance broker.

Prydis Consulting Ltd

The Healthcare Consultancy

Penvest Ltd

The City Broker

Northwest Business Funding

OP Commercial Ltd

Think Business Finance

QHFS Limited

To find out more about this exclusive offer, speak to Justin today on 020 7118 1133 or visit intermediaries.lendinvest.com, your dedicated lending resource.

Simply 1 Financial Services Ltd Ardent IFA Limited Flare Path Finance Ltd

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

4 | NACFB Magazine

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

In the press The NACFB has written features in March and April which have been picked up in the Telegraph Business section, Business Advice and the FT Weekend.

We’ll pay 50% of the valuation fees. Fast-track their application with LendInvest giving them peace of mind and you another deal well done.

Welcome to our new Members

Accelerate your client’s auction purchase today.

Prydis Consulting Ltd

The Healthcare Consultancy

Penvest Ltd

The City Broker

Northwest Business Funding

OP Commercial Ltd

Think Business Finance

QHFS Limited

To find out more about this exclusive offer, speak to Justin today on 020 7118 1133 or visit intermediaries.lendinvest.com, your dedicated lending resource.

Simply 1 Financial Services Ltd Ardent IFA Limited Flare Path Finance Ltd

4 | NACFB Magazine

NACFB NEWS

Notes from our sponsor

Farewell to our chief accountant

Karen Bennett Managing director of commercial mortgages Shawbrook Bank

After 17 years, the NACFB’s chief accountant, Clare Lillington, has decided to move on.

With Easter now behind us and the summer months so tantalisingly on the horizon, it’s shocking to think we are nearly at the halfway point of 2017.

lare joined the Association in May 2000, commuting to the NACFB’s base in Birmingham and then Exeter for the next 12 years. When the Association moved to London, Clare’s commute became considerably longer, but she stayed with us and continued to manage the ever more complex accounts. Clare is the Association’s longest-serving member of the team. She leaves big shoes for our new accountant, Victoria Skeat, to fill. We’d like to record our gratitude to Clare for the huge difference she has made over the last 17 years.

New Compliance Services launches The NACFB has developed an in-house compliance division – NACFB Compliance Services. The NACFB Compliance Services website, launched in early April, offers a wide range of products, template documents and general assistance with regulation. Find it at: www.nacfbcompliance.co.uk

Clare Lillington, NACFB chief accountant

6 | NACFB Magazine

learly, the pace of change in our market continues to inspire competition between lenders. This has to be perceived as a positive, bearing in mind that intermediaries and their clients will receive ever more competitive lending solutions as a result. This will apply not only to the products which are available to investors, but also the systems and processes through which these products are delivered.

Dates for your diary NACFB & Barcadia Commercial Finance Roadshows When: 23rd May Where: Sandy Park, Exeter When: 24th May Where: Hilton at Ageas Bowl, Southampton When: 25th May Where: CEME, Conference Centre, Essex

Here at Shawbrook we recognise that change is natural and – when applied with good sense – it can have a profound impact on the investors and landlords we serve. With that in mind, we were pleased to announce a series of customer-focused product initiatives recently across our ‘Spring Fling’ series. These included a suite of changes which were designed to provide both cost and efficiency benefits for our broker partners’ clients.

When: 26th May Where: Stadium MK, Milton Keynes

We were able to significantly reduce pricing across commercial, mixeduse and short-term loan products as well as offer a discount on the arrangement fee for all applications received in March. We also streamlined our LTV structures across these product sets, promoting maximum transparency for brokers’ clients throughout the application process.

NACFB and Barcadia Commercial Finance Roadshows When: 17-20th October Where: East, various locations – to be confirmed

Providing clarity and cutting through the noise is something that our partners at the NACFB also excel at, and it is reassuring to work so closely with an organisation that chimes with our business philosophy. This is best illustrated by their 25 years of ferocious commitment to the intermediary channel and the services made available to investors and landlords. Throughout a quarter of a century, the NACFB has maintained its hunger to educate and inform across a range of mortgage markets, with no sign of slowing down. Their nationwide compliance workshops are a pertinent example, providing invaluable training on the regulatory issues that count for intermediaries and their clients.

Gala Dinner and Industry Awards When: 30th November Where: Park Plaza Westminster Bridge, London

Let’s also not forget the positive work that the NACFB does by liaising with lenders such as Shawbrook on a daily basis, holding us all to account and allowing a positive professional

Summer Drinks Reception When: 20th June Where: Highline Bar, Genting Hotel, Birmingham Commercial Finance Expo When: 21st June Where: Hall 3A, NEC Birmingham

AGM at the Park Plaza When: 30th November Where: Park Plaza Westminster Bridge, London

dialogue to take place as a result, in addition to lobbying relevant parliamentary groups to find the answers to a range of pressing issues within the mortgages industry. It is never easy to predict what awaits us in the summer months and beyond, but there are some things we can do to position ourselves responsibly. Putting the customer’s long-term financial stability first – allied with a responsible attitude to lending and a willingness to embrace new technologies – will ensure growth opportunities for lenders, intermediaries and their clients alike. This is a sound way of thinking and one that I am sure we can all benefit from.

NACFB Magazine | 7

NACFB NEWS

Notes from our sponsor

Farewell to our chief accountant

Karen Bennett Managing director of commercial mortgages Shawbrook Bank

After 17 years, the NACFB’s chief accountant, Clare Lillington, has decided to move on.

With Easter now behind us and the summer months so tantalisingly on the horizon, it’s shocking to think we are nearly at the halfway point of 2017.

Clare Lillington, NACFB chief accountant

6 | NACFB Magazine

When: 26th May Where: Stadium MK, Milton Keynes

NACFB and Barcadia Commercial Finance Roadshows When: 17-20th October Where: East, various locations – to be confirmed

Gala Dinner and Industry Awards When: 30th November Where: Park Plaza Westminster Bridge, London

Let’s also not forget the positive work that the NACFB does by liaising with lenders such as Shawbrook on a daily basis, holding us all to account and allowing a positive professional

Summer Drinks Reception When: 20th June Where: Highline Bar, Genting Hotel, Birmingham Commercial Finance Expo When: 21st June Where: Hall 3A, NEC Birmingham

AGM at the Park Plaza When: 30th November Where: Park Plaza Westminster Bridge, London

NACFB Magazine | 7

New lending standards for businesses introduced

Commercial Finance | news

Opportunities for developers as supermarkets sell off unwanted land Treasury hosts Brexit roundtable on financial services sector

The Department for Exiting the European Union and the Treasury have hosted a roundtable to discuss Brexit with members of the financial services sector. Topics covered at the event included the Great Repeal Bill, the movement of skilled workers and increasing the sector’s competitiveness on a global scale.

MTF sells £125m of bridging loan assets

MT Finance Limited (MTF) has entered into a relationship with a global institutional investment manager, which has committed to acquiring up to £125m of the lender’s bridging loan assets. The investment manager has over $1.4 trillion (approximately £1.1 trillion) of assets under management and also has the option to acquire a further £125m of assets from MTF.

8 | NACFB Magazine

The new Standards of Lending Practice have been published by the Lending Standards Board. The new standards saw a change in product scope and protections extended from micro-enterprise customers to include businesses with turnover of up to £6.5m. They will bring protections for a much wider range of businesses to help achieve fairer customer outcomes. The value of land owned by major supermarkets has fallen by £6.5bn, according to research by Saving Stream, with new sites creating an opportunity for property developers. The research showed the value of property owned by Tesco, Sainsbury’s, Morrisons and Asda has fallen from a peak of £44.3bn to £37.8bn in just two years.

More SMEs swap overdrafts for asset-based finance Figures from the Asset Based Finance Association have revealed that average lending to SMEs through asset-based finance rose by 3% last year to £9.5bn compared with 2015. The association points out that over the same period, outstanding bank overdrafts decreased by 2% to an average of £12.4bn, according to Bank of England data.

Landlords look to commercial loans to sidestep buy-to-let changes

Almost half of UK financial services staff committed to Women in Finance Charter Thirty-three more firms have signed up to the government’s Women in Finance Charter to tackle gender inequality in financial services. Some 33,000 extra staff are now covered by the scheme. The 122 firms signed up so far represent over half a million employees in the UK (almost 50% of the financial services sector).

P2P lender launches three-minute loans through app

69% of brokers expect increase in development finance demand Crowdfunding platform for SME developers launches Fushi has launched a new equity crowdfunding platform for SME developers. LandDevelop offers UK, European and Asian investors equity stakes in UK property developments across various asset classes, with a potential 20% gross internal rate of return after fees. The minimum loan amount for developers is £200,000. The minimum for crowdfunding investors is as little as £100.

The proportion of landlords intending to take out commercial loans to fund property purchases has doubled over the last 18 months. Research from the National Landlords Association shows the proportion of landlords planning to use commercial loans has risen from 10% in July 2015 – when changes to landlord taxation were announced – to 19% at the end of 2016.

Fintech app Revolut has partnered with P2P platform Lending Works to offer speedy loans. Customers can apply for between £500-5,000 in credit in two minutes and receive funds on contactless cards almost instantly. The entire process can take as little as three minutes. The company also plans to enable a P2P marketplace among its user base of 530,000 Europeans, allowing cross-border lending and borrowing for customers.

New research by United Trust Bank has found 69% of development finance brokers anticipate greater demand in the year ahead, while 27% expect demand to stay roughly the same. Some 63% of asset, development, bridging and mortgage brokers surveyed believed the government was not doing enough to tackle the UK’s housing shortage.

Lloyds offers competitive commission for invoice finance brokers

Lloyds Bank Commercial Banking has offered brokers a 40% share of its service fee revenue, generated from their clients for the duration of the account. Those referring SME clients for invoice discounting, factoring or asset-based lending products to Lloyds will receive transparent monthly rewards and support from dedicated relationship and on-boarding managers.

London to pilot new development funding model

London is set to pilot a new development rights auction model for funding infrastructure projects. Announced as part of a new London Devolution Agreement in the spring Budget, the new model will provide significant funding towards future infrastructure developments, improve building speeds and reduce reliance on government funds.

240-year-old private bank introduces expat lending service Commercial lender to open £50m NI SME fund

Capitalflow Commercial Finance plans to double its staff headcount and open a £50m cash pot to support Northern Ireland SMEs. The cross-border commercial lender is looking to increase its team from six people to 12 by autumn. Since launching, Capitalflow has lent £43m to Irish businesses via a variety of products, including invoice discounting, leasing and asset-based lending.

Weatherbys Private Bank has launched a new mortgage and savings service for expatriates. Weatherbys now offers loans of between £500,000£5m, a variety of currency accounts and foreign exchange for individuals who live abroad for whom the UK is their long-term home. A dedicated team of experts will also be on hand for assistance with foreign exchange markets.

Growth Street to enter broker market

Growth Street plans to launch a broker proposition as it bids to increase access to funding for UK SMEs. The marketplace lending platform offers revolving credit facilities to businesses. Growth Street has previously not used the broker market, but is starting to build relationships with the broker community after fine-tuning its product.

BUSINESS FINANCE

0203 051 2331 W W W. M T- F I N A N C E . C O M E N Q U I R I E S @ M T- F I N A N C E . C O M

NACFB Magazine | 9

New lending standards for businesses introduced

Commercial Finance | news

Opportunities for developers as supermarkets sell off unwanted land Treasury hosts Brexit roundtable on financial services sector

MTF sells £125m of bridging loan assets

8 | NACFB Magazine

Landlords look to commercial loans to sidestep buy-to-let changes

P2P lender launches three-minute loans through app

Lloyds offers competitive commission for invoice finance brokers

London to pilot new development funding model

240-year-old private bank introduces expat lending service Commercial lender to open £50m NI SME fund

Growth Street to enter broker market

BUSINESS FINANCE

0203 051 2331 W W W. M T- F I N A N C E . C O M E N Q U I R I E S @ M T- F I N A N C E . C O M

NACFB Magazine | 9

Top | story Our pick of the latest patron news

Funding Circle co-founders Samir Desai, James Meekings & Andrew Mullinger

Funding Circle refocuses on supporting UK SMEs P2P lending platform Funding Circle has announced plans to cease all property development lending activity by mid-2018. Vera Sugar Editor NACFB Magazine

he lender will use this strategic move to refocus resources on its core SME offering in the UK, US, Germany and the Netherlands. Funding Circle also claimed that narrowing its focus will allow for the strengthening of its leadership position in its operational markets. Additionally, the refocused activity will allow the lender to expand into more international markets, according to Samir Desai, CEO and co-founder of Funding Circle: “While delivering attractive returns to our investors, property development lending represents a small and diminishing share of [approximately] 5% of our global revenue, and is available to borrowers in only one of our international markets.

10 | NACFB Magazine

“This decision means we can focus resource on our core small business lending product in the four countries where we already have a leadership position. It will allow us to extend our small business lending product to more international markets in due course.” James Meekings, UK managing director and co-founder, added: “We have taken this decision because we are absolutely focused on making Funding Circle the first choice for small business loans globally.” Funding Circle has reassured current development finance clients of its commitment to meet any outstanding funding over the next 12 to 18 months with the scaling down of property development lending activity taking place gradually. Also, where the lender has committed to a new proposal and is currently undertaking due diligence, it will continue to support the proposal through to fruition.

With regards to the lender’s commercial finance broker relationships, Luke Jooste, head of UK sales channels at Funding Circle, said: “There will be no change to the way we work with our existing commercial finance brokers on the small business side, and we look forward to continuing to help their clients to access fast and flexible finance.” Following the lender’s announcement, speculation in the sector has begun about whether other P2P lenders will follow suit, and whether the specific risks and requirements of development finance are suited to the P2P environment. To date, Funding Circle has lent over £2.1bn to UK businesses, and has an investor base of over 60,000. Today, as a Patron of the NACFB, the lender works closely with the Association and has been a sponsor of the Commercial Finance Expo for four years in a row.

SPEED MEETS EXPERIENCE 020 7655 3388

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.

Top | story Our pick of the latest patron news

Funding Circle co-founders Samir Desai, James Meekings & Andrew Mullinger

Funding Circle refocuses on supporting UK SMEs P2P lending platform Funding Circle has announced plans to cease all property development lending activity by mid-2018. Vera Sugar Editor NACFB Magazine

10 | NACFB Magazine

SPEED MEETS EXPERIENCE 020 7655 3388

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

MarketInvoice announces partner incentives for commercial finance brokers MarketInvoice business highlights Funded against invoices worth over £1.2bn since 2011 Provided record funding to UK businesses in March 2017 (£54.7m) and delivered 60% year-on-year funding growth from £81.1m (Q1 2016) to £129.6m (Q1 2017) Appointed Zopa co-founder Giles Andrew as chairman Secured new funding partnerships with local authorities in Leeds and West Oxfordshire

Vera Sugar Editor NACFB Magazine

2P online invoice finance lender MarketInvoice has announced a new commission structure for its partners, offering 40% of its first-year subscription fee for commercial finance brokers. In order to drive the company’s goal of doubling its lending to £2bn in 2017, the lender is offering commercial finance brokers, financial advisers and accountants a 40% revenue share for all new clients referred to MarketInvoice Pro, the company’s new, confidential invoice discounting service. Following the initial 12 months, MarketInvoice will offer a 20% share every year that those new clients remain with the lender thereafter. Anil Stocker, co-founder and CEO at MarketInvoice, said: “This incentive structure is one part of our offer to commercial finance brokers. What’s most important for us is the depth of relationships that brokers hold within the business community and

12 | NACFB Magazine

we feel that the commission structure represents the great level of expertise they bring in promoting our services. Commercial finance brokers bring a variety of businesses to us and that’s why we like working with them.” Brokers will have access to MarketInvoice’s introducer partner portal in order to refer clients and track their progress. The platform also provides transparent updates on commissions, as well as broker support from a dedicated partnership manager. On the same portal, clients will be able to immediately apply for an invoice finance facility and receive an indicative quote. After MarketInvoice has carried out its due diligence and a decision is made, the client account is set up and funds can be withdrawn within as little as seven days. Anil added: “Our network of introducers, which includes commercial finance brokers, are a big catalyst for growth in our business. In 2016 around half of the businesses that MarketInvoice provided funding to came from this network. Brokers are excellent brand ambassadors for us, helping us to build trust with a wide

Moneyfacts. Winner: Innovation in the SME Finance Sector

Highly commended: Best Bridging Finance Provider

range of business communities all over the UK and play a huge role in our strategic ambitions going forward. “We partner with several leading commercial finance brokers and are keen to widen our network within the commercial finance community.” Launched earlier in 2017, MarketInvoice Pro offers businesses a confidential funding line against all outstanding invoices, enabling them to manage cash flow and to keep customer relationships in hand without having to disclose the facility. According to the lender, the launch of the service has provided a significant boost for its business, having provided record funding to UK businesses in March (£54.7m) and demonstrating a 60% year-onyear growth in funding from £81.1m (Q1 2016) to £129.6m (Q1 2017).

A heartfelt thank you to everyone who voted for us at the Business Moneyfacts Awards - we’re thrilled. The greatest satisfaction comes from knowing that our resolute belief in the power of collaboration is something you share too.

MarketInvoice became a Patron of the NACFB in November 2013 and is also an official partner of the British Business Bank, having advanced over £99m in government funds to growing UK businesses.

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

Helping Fund UK Business

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

Vera Sugar Editor NACFB Magazine

12 | NACFB Magazine

Moneyfacts. Winner: Innovation in the SME Finance Sector

Highly commended: Best Bridging Finance Provider

MarketInvoice became a Patron of the NACFB in November 2013 and is also an official partner of the British Business Bank, having advanced over £99m in government funds to growing UK businesses.

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

Helping Fund UK Business

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

Ultimately, a company can’t budget for every single expense, so when something unexpected occurs that requires immediate attention, the cash won’t always be available

Lancombe Country Cottages

Why trust is key to a successful deal Jenny Knight Senior relationship manager Fleximize

A weakened pound has made the ‘staycation’ an increasingly popular holiday option for British families, while slashing the cost of a trip to the UK for overseas visitors.

n the surface, this is great news for the UK tourism industry, but with thousands of people offering up their properties on Airbnb, it’s never been more challenging for traditional holiday companies to attract customers. Set in the heart of the stunning Dorset countryside and only a short drive from the Jurassic Coast, Lancombe Country Cottages & Lodges – a complex of attractive cottages, lodges and shepherd huts – was opened in December 2013 by Caroline Newling-Ward, who previously spent 20 years working as a risk and compliance manager in the financial services sector. Since acquisition, she has transformed the complex into a collection of beautifully presented holiday homes, which suit the requirements of small and large families alike. Caroline has also installed a heated indoor swimming pool and outdoor play area. Off the beaten track In January 2016 – after receiving a recommendation from a Dorset-

14 | NACFB Magazine

After dealing with banks all my life, I was nervous about using an alternative option. However, I found the process to be expedient and very professional

based funding company – Caroline applied for an unsecured business loan with Fleximize. She explained that the funding would help cover the cost of some essential maintenance, including the installation of a new boiler. Caroline had initially approached her bank – with whom she had an existing finance facility – but was unable to secure the additional funding she required due to a change in the bank’s lending metrics. Understanding Caroline’s need for a relatively quick turnaround, Fleximize promptly put an offer together. From speaking with her and reading the fantastic reviews of Lancombe Country Cottages, the Fleximize team recognised that Caroline is a highly professional business owner, who goes the extra mile for her guests. Better still, she was running a profitable business which attracts customers all year round. After applying online – and passing Fleximize’s initial credit checks – Caroline was assigned a relationship manager, who served as a dedicated point of contact from application to approval. Dealing directly with the

person who was underwriting her loan meant that Caroline knew exactly what was required of her at every stage of the process, and resulted in a speedy drawdown of funds. Ultimately, the decision to lend was based on the strong revenue growth that Caroline’s business had enjoyed over the past 12 months, and a belief that she’d have no problem repaying the loan. Unlocked potential With the funding from Fleximize in place, Caroline has been able to install a new boiler, and make a number of material improvements to the on-site accommodation. It’s also freed up the capital for Caroline to do her own marketing, which has increased Lancombe’s profit margin by almost 25%. Commenting on her experience with Fleximize, Caroline said: “After dealing with banks all my life, I was nervous about using an alternative option. However, I found the process more expedient, very professional and the pragmatism with understanding my business and applying that to the company’s demands and needs was second to none. Applying

for the loan was an absolute breeze – the paperwork was very straightforward. I would recommend Fleximize to any business.” Peter Tuvey, managing partner of Fleximize, said: “We were delighted to lend our support to Caroline’s fantastic business. Ultimately, a company can’t budget for every single expense, so when something unexpected occurs that requires immediate attention, the cash won’t always be available. After seeing how Caroline has successfully grown her business over the past three years, we had no hesitation in offering her a finance package that met the requirements of her company.” Fleximize offers unsecured and secured funding to UK companies, and will consider lending to businesses in any sector. Subject to the timely receipt of relevant documentation, Fleximize can deposit funds in as little as 48 hours.

NACFB Magazine | 15

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

Ultimately, a company can’t budget for every single expense, so when something unexpected occurs that requires immediate attention, the cash won’t always be available

Lancombe Country Cottages

Why trust is key to a successful deal Jenny Knight Senior relationship manager Fleximize

A weakened pound has made the ‘staycation’ an increasingly popular holiday option for British families, while slashing the cost of a trip to the UK for overseas visitors.

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After dealing with banks all my life, I was nervous about using an alternative option. However, I found the process to be expedient and very professional

NACFB Magazine | 15

CASE STUDIES

Flat roof a platform for luxury

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

Andrew Lazare Managing director Mint Bridging

In an ever more competitive housing market – with land values at a premium – successful property developers continue to look for ways to maximise their returns on every project.

hen all horizontal elevations have been maximised, the only options are up or down. While this can create fresh challenges for a developer, it can be a financially rewarding experience. Beyond the form Our borrower’s proposition was to develop the flat roof of a former commercial office building (now successfully converted to apartments with the project fully sold out). Other lenders within our sector were approached, but the client’s broker was met with a lot of headshaking, as they were daunted by the complexity of the project. After all, there’s no space on a form that fits the criteria he had in mind: the development of eight luxurious penthouses on the flat roof of a former office building on the outskirts of a city centre. Although the borrower is a seasoned developer with plenty of successful refurbishments and conversion projects in his portfolio – including the project which we were being approached to develop – he didn’t have experience in the type of project proposed. At Mint, we like to meet our borrowers, so when I visited the developer, I could see the merit in what he was

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All in a day’s work – a profile of a Just Cashflow Broker Relations Manager

Brokers can’t be expected to know exactly how these facilities can benefit their customers and this is where Wayne Martin comes in. When Wayne, in his role as Broker Relations Manager at Just Cashflow, answers the phone he has two thoughts in mind:

trying to do. Richard Showman, senior underwriter, said: “I remember when Andrew advised us that he’d agreed to fund a loan on a leasehold flat roof of a commercial property. I thought his entrepreneurial flair had finally got the better of him, but once on site, I could see its potential and felt it was worth our support.” Field experience The Mint management team are successful developers in their own right and have a track record of delivering developments of various sizes. Thanks to this knowledge, we are in a great place to provide visionary borrowers with a handmade solution, based on their unique needs. With our support, the borrower was able to proceed with his plan of creating purpose-built (timber frame) pods on three rooftops. We introduced our own quantity surveyor – who had experience in this type of development – to the developer’s own project team to offer assistance as well as to manage our further advances. The developer now had an extra tier of expertise on hand to monitor the building’s progress. As the client was the freeholder, no consents were required to progress the development when planning permission was attained. The payments were staged and released to the client, allowing him to call upon funds when required to progress the project. The client, therefore, only paid for funds utilised, but had the comfort that the money was at his disposal.

The borrower said: “When we were turned down by other bridging and development lenders, we were introduced to Mint Bridging by our broker. When Andrew came on site, he offered us terms there and then. The funds were drawn down soon after, and working with their QS [quantity surveyor] was seamless. I would have no hesitation to use them again for our next project or to recommend them to anyone looking for a reliable, honest, trustworthy lender with a ‘can-do’ attitude.” Our entrepreneurial spirit is derived from the knowledge and experience that exists within our team. Where we feel a project has the potential to be viable – even if it seems outwardly complicated – we will invest time and effort to understand it on its financial and practical merits. By doing this, we can tailor a handmade solution that works for all parties. We’re financially independent and this allows us to write loans or fund developments of up to £5m. In addition, we have the in-house skills and experience to support a borrower with every aspect of their development or project.

Firstly, how quickly can he provide time starved brokers and their business customers with the answers they need. Closely followed by how he can provide absolute clarity about what needs to be done to get a deal across the finishing line.

Wayne is well qualified to provide this service having worked previously as a broker combining this with unrivalled knowledge of the facilities Just Cashflow has to offer. “I totally understand that brokers don’t want to go through the hassle of filling in an application and then wait to be told that their customer doesn’t qualify - this is a waste of everybody’s time,” explains Wayne. “That’s why my approach is a short initial conversation with the broker, asking the key questions that can quickly identify if a deal can be done. I can then say what I believe to be the best option and give an indication of cost to the customer and any commission that will be paid to the broker. From experience this saves everyone valuable time and allows us to move swiftly through the application process by identifying what information and paperwork is going to be needed. It’s all about good communication and key to this is outlining what needs to happen to get

a particular deal over the line. With a clear understanding of why the funding is required and how urgently the broker’s customer needs the finance I can then put together the most effective and efficient funding solution for all concerned.” Wayne has built up a wide range of financial services experience and prides himself on his ability to help customers cut through any jargon. He has been with Just Cashflow since the word go and previously developed his knowledge, skills and customer focus during his time with Egg Finance, Purple Loans and G.E. Money. He regularly receives positive feedback for his helpful, straight talking and customer focused attitude. “That initial conversation with the broker is extremely important but it is important good communication doesn’t stop there. If issues crop up as the application progresses, it is essential to keep the broker fully updated on how a case is progressing,” adds Wayne. To find out more about Just Cashflow and how, by partnering with them, they can support the business growth of your clients in the longer term, why not talk to Wayne direct on 0121 2276450. He will be more than happy to help you get more deals across the finishing line.

Get your clients across the finishing line As a professional broker or intermediary you’ll be used to see ing st nd e i e nding or o r c ients. st s o no s t t e er siness is di erent nd e re e to o er o t i ored n nci so tions to eet t e re ire ents o o r c ients. Our Revolving Cash Fund gi es o ccess to nds ro 1 , to 5 , , or itio s sinesses, to s ort t eir contin ed gro t . o i nd t e ic tion rocess re si e nd str ig t or rd nd o r nder riting te i s ort o , to e ens re o get e en ore c ients cross t e nis ing ine.

Just call us now

0121 418 5037 Alternatively, find out more

justcashflow.com/partner

Trade Finance Excellence Awards

2017

TradeFinance.Global

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

CASE STUDIES

Flat roof a platform for luxury

Andrew Lazare Managing director Mint Bridging

In an ever more competitive housing market – with land values at a premium – successful property developers continue to look for ways to maximise their returns on every project.

16 | NACFB Magazine

All in a day’s work – a profile of a Just Cashflow Broker Relations Manager

Just call us now

0121 418 5037 Alternatively, find out more

justcashflow.com/partner

Trade Finance Excellence Awards

2017

TradeFinance.Global

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

CASE STUDIES

How flexibility and expertise enable successful bridging finance

Fixed rate loans with no set up fees or early repayment charges

Carl Graham Sales director Bridgebank Capital

ridgebank Capital is committed to working with experienced property professionals throughout the property investment lifecycle, whether it’s at acquisition, redevelopment or refinance stage, to provide the funding required to facilitate and complete projects. We recognise that short-term finance is a key investment tool for property professionals, irrespective of how advanced the project is. As an example, we were approached by a highly experienced property investor with an extensive portfolio, who required £5.5m to refinance an expired term facility, secured against an income-bearing block of apartments, held on one individual title in the North West. During our due diligence it was identified that, due to an existing cross corporate guarantee on another one of the applicant’s assets, it would not be possible for the borrower to complete the refinance as originally anticipated. Bridgebank Capital entered into direct dialogue with the incumbent lender in order to negotiate and agree a structure for the release of the cross corporate guarantee, by raising sufficient capital against the security property to both repay the facility and make partial repayment on facilities secured on the second asset. As part of the initial meetings with the borrower and their professional team, discussions were also held regarding improving the borrower’s equity position to achieve greater flexibility and potential return on investment through the division of the single title into individual leases. When structuring the loan facility, Bridgebank Capital ensured that the facility provided the borrower with the flexibility to complete this division of titles during the loan term if required.

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Business-boosting loans up to £500,000 Security may be required. Product fees may apply. Over 18s only. Business turnover of up to £2 million. Excludes reﬁnance and Commercial Real Estate Finance.

Risk profiling In order to assess the risk profile of the application and determine the borrower’s ability to successfully complete and exit the short-term loan facility as agreed during the application process, Bridgebank Capital instructed reviews of the assured shorthold tenancies. This process ensured that not only did the security property fulfil Bridgebank Capital’s lending requirements, but also that as a responsible lender, we were not allowing a borrower to enter into an agreement that could not be exited as anticipated. Following the successful review of the security property and tenancies, Bridgebank Capital advanced the full funding required for a four-month period.

whilst also achieving a sustained residual ground rent portfolio. The flexibility afforded to the borrower by completing this process enabled them to explore a wider range of term funding options, and subsequently secure term funding to repay the bridging loan on market-leading terms. In every case we handle, the team at Bridgebank Capital works closely with borrowers to fully understand their funding requirements. We are able to financially engineer a short-term loan facility in line with such requirements, ensuring that the objectives and requirements of the borrower are properly met.

Loan performance Prior to agreeing the facility with Bridgebank Capital, an exit strategy and lender had been identified by the borrower for repayment of the loan. During the term of the facility the borrower successfully carved out individual leaseholds for each of the apartments, as had been discussed during initial client meetings. This process enabled the borrower to successfully increase the aggregate value of the security property,

Email us at brokerteam@natwest.com ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT.

CASE STUDIES

How flexibility and expertise enable successful bridging finance

Fixed rate loans with no set up fees or early repayment charges

Carl Graham Sales director Bridgebank Capital

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Email us at brokerteam@natwest.com ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT.

Cover Story | feature

The NACFB renaissance

The Association’s new horizons G

overnance is one of those words like compliance and regulation: it tends to make you feel sleepy – but stay with me… All governance is really about ‘how things are done around here’ and one fact I’ve witnessed first-hand over the last 25 years is this: high-performing businesses are underpinned with great governance, whatever the business. Another thing I’ve learned over those 25 long years is business and governance do not operate in isolation. Over the last quarter of a century I’ve had the opportunity to be involved with an international charity, a 20,000-property housing association and had the privilege to launch a number of new lenders. I can therefore confidently say governance sits at the heart of all successful organisations, big or small. Particularly in the current economic environment, all businesses,

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in my opinion, need strong, skilled management teams and boards backed up by clear, effective governance frameworks in order to thrive. Over the last 25 years the NACFB has grown considerably in scale and complexity. On top of this, the pace of change has gone through the roof. After about 10 years of trading (ie 15 years ago), the NACFB had less than half the Members it does today and less than half the number of Patrons. That’s some change by anyone’s estimation. If growth was the only consideration, governance wouldn’t be so important, but it’s not. When you take today’s operating environment, ie the challenges associated with regulation, Brexit uncertainty and now a general election (need any more?) the trading landscape is altogether a more complex beast for the NACFB than ever before.

In addition, while the business operating environment we are in is far from straightforward (even though it is relatively benign currently), one thing we can be sure of is that further challenges will arise as the NACFB responds to new and ongoing changes in the commercial finance arena. If all this wasn’t enough, the Association is also rapidly establishing its own new compliance services, which is like a business within a business. So what does all this mean? Well, greater complexity plus more risks result in a heightened need for strong, effective governance. The NACFB board has recently taken a look at what best practice says about governance structures and recognised that governance plays an increasingly important role in balancing the needs of

an organisation and its stakeholders. Part of the NACFB board’s role is to deliver the NACFB’s raison d’être, and one thing the board recognised is that it hasn’t been as clear as it could have been about our strategy and plans both in the short and long term. Alongside all these business challenges is the internal one presented by an everrising bar in respect of the skills and quality expected of board members and management in the Association. The list of expected personal and technical qualities of a board director in 2017, for example, is so long and precise that one wonders whether anyone could fit the bill. To put it simply, the board should be a balance of the appropriate skills and experiences required to discharge its responsibilities. However, securing the right people and providing development, support and appropriate

infrastructure requires dedication and is an important challenge for the Association. It is also important to look forward and consider what skills, knowledge and experience a board needs to lead and direct the Association towards its vision and business aims over the next five years. The skills required of the board must be aligned to robust business plans. Talent management within the board then needs to be linked to the NACFB’s strategy if the board is to be effective. Our governance review At its January 2017 meeting, the NACFB board agreed the Association should conduct a review of its governance, which was to be led by the NACFB’s chairman, Paul Goodman, with support from me drawing on my experience of 25 years of not only installing corporate governance

across a variety of business structures, but also understanding the practical implications arising from implementing changes in governance. What we need to address The Association wants to embed a stricter internal operating environment so it’s crystal clear who can do what and who can sanction the actions. We need to make sure the right piece of work is on the right desk. In practice this means the main NACFB board remains the custodians of the Association’s strategy and direction, while the NACFB operations board, which meets monthly, deals with the operational matters supporting the executive, which in turn looks after the running of the Association daily. The board felt it wasn’t meeting often

NACFB Magazine | 21

Cover Story | feature

The NACFB renaissance

The Association’s new horizons G

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NACFB Magazine | 21

COVER STORY

enough in this fast-moving environment, so instead of four meetings a year, we’re moving to six. It’s also going to hold a facilitated strategy ‘away day’ to refocus and cement the NACFB’s strategy. Better management information (MI) was required, so to make sure there’s an excellent flow of information, we’re introducing more detailed MI, so the board directors and executive know exactly what’s going on. The board wants to explore the broadening of its skills, so at the next AGM, the Association will be asking Members to vote to allow the NACFB’s board to include independent board members and Patrons’ representatives for the first time. While this might sound a bit radical, it isn’t really. Yes, it’s a first for the Association, but if you look at the format and composition of other trade bodies and similar organisations, most look for a mix of skills relevant to their industry. So we’re going to propose having a board of 12, comprising six NACFB broker board members, two independent board members (these could be valuers, solicitors or other relevant stakeholders in the commercial finance industry) and two members who hold leading roles within our Patron firms. The members will always be a majority but we sincerely feel that this broadening will extend the insight, knowledge, skill and experience of the NACFB board. At the board’s strategy ‘away day’, we’ll be considering this proposal in more depth and honing the details so we can ask for your support at the AGM on 30th November. It’s a big change, so we’re not going to rush it and we’ll take the time to ensure we get the structure right. But you can see, from the direction of travel, we’re prepared and not afraid to make big decisions to enhance the NACFB for the next quarter of a century. The role of the deputy CEO has grown in responsibility and stature, and has become quite distinctive to the role of a CEO. So we’ve created the new position of managing director of the NACFB, responsible for all day-to-day aspects of the successful running of the Association. Norman Chambers has been with the Association for nearly three years and has been promoted to this position. He also becomes company secretary to the NACFB companies and still remains deputy CEO, so he can stand in when the CEO is absent. Norman has done a terrific job for the Association, particularly over the last six months, and his promotion recognises the direction the Association is travelling, its ambition for growth and is well deserved.

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COVER STORY

How will the Association be structured? The chart sets out how we’re planning to structure the Association going forward and we’ll be asking our Members to vote for it at the AGM in November.

Compliance committee, reporting to the main board (code of practice 1.2.2)

shocks, wheels and a few go-faster bits. Now it’s ready for someone to take it out and develop it further.

Advisory board (AB)

This is the main board and it’s proposed to comprise of six broker board members, two co-optee broker board members, two independents and two Patrons. Meets six times per annum. Custodian of strategy and direction.

Operations board (OB)

Responsible for commercial/operational activities and comprising of the executive of the NACFB and members of the AB, and has the option to appoint NACFB broker Members for special projects

CEO of the NACFB Notes on the structure chart 1) The proposed structure preserves the overall structure of the NACFB, ie an executive, sub-committees, an operations board and a main board, renamed the advisory board. 2) As mentioned above, it recognises the important role independent and Patron board members could play, alongside the broker board members. Patrons are a critical part of the NACFB and always have been. Independent and Patron members bring to the table a vast amount of experience and will strengthen the NACFB board. A not-for-profit trade body such as the NACFB needs to draw on the expertise available to it, as well as reflecting the role it plays when it comes to influencing its stakeholders.

Transition to the new NACFB structure The transition from the current structure of the Association to the new will be carried out carefully and gradually. We’re going to ask our Members to support the changes at our AGM in November, but we wanted to talk about them to the industry, now, in an open way. The implementation of the new board structure will take place in the 12 months from the 2017 AGM. Given the Association’s structure has remained largely the same for nearly a quarter of a century, it would not be prudent to rush

things; but there’s a lot we are doing now to improve governance and efficiency. For example, we’ve implemented a new document called standing orders – which doesn’t have anything to do with banking by the way. This document is effectively the internal rule book of who is accountable and responsible for what at the Association, and who has the authority to agree things and get them done. We’ve also already implemented better MI, along with a host of other, small tweaks to make the business more effective. The lid has also been lifted on the commerciality of both

Norman Chambers managing director of the NACFB

the gala dinner and the Commercial Finance Expo and I’d like to thank David Whittaker, CEO of Mortgages for Business, for the work he’s put in to help the Association make these events the best yet. The net result of all of this is the Association will make a greater profit in 2017 than we first expected and I’m proud of that. There is no shame at all in a not-for-profit organisation making a lot of profit. Not-for-profit does not mean don’t make one. We will absolutely make as much profit as possible for reinvestment into what the NACFB does and provide the essential fuel to get new initiatives off the launch pad.

Roger Deane

managing director of NACFB Compliance Services business

Leading into the future Turning to the subject of a new CEO, I can’t think of a better time to join the Association as its leader. You might think that’s a strange thing to say when I’m moving on, but it’s honestly not. My role was always going to be an interim one. That’s why I was hired. What my term of office now allows is for a new CEO to step in and take the reins of an Association which is really going places. As I’m a petrol-head and love cars, maybe a car analogy would be appropriate here. It’s like taking your family saloon and fitting new

One thing we do expect, however, is that unless we really fall on our feet, the recruitment of a new CEO may take many months to achieve. You may be asking, quite fairly, why the Association didn’t start the search earlier and the answer to that lies in the review of governance we’re doing. It was important we considered various governance models, and what the right structure for the Association should be. Having concluded our review, we decided the timing was now right to find a longterm successor to me. Hence why we’re starting now. We wanted to hand over the implementation of the governance plan, rather than the design of them. Therefore, any appointment of our new CEO could be after the Commercial Finance Expo, but if this is the case, our new managing director will do what a deputy CEO does, and stand in until we’re ready to appoint the right candidate. We may also appoint another interim CEO who has the specific skills and experiences needed to support the Association while the search for a long-term replacement is undertaken. So, I sign off with pride and have relished the opportunity to leave what I hope is a very positive mark on the Association. My closing words would say to Members and Patrons alike: please get behind us and support our aims. There is no organisation out there which is better placed than the NACFB to not only represent the commercial finance industry, but also to lead the way in building industry standards. That’s not all: the NACFB is designed around the interests of you, the Members and Patrons. We know we’re going in the right direction – enough of you tell us so. We also know that we need to talk about what we’re doing more often. Hence this article. Patrons, link arms please and help us implement our goals. We know you’ll all continue to compete for customers in this dynamic market, but please don’t compete among yourselves on standards! The renaissance of the NACFB is exciting and I’ll continue to watch future steps with great interest. See you at the CFE.

Rob Lankey CEO NACFB

NACFB Magazine | 23

COVER STORY

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COVER STORY

How will the Association be structured? The chart sets out how we’re planning to structure the Association going forward and we’ll be asking our Members to vote for it at the AGM in November.

Compliance committee, reporting to the main board (code of practice 1.2.2)

shocks, wheels and a few go-faster bits. Now it’s ready for someone to take it out and develop it further.

Advisory board (AB)

Operations board (OB)

Responsible for commercial/operational activities and comprising of the executive of the NACFB and members of the AB, and has the option to appoint NACFB broker Members for special projects

Norman Chambers managing director of the NACFB

Roger Deane

managing director of NACFB Compliance Services business

Rob Lankey CEO NACFB

NACFB Magazine | 23

Patron | profile

One of the most common causes of frustration and delay on a finance application can be the legal process and our ... deep understanding of the nuances of property law are a key component in our success

Peninsula Finance PLC: punching above our weight Daniel Palmer CEO Peninsula Finance plc

was delighted when I was asked by the NACFB to contribute to the latest edition of the NACFB Magazine. We try to regularly keep up to date on developments in the property-lending market and, as a smaller specialist lender, it can at times be challenging to maintain an active profile in an increasingly competitive marketplace. I think most involved in our specific type of lending will agree that there have been a large number of new entrants to our sector since the credit crunch a decade or so ago.

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Get to know us

Peninsula is one of the few specialist lenders whose brand and lending ethos pre-dates 2007/08. We launched in 2002 and have been a Patron and firm supporter of the NACFB for over 15 years now. Our lending roots do actually go back much further than this to the early 20th century, when the loan book was operated within a solicitors’ firm in Plymouth. One of the most common causes of frustration and delay on a finance application can be the legal process and our history, background and deep understanding of the nuances of property law are a key component in our success.

Our focus

The most important aspects of our business are the broker and introducer relationships we have been able to establish and develop, together with a flexible approach to lending. While cuts in rates of interest tend to grab the headlines, our view is that it is the service delivery and ease of our application process that provides us with a unique advantage over our competitors. Our lending policy is not formulaic and ‘one size fits all’; if we accept the deal in principle on the initial submission, we are committed to following through with that promise and funding the deal. Moving goal posts is just not for us and I think that is one of the main reasons why brokers have trust in the products and service we offer.

Our products

At present time, we have a range of six bespoke products we offer. Unlike others, we specialise in commercial property and accept security in a wide range of sectors from farm land to care homes. We have a specialist auction product, new business finance, turnaround finance, refurbishment bridge and can also offer regulated bridging to assist with house purchases. More recently, we have become active in the development sector for newbuild residential property and with loans from as little as £25,000, we have a nice niche for smaller projects which are typically under-funded, and where there may only be one or two units developed. We are happy to accept applications based throughout England, Scotland and Wales.

One of our recent cases was helping our client who wanted to change her own property into a buy-tolet. Her existing mortgage provider wouldn’t allow the property to be used for investment purposes and buy-to-let lenders turned her away for lack of experience and as the property was not yet let. Thanks to our quick and efficient service, a loan of £365,000 helped our client move swiftly into the investor market.

performance, but also to grow at a sustainable level so that our unique selling point of service is not compromised in any way. Though we are relatively small (and based down in the West Country) we believe that we offer a unique service and product, and punch above our weight in the short-term property market.

The funding background for a specialist lender will often determine product flexibility. Our capital is based on a healthy blend of shareholders’ retained funds, loan stock investment and a well-established funding line from a bank which supports our business and aspirations. Our ambition is to consolidate on recent

NACFB Magazine | 25

Patron | profile

Peninsula Finance PLC: punching above our weight Daniel Palmer CEO Peninsula Finance plc

24 | NACFB Magazine

Get to know us

Our focus

Our products

NACFB Magazine | 25

At home

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

with regulated loans We are Principal Lenders and provide first and second charge residential loans, regulated and non-regulated, from £250,000 up to £10m. Up to 75% LTV and interest rates from 0.65% p.m.

Releasing the authentic leader within

NON-REGULATED • REGULATED • REFINANCE • PURCHASE • IMPROVEMENT

David Tomkinson, director at leadership development consultancy andpartnership, on how to bring hidden skills to the forefront

Q A

What key traits does a good leader need to possess?

There has been much written about leadership over the last couple of decades, with contradictory opinions on the best leadership style to get the most from people. This has resulted in the topic appearing overly complex and only for the ‘heroes’ among us. We have a different view: leadership is a state of mind, not a job title. We can all be leaders if we choose to be. As one of my previous CEOs once said to me: “It is simple, but not easy.” Great leaders always know where they are going and what the future is they are trying to create. This connects to what they care about and what matters to them, and they work hard to create a compelling story for those they work with.

Q A

How do leadership skills come into play when engaging with others?

People engage first and foremost with people, not strategies, tasks or plans. Great leaders are able to explain where they are heading in a way which excites and engages their people. They talk passionately about why this matters to them and people want to follow them.

26 | NACFB Magazine

They are then able to have honest conversations that get people to deliver what is needed. This includes making ‘big requests’ that link tasks to the ‘why’, and to the future they are wanting to create. They set people up for success rather than inadvertently setting them up to fail, and help them to be at their best. They then acknowledge progress and hold people to account as necessary to ensure the job gets done.

Q A

What are some of the obstacles to mastering leadership skills?

What we know is that we all step into this leadership space naturally some of the time, whether it is running a multimillion-pound organisation, organising the work Christmas party, managing the finances of the local cricket club or running the family diary. What is intriguing is if we can do this already, why don’t we step into this space more often? The answer lies in the self-limiting beliefs we all hold – the voices in our head that tell us “don’t ask that question, you might look stupid” or “I’m not good enough, someone will find me out”. These stop us from being at our best and being the purposeful leader we are all capable of becoming.

Q A

How can one overcome these?

The key to great leadership then – based on the above – is the ability to connect with your best self, turn down the volume on limiting beliefs and be authentic; know who you are, know where you want to get to (at home and at work) and value your unique talents. Great leaders notice what is going on around them, have the curiosity to ask questions from a non-judgemental position (and really listen to the answers) and are willing to admit they are wrong or don’t know the answer. They care about the impact they have on others and constantly check the shadow they are casting to ensure it is the one they are intending.

Q A

What is your best piece of advice to budding leaders?

To summarise, great leadership is more about being than doing. So, whether you’re the leader in a commercial finance broker business or one of the ‘big five’, when we are at our best we are already brilliant – you don’t need more leadership skills pouring in, you simply need to use what you naturally have more often. When we are able to master this, there really are no limits to what we can achieve.

CMY

Let’s Talk! 020 8349 5190 finance@alternativebridging.co.uk @ABC_Bridging

COM M E R C IAL

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R E SIDE N T IAL

•

A PRINCIPAL LENDER

DE V E LOPM ENT

At home

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

Releasing the authentic leader within

NON-REGULATED • REGULATED • REFINANCE • PURCHASE • IMPROVEMENT

David Tomkinson, director at leadership development consultancy andpartnership, on how to bring hidden skills to the forefront

Q A

What key traits does a good leader need to possess?

Q A

How do leadership skills come into play when engaging with others?

26 | NACFB Magazine

Q A

What are some of the obstacles to mastering leadership skills?

Q A

How can one overcome these?

Q A

What is your best piece of advice to budding leaders?

CMY

Let’s Talk! 020 8349 5190 finance@alternativebridging.co.uk @ABC_Bridging

COM M E R C IAL

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R E SIDE N T IAL

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A PRINCIPAL LENDER

DE V E LOPM ENT

Spotlight Unmissable industry coverage

Seeing eye to eye in Gatwick Roger Deane Managing director, compliance NACFB

n 7th March, the NACFB held its inaugural compliance workshop at Gatwick, followed by further events in Nottingham, Bristol, Birmingham and Manchester. We have been delighted with the feedback, so expect this to be a regular offering from the NACFB whereby we keep our Members up to date and raise our professional standards. Since we began sending out an annual survey which asked our Members where the Association should focus its attention, the answer we’ve received has always been unambiguous: brokers want to stamp out fraud and learn about complying with the changes FCA regulation has brought to our sector. The code of practice compliance visits we have been undertaking have illustrated to the Association the areas that brokers most need support and guidance on, and this first round of events has focused on business quality. A day of discussions The Gatwick workshop began with a round of introductions from the 16 attendees, with my drawing out some specific areas attendees wanted to see discussed during the day. “It was great that we were able to get some real-life examples of the things we face on a daily basis in our businesses discussed in a group situation like this,” said one of the delegates, adding that it was “really valuable”. The initial session brought alive the regulatory background to what was going to be covered later in the day. “I now see how the FCA rules and manuals actually set out what we must consider doing for clients,” said one broker.

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Central to underpinning the key messages from the workshop was a lively discussion about what a regulated sales and advice process should contain. One broker stated: “We’ve been doing this for years and some of my clients have been with me for over 20.”

Delivering value to Members We have researched the market to ensure the cost of attending these events is competitive and comments back from Members about the value gained has been proof enough – and, of course, certificated hours of structured CPD helps too!

Roger explained: “There is a wellknown and often used phrase that says: ‘You’re only as good as your last sale’, and professionals offering a service do indeed trade on their reputations. Doing a good job (and retaining clients), however, is one thing; being able to evidence and prove that you can handle present challenges, particularly for the commercial broker who has to deal with such a wide variety of clients’ requirements.”

Our attendees praised our experience and excellent delivery, despite the varied broker circles attending the event. The overall conclusion was that our events are good value for money and the takeaways were all positive.

The business quality workshop focuses on the background to, and the delivery of, keeping robust records for this purpose. It is not just about treating customers fairly; it is also about protecting your business and avoiding the type of legacy issues that have blighted other sectors of the financial services industry. It is also worth noting that maintaining an appropriately detailed client file is a requirement for cover under the majority of professional indemnity insurance policies.

With such a positive start, I think we will be seeing more workshops coming soon.

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Spotlight Unmissable industry coverage

Seeing eye to eye in Gatwick Roger Deane Managing director, compliance NACFB

28 | NACFB Magazine

With such a positive start, I think we will be seeing more workshops coming soon.

Faster, simpler short term lending You can now get a quote in under 60 seconds and an offer in 2 minutes.

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% 5 6 0.

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

Special | features

Tom Shave BDM Funding Circle

An up-to-date insight into the industry

P2P: a stimulus for the economy

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If we cast our minds back to 2008, small businesses were only able to access finance through their high street banks. When the financial crisis struck, banks withdrew and small businesses – who make up 50% of GDP and 60% of private sector employment – had nowhere else to turn.

his changed in 2010. With the birth of direct lending platforms, businesses could begin to borrow from a wide range of investors – similar to a stock exchange for small business finance. By creating the infrastructure whereby any investor – big or small – can lend directly to creditworthy small businesses, the ecosystem has become more stable and small businesses should never be in the same position again. Who are P2P investors? Today, there are nearly 60,000 people lending through Funding Circle and we see hundreds of new investors joining the platform every week. By lending to small businesses, investors are able to earn stable, attractive returns while supporting the lifeblood of the economy. Retail investors lend small amounts to hundreds of businesses in order to manage risk, using the partial loan marketplace. To date, 91% of investors that have lent to more than 100 businesses have earned 5% or more and the average return is around 7%. The government is also lending directly through the platform. Since 2013, the government has lent £60m to more than 10,000 small businesses, initially through the Business Finance Partnership and

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now through the British Business Bank. Eighteen local councils are lending and last year the European Investment Bank committed to lend £100m to UK businesses. Approximately 10% of lending now comes from government sources. In order to further deepen the pools of capital available to small businesses, a range of institutional investors – including pension funds – are lending through the platform. As I’ve already mentioned, all small business lending was previously held on bank balance sheets and these investors were unable to access this asset class. Institutions today either lend directly by buying whole loans or through the Funding Circle Income Fund, which is listed on the London Stock Exchange and has opened up small business lending to a number of equity investors for the first time. Buying a share in the fund gives investors access to Funding Circle loans in the UK, US and Europe and is a source of stable capital for small businesses.

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in the same period in 2015. In comparison, investors at Funding Circle lent £167m on a net basis across the same period. We have always said that lending platforms would become a macroeconomic tool for governments to directly stimulate the real economy during periods of economic uncertainty. In January, we saw just that with the British Business Bank committing a further £40m to UK small businesses through our platform. Over the last seven years, the direct lending model has proved to be a more efficient way for small businesses to access finance, with businesses receiving the money they need to grow within days rather than months. It is now increasingly proving to be a more resilient model which will aid the economy during the next downturn. As Lord Adair Turner said towards the end of 2016, platforms like Funding Circle could “add a spare tyre to the credit supply system, making credit crunches less likely”

Stimulating the economy Recent Bank of England figures show that bank net lending – which is essentially new money into the economy (total lending minus repayments) – has slowed since the EU referendum. In Q4 22 UK banks lent £220m on a net basis – down from £600m

NACFB Magazine | 31

Special | features

Tom Shave BDM Funding Circle

An up-to-date insight into the industry

P2P: a stimulus for the economy

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30 | NACFB Magazine

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NACFB Magazine | 31

SPECIAL FEATURES

Creative funding for challenges in manufacturing S

the costs of investment needed to lay the foundations for business growth typically come well in advance of new orders and sales. This can be an opportunity to introduce additional assistance to borrowers in the form of a VAT deferral, which allows the business to retain the cost of VAT on bigger ticket items for up to three months, easing cash flow and working capital.

Simon Welling Sales director Paragon Bank Asset Finance

mall businesses in the UK manufacturing sector are increasingly realising the potential for asset finance. The Finance & Leasing Association’s figures released in January showed a 16% increase in asset finance new business, compared with the same month last year. As SMEs seek to balance cash flow pressures while responding to growth, asset finance is noticeably becoming a more popular solution.

Another opportunity is to refinance existing business assets, releasing cash tied up in existing plant and machinery. Refinancing existing, owned assets can, for example, support investment in marketing, training or research and development. With many small business owners active in all aspects of the running of their business, introducing refinance can begin to connect asset finance to the broader development of a business.

According to the Markit/CIPS UK Manufacturing Purchasing Managers Index, UK manufacturing demonstrated solid growth in production and new orders during February. Rates of expansion have remained well above the long-term average, with demand rising in both the domestic and overseas markets. What’s more, manufacturers are optimistic about the future, with 50% expecting output to be higher in a year’s time, compared with only 6% expecting a decline.

New entrants Alongside established businesses looking for ways to balance cash flow pressures, we’ve also seen an encouraging uptick in the number of start-ups. In the automotive and aeronautic sectors in particular, there’s been a definite increase in the number of start-ups through the supply chain eager to invest in new technology that can shorten manufacturing lead times, reduce component costs and drive up product quality.

Continued economic growth following the EU referendum last summer has been encouraging for businesses both big and small across the UK. However, with a less certain long-term outlook, financially fluent SMEs are expressing a demand for more flexible forms of financing. Opportunities within asset finance One of the biggest challenges for SME borrowers in the manufacturing sector is being able to borrow on terms that mirror the forecast performance of their business. To this end, we’ve recently reiterated our support for structured repayment profiles that can step up or down over time to respond to fluctuations in forecast business income. This way, businesses can more closely align the cost of investment with the forecast income of specific assets or customer contracts. If we consider the steadily increasing costs of imported manufacturing machinery,

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SUMMER’S NEARLY HERE

One of the biggest challenges for SME borrowers in the manufacturing sector is being able to borrow on terms that mirror the forecast performance of their business

In an increasingly automated lending environment, there’s a risk that valuable aspects of a start-up’s business plan are overlooked. While many lenders now rely almost entirely on historic performance data to gather information on lending decisions, start-up businesses need lenders who will engage more fully with young businesses and who place a high value on a well-supported business plan. Importantly, this is where specialist lenders can add value, leveraging their history of working with new starts to provide a more thoughtful evaluation of requests for investment and support.

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SPECIAL FEATURES

Creative funding for challenges in manufacturing S

Simon Welling Sales director Paragon Bank Asset Finance

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SUMMER’S NEARLY HERE

One of the biggest challenges for SME borrowers in the manufacturing sector is being able to borrow on terms that mirror the forecast performance of their business

SPECIAL FEATURES

The broker’s role in translating financial lingo As the amount of different commercial finance options continues to grow, so does the variety of financial terminology used by lenders. Terms such as debt financing, LTV, GDV and DSC may all sound confusing to SMEs looking to access finance.

Tom Belger Reporter Bridging & Commercial

t is, therefore, more important than ever that commercial finance brokers help SMEs navigate their way through the vast range of commercial finance options to make sure they secure the right funding to support their needs. “…Lack of time and jargon are the enemies of hard-pressed SMEs that are juggling so many balls at the same time,” said John Davies, director of Just Cash Flow PLC. “Unfortunately, most SMEs don’t plan how they are going to access the finance they need to grow their businesses until the last minute or until it is too late. “I see this as a fantastic opportunity for commercial brokers to produce and distribute a short summary of the finance options available and where they fit with different stages of a company’s development.” Rob Lankey, CEO of the NACFB, said brokers played a key and pivotal role in helping SMEs, not only to get a good overview of the wide range of

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offerings out there, but also to help them understand the differing styles of paperwork lenders tend to use. “This latter point is especially important if the SME is using a Patron of the NACFB that they’ve never used before and in some cases, never even heard of. “The great thing for SMEs is simply by dealing with an NACFB broker and NACFB Patron, an SME already has a massive tick in the confidence box because he knows he’s going to be dealing with compliant professionals.” What steps are being taken? Jo Breeden, managing director of Crystal Specialist Finance, said that specialist finance was misunderstood by many SMEs, with lenders having different terminology for the same thing. “A good broker can explain the product, process and fees to an SME in the language they understand so they feel confident in the process. “Specialist finance isn’t a dark art, but as the name states it is a specialised area where additional assistance is needed. “Education has been key to our development over the last 12 months,

and we have engaged brokers in a large number of seminars and events all across the UK with another 40 planned for 2017.” Crystal has also produced a number of downloadable guides which are designed to help brokers feel more confident in the specialist market. Meanwhile, Robert Collins, director of commercial finance at Brightstar, said a lot of its time was spent speaking to introducers and running through basic principles of how commercial loans are structured as it aims to make life easier for clients. “The steps that we are undertaking to underpin this [include] regular educational pieces such as case studies [and] examples of typical client requirements for commercial finance, and we are also in the process of adding a specific commercial feedback portal to complement the general feedback form that Brightstar operates. “This will give us a real sense of what we are doing well for clients and if there are any areas that need additional thought.” Carmen Dixon, vice-president of PR and communications at LendInvest, felt that education

Lack of time and jargon are the enemies of hardpressed SMEs that are juggling so many balls at the same time

was paramount for brokers to assist SMEs and LendInvest, as a lender, was playing its part. “We prioritise this information-sharing through initiatives like the LendInvest Property Development Academy and regular broker breakfasts hosted with the aim of helping brokers improve their understanding of the specialist financing process from application to completion. “We also maintain a glossary of property development terminology that brokers can use as a resource of reference when consulting with their clients.” Experience is the key differentiator Rob concluded by adding that most NACFB brokers were already good at explaining different financial terms. “Many of them have been serving SMEs with financial solutions for donkey’s years and they understand the nuances of the lenders they work with. “I believe, as a general rule, that broker Members and Patrons do a good job to avoid jargon and complex terminology, but I accept there’s always more that can be done.”

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SPECIAL FEATURES

Tom Belger Reporter Bridging & Commercial

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Lack of time and jargon are the enemies of hardpressed SMEs that are juggling so many balls at the same time

NACFB Magazine | 37

SPECIAL FEATURES

Invoice and trade: a perfect match Rob Mercer Senior regional director Ashley Finance

s is widely understood, traditional invoice finance is suitable for a variety of businesses and helps provide immediate working capital against work that has already been completed. This type of facility is invaluable to businesses that require day-to-day cash flow support to enable them to trade and to meet their financial obligations. However, sometimes assistance is needed at the front end of the trading cycle and this is where supplier finance comes in. Help at the front end Supplier finance is designed to allow a business to fund the purchase element of a transaction. Smaller businesses can often suffer from the inability to fund larger purchases from their suppliers as the surplus cash flow is just not there. It’s a catch-22 scenario: they want to take customer orders to grow, but they cannot purchase the goods needed to fulfil bigger or more regular orders. Many small businesses do not have large amounts of spare cash available and often suppliers demand cash up front or won’t allow extended terms. It creates a real cash issue for the average small business owner and can be

detrimental to an SME’s ability to grow. Supplier finance works by funding an invoice from a supplier against an order from a reputable customer. Goods are then purchased on behalf of the client and – once goods are delivered to the end customer – the invoice for the supply is raised. The supplier finance facility then links to the invoice finance facility to complete the entire trading cycle. Funding that complements There’s no need to view these two funding options as discrete; they can be successfully used together by a business as a means to maximise its buying power. For example, we’ve worked with a medical supply and distribution company which was struggling with an invoice-only facility. It’s a cash-hungry business as its suppliers demand full, upfront payment for goods prior to them being dispatched. Their supplier was based in the US, meaning the timescale between paying for the goods and getting paid by their customers was too long for them to fund themselves. Added to this, the business had recently secured some new, larger orders which – on the face of it – was great, but caused a further funding headache. The business owner got to the stage where – if he didn’t get funding support for his purchases – he could not take

on any more orders, which would eventually result in his business folding. Supplier finance has given the owner the tailored funding his business needed to overcome these challenges. It has also provided him with the confidence to accept orders knowing that he could fund them through this facility without having to struggle trying to use the cash flow generated by invoice finance alone. As with traditional invoice finance, users will often reap the benefits in other ways, not just better cash flow. Due to suppliers being paid earlier – or certainly promptly – business owners have a strengthened position from which to negotiate better terms, often resulting in further savings. With 24 years in the business, we know that cash flow is a problem for many SMEs and often a lack of cash can be the final nail in the coffin for a company. For Ashley Finance, it’s really important that we get under the skin of our customers so we can ensure we offer a solution to our customers based on their individual needs, because we know that bumps in the business road happen and don’t necessarily mean a company is in dire straits. Sometimes they just need a helping hand.

An open mind + Cash ready = A ‘yes’ from us For nearly 25 years we’ve helped turn around all kinds of small businesses by saying ‘yes’. Ashley says yes more than anyone else (91% and growing) because we look for the positives in each business and love to see them grow. Yes, we understand the pressures of small business. Yes, we have a variety of solutions for the many different types of businesses out there- including those other lenders often overlook. And yes, we make the whole process as simple, quick and painless as possible for you and your clients. Call us on 0161 233 6390, and yes, our team would love to have a chat with you.

Problem solved 38 | NACFB Magazine

SPECIAL FEATURES

Invoice and trade: a perfect match Rob Mercer Senior regional director Ashley Finance

Problem solved 38 | NACFB Magazine

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

Working with vulnerable customers Thomas Sialwiindi Vulnerability agent Investec Asset Finance Group

All FCA-authorised businesses must have processes in place for identifying and working with vulnerable customers.

ulnerability can take many forms: both mental and physical health issues can affect a customer’s ability to make financial decisions. Brokers, lenders and other registered businesses are not expected to be able to diagnose these problems but, for both new and existing customers, they must pay regard to their interests and needs, and communicate information in a way that is clear, fair and not misleading. They must also establish policies to identify and deal appropriately with vulnerable customers. How can I identify vulnerability? A quick mental health capacity test can help identify vulnerable customers. Staff should consider whether a customer appears to understand what is being discussed, or whether there are signs of confusion. Repetitious questions, failures in logic and signs of anxiety – such as emotional outbursts or shortness of breath – could all point to a vulnerable person. A simple, five-step process called the ‘TEXAS’ method can ensure that customers who have disclosed a problem are treated fairly:

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Thank them. Explain how information on their mental health status will be used. Obtain eXplicit consent for that information to be recorded – this is a legal requirement. Ask them three key questions:

your mental health » Does problem make it difficult for

you to repay your debt? If so, how?

your mental health » Does problem affect your ability to deal or communicate with us? If so, how?

anyone need to help you » Does manage your finances, such as a carer or relative? If so, how? Signpost them to help appropriate to their situation, including mental health specialists. It is important to keep calm, get to the key facts, listen and make adjustments where possible. Creditors and other FCA-registered businesses are not expected to ‘rescue’ customers, but to ensure that they are treated fairly.

What should my business be thinking about? Any business dealing with customers regulated under the Consumer Credit Act is obliged to have policies in place for identifying and dealing with vulnerable customers. This means any firm facing individual consumers, sole traders or partnerships with fewer than four partners. Brokers also lending from their own book are doubly obliged, both as introducers and as providers of finance who conduct their own collections and thus manage the entirety of the customer relationship during the life of an arrangement. While regulated firms are obliged to have policies in place, we believe that it is essential for all brokerage firms to be aware of potential customer vulnerability at every stage of the deal lifecycle. It is an important factor that could affect any one of their customers and it is vital for the industry at large that all firms are sensitive about it. A lot of brokers are not sufficiently aware of their obligations but, thankfully, there are many resources available to help them address the

The consequences of getting this wrong are serious: the FCA will always act when it believes customers are being put at risk four key problem areas identified by the FCA for financial services in general: policy, systems, products and implementation. In addition to specific FCA papers and updates on vulnerability, firms can also refer to its Consumer Credit Handbook. In addition to the written resources available, the Finance & Leasing Association offers standard courses for businesses keen to brush up on their responsibilities. This will be sufficient for many finance firms, but the Money Advice Trust also provides bespoke inhouse training.

When arranging training, it is essential to ensure that staff are being given the right advice for their function: while everyone is looking for the same indicators, the experience will be different for people in different roles. Field sales staff looking for new business and dealing with people face to face will not have the same experience as customer liaison staff working with customers by phone. The FCA measures success in 10 key areas: consistency, staff awareness, front-line staff training, an audit of vulnerability policy and systems, ongoing evaluation, flexibility, efficiency, simplicity, specialist training and appointments, and good information handling. The consequences of getting this wrong are serious: the FCA will always act when it believes customers are being put at risk. But regardless of the regulatory perspective, having protocols in place for the fair treatment of vulnerable people is simply good business practice, for peers and customers alike.

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

Working with vulnerable customers Thomas Sialwiindi Vulnerability agent Investec Asset Finance Group

All FCA-authorised businesses must have processes in place for identifying and working with vulnerable customers.

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your mental health » Does problem make it difficult for

you to repay your debt? If so, how?

your mental health » Does problem affect your ability to deal or communicate with us? If so, how?

NACFB Magazine | 41

GUIDES

Market Financial Solutions Bridging with Finesse

An in-depth loan grading system Damon Walford Chief development officer ThinCats

ecause the peer-to-peer industry is relatively young within the finance sector, few platforms have had the chance to build up datarich, seasoned loan books to use for developing risk prediction models. As a result, many rely on scorecards developed using information from a wider circle of UK companies, partner with credit reference agencies and use a mixture of off-the-shelf credit risk scorecards, their own metrics and human judgement. Information is not enough Commercial Credit Data Sharing (CCDS) is expected to kick off later this year – a scheme launched in April 2016 that requires nine major banks to share credit information on all their (willing) SME clients, furnishing finance providers, including alternative lenders, with a wealth of current account and credit information not previously available. This is expected to provide a considerable uplift in the accuracy of credit-scoring models over time and hopefully will facilitate the alternative finance industry in serving a host of currently overlooked smaller businesses.

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outcomes, accurately reflecting investors’ experience of risk and return, but also affording borrowers fair and objective assessments. How does loan grading work? ThinCats has allocated a considerable amount of time and resources to these issues, and the company is in a position to give UK SMEs more than just a number-crunching, ‘computer says no’ experience, while also protecting the interests of the lenders. As a secured lending platform, investors’ risk exposure and net returns are driven by both default risk and the ability to recover capital, given a default. The ThinCats grading system makes the distinction between these two risk components, providing every loan on the platform with two grades: a number of security ‘padlocks’ and credit ‘stars’.

This is the current challenge that data scientists face: building risk models that predict very specific outcomes, accurately reflecting investors’ experience of risk and return, but also affording borrowers fair and objective assessments

In order to produce these relative gradings, multi-layered processing models have been developed in-house. The credit grading model consists of an in-depth analysis of the company’s financial health, the hybrid financial score and its dynamism, the dynamic score. These scores are combined through multivariate analysis of the observed levels of insolvencies within the calibration data set (approximately 500,000 borrowing companies in the UK) to give a rating of one to five stars for each applicant. Over time, specific information about P2P defaulters as a differentiated segment will be integrated into the model.

This is complemented by the security grading, represented by a maximum of five padlocks and determined by the asset-to-loan ratio, based on the value of the borrower’s assets relative to the outstanding loan amount. All loans listed on the ThinCats platform are then professionally qualified by the credit team. This all combines to produce an award-winning analysis of information, ensuring that businesses looking for loans are given a fair and balanced hearing, and that investors know that each loan has been thoroughly assessed and vetted based on the most accurate information available; a complex system, but one that proves beneficial for borrowers and lenders alike.

Market Leading Bridging

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Associate Lender

However, it’s not as simple as just having access to information; not all grading systems predict the same event. Some are calibrated on publicly available data to predict formal insolvency events; others are trained to predict all forms of company closure, insolvency and dissolutions. Still others are trained on proprietary (ie not publicly available) customer data, including events such as late payments – not necessarily associated with insolvency – as practised extensively by the main banks. This is the current challenge that data scientists face: building risk models that predict very specific

Credit scoring in the wider world is well documented, and loved and hated in equal measure. But when it comes to an accurate analysis in the alternative finance industry, there is huge variability across the platforms.

Association of Bridging Professionals

GUIDES

Market Financial Solutions Bridging with Finesse

An in-depth loan grading system Damon Walford Chief development officer ThinCats

42 | NACFB Magazine

Market Leading Bridging

CMY

COMPETITIVE MONTHLY RATES EXCELLENT INTERMEDIARY INCENTIVES SIMPLICITY OF APPLICATION PROCESS INDEPENDENT LENDERS WITH IN-HOUSE FUNDING

020 7060 1234 info@mfsuk.com www.mfsuk.com Berkeley Square House, Mayfair, London W1J 6BD

Associate Lender

Association of Bridging Professionals

Debate | the burning issues

Is it that business owners have a fear of being refused by their banks, have no alternative option to hand or is it the need to preserve cash which is driving this behaviour?

Two Patrons discuss the hot topics affecting the industry

Cutting back on investment – the right approach to reduce risk? Let’s break the careful investment cycle Martine Catton Sales and marketing director Catalyst Finance

he level of uncertainty within the SME owner community seems to have remained quite high since the crash of 2008. Back then, many SME owners withdrew their investment plans and battled to keep control of their working capital. Brexit has certainly impacted business owners’ decisions and is contributing to shaping their immediate and short-term plans. Despite wanting to grow their businesses, it seems some are reticent to put their plans into action, apprehensive that if plans don’t succeed as expected, the bank may withdraw their support. This means many are in danger of making their short-term activity their medium-term plans and, therefore, inadvertently stunting their growth potential. Are banks the safe haven? No one knows how the UK leaving the EU will impact the economic landscape. The events of 2008 have resulted in businesses that have enough fat retaining their cash in the bank as added protection. They now seem to be reluctant investors, as only when necessary are they dipping into their reserves. Many would rather have the

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cash in the bank at times of uncertainty, which is hard not to sympathise with. It is incredulous but still many business owners only approach their banks for finance, and are not reaching out to alternative lenders. The launch of the business referral scheme has helped on a small scale; however, the numbers being referred are not reaching expected levels. The premise on which an SME is introduced is potentially at the heart of the lack of referrals. Theoretically, bank managers make the referral after the case had been submitted to their credit team and the proposal has been refused. However, with very clear guidelines and policies to work within, a proposal is often refused without reaching the credit team. Flat business conditions In February, the Bank of England’s Summary of Business Conditions said businesses indicated they would have a broadly flat business investment plan over the next year, with investing intentions falling since the EU referendum. So how can business owners be convinced to keep investing in their businesses? According to the Federation of Small Businesses, at the start of 2016 there were 5.5 million private sector businesses in the UK, an increase of 97,000 since January 2015. There still appears to be a high level of confidence to go out and set up a business, but it seems a potential lack of knowledge as to how to access

funding is a factor in the growth plans for many. Is it that business owners have a fear of being refused by their banks, have no alternative option to hand or is it the need to preserve cash which is driving this behaviour? The ups and downs It is also fair to note that some industries are reporting more buoyant times. Manufacturing has benefited from the weaker pound and increased exports and, in turn, a boost to service providers that operate overseas is also being seen. Conversely, haulage and distribution companies are reporting a weakening position, as well as some publishers and broadcasters who are seeing advertising revenues decreasing. Marketing and advertising budgets are always the first to reflect a slowdown. Reducing investment at times of uncertainty may seem the most sensible approach, particularly for those industries already reporting a downturn, but is it the most beneficial in the medium to long term? Possibly not. But this is a cycle of behaviour we may continue to see for some years unless we have more certainty and available, accessible funding with the education that signposts the majority, not the minority, of business owners.

Growth should be coupled with calculated investment Alan Cooper Finance director Liberty Leasing Plc

hen it comes to assessing risk, it is crucial to evaluate the environment in which SMEs operate and recognise those factors which most impact and determine their investment decisions. Many UKbased businesses use national GDP figures and forecasts to gauge the state of the economic climate and inform their future investment decisions. No signs of slowdown In February, the Bank of England adjusted its growth forecast from 1.4% to 2.0%, which is a sharp increase and brings forecast GDP to a higher rate than the previous year, when this stood at 1.8%. Between October and December 2016, the economy grew by 0.6% - the best result among the developed countries. The figure also indicates that the feared economic slowdown following the Brexit vote has not materialised. This growth trend is echoed within the manufacturing industry where there has been a modest pick-up in business according to the latest report from the Bank of England, which showed manufacturing investment intentions

over the next 12 months in February ticked up to 0.7 from 0.2 in January.

unable to access the benefits that a growing economy has to offer.

The data is consistent with statistics from the Finance & Leasing Association (FLA), which also shows no sign of SMEs slamming on the brakes in regards to further investment. According to the FLA, as of January 2017, the total of new business within the asset finance industry stood at £2.3bn, which was a 16% increase on the previous year. The asset volumes in the 12 months up to January 2017 were £30.5bn – 6% higher than the previous year, indicating no evidence of declining investment.

“Liberty understand that we have a responsibility to provide clear information to our brokers on the funding options available and how we can best structure deals to meet the needs of their customers … We are committed to ensuring our brokers are aware of our products and ability to structure a deal effectively.

What is the true risk for SMEs? Alan Cooper, finance director at Liberty Leasing, said: “Certainly, since Brexit, it appears the economic data has repeatedly defied the gloomy predictions with the economy continuing to perform strongly and Bank of England forecasts being upgraded. It is also clear from recent FLA statistics that, within the asset finance industry, there are no signs of a slowing down in investment by SMEs. From our perspective at Liberty we haven’t seen any scaling back in investment from SMEs, with new business volumes performing strongly in Q1 2017 and there is a good pipeline going into Q2.

“Businesses that are unable to grow can compromise their ability to compete and risk being left behind in a competitive marketplace. Investment in new physical assets and infrastructure are vital ingredients for future growth and success of SMEs in the UK. “It’s important for SMEs to adopt a data-driven and objective approach to assessing business risk and future strategy. Within the media there has been some speculation and pessimism, which doesn’t appear to correlate to the actual statistics … “Averting risk should be balanced against the cost of compromising a business’ resilience and ability to compete. SMEs should be focusing on future growth strategies coupled with calculated investment to promote their future growth and success.”

“There is always a case to be made for fully appraising investment decisions, maximising efficiency and squeezing the most out of existing assets. However, dramatically reducing investment can leave a business in the position whereby they are

NACFB Magazine | 45

Debate | the burning issues

Is it that business owners have a fear of being refused by their banks, have no alternative option to hand or is it the need to preserve cash which is driving this behaviour?

Two Patrons discuss the hot topics affecting the industry

Cutting back on investment – the right approach to reduce risk? Let’s break the careful investment cycle Martine Catton Sales and marketing director Catalyst Finance

44 | NACFB Magazine

Growth should be coupled with calculated investment Alan Cooper Finance director Liberty Leasing Plc

over the next 12 months in February ticked up to 0.7 from 0.2 in January.

unable to access the benefits that a growing economy has to offer.

NACFB Magazine | 45

Opinion | & commentary Thought leadership from our Patrons and Members

Financing, planning and building for the future James Bloom MD - development finance Masthaven

ome ownership in the UK has hit a 30year low. Where once an Englishman’s home was his castle, it is now more likely a property that he or she is renting from a landlord, who is wondering how to generate returns in the future. Yet it doesn’t need to be this way and the nation’s SME housebuilders have a huge opportunity to help address the issue and rebuild the property ladder. Fundamentally I believe there are three key issues to overcome: first, building more affordable homes to help first-time buyers get on to the property ladder; second, converting the UK’s existing housing stock to meet the needs of a society which is living longer; and third, addressing fundamental issues with the current planning regime to help make this happen. Donning hard hats and getting building A decade ago, the Barker Review of Housing Supply said that we would need to build around 250,000 homes a year to prevent spiralling house prices and a shortage of affordable homes. The Labour government set a target to build 240,000 homes a year by 2016, yet a decade on we are still a long way off that target. In 2015/16 more than 168,000 homes were built – the highest number since 2008/09, but a significant way off the 300,000 new homes a year that were being built consistently for decades after World War Two. The new administration is making the right noises, having allocated £1.4bn to deliver 40,000 new, affordable homes across the country. This may go some way to help address the housing shortage that we are facing.

Unlike our developers, we don’t build walls Lending without the box ticking Our development finance specialists deal with each case personally, and can usually help customers who don’t fit neatly into the more traditional banks’ rules.

Yet for millennials, the difference must come soon. Recent research carried out by the Social Mobility Commission shows that the only way on to the property ladder for most is via the bank of mum and dad, who are now supporting more than a third of all first-time buyer purchases. The Council of Mortgage Lenders predicts that only 25% of 30-year-olds will own their own home by 2020. While deposit raising may fall to the next generation up, it is our generation which needs to ensure the ready supply of homes that they can afford both from a deposit and from a monthly mortgage repayment point of view. This is where SME housebuilders come in – the brave army who are building small developments across the country that all add up. A long-term view Yet in my view, ‘building, building, building’ isn’t the only thing that can make a difference. The development sector also has a huge opportunity in converting existing housing stock and making it fit for purpose for the future. As people live longer and the sandwich generation

becomes the club sandwich generation, having properties which can house greatgranny as well as grandson are going to be more in demand in the future. Yet financing and planning need to catch up with this shift in demand to ensure that we don’t remain trapped as we are today, with our elders owning the housing stock that needs to work across the generations. Getting going There are some fundamental issues which affect the number of new homes being built, such as planning. The current system is expensive, cumbersome and incredibly time consuming, but it is also uncertain – especially for SME housebuilders. Even when you have an outlined plan, you’re still subject to lots of reports and studies. It can be a frustrating and drawn-out process. Unless planning and affordability issues are tackled, it is hard to see how the current housing crisis can be solved. Demand for affordable housing outweighs the supply, so there is no surprise we have the current housing issues that we do.

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

masthaven.co.uk Your property, provided as security for the loan, may be repossessed if you do not keep up with payments. Masthaven Bank Limited is a company registered in England & Wales with registration number 09660012 and whose registered office is at: 4th Floor, 11 Soho Street, London W1D 3AD. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Firm reference number 719354). The “Masthaven” name and logos and all other brands, names, logos, marks and slogans on this document are the trademarks or service marks of us or our licensors.

46 | NACFB Magazine

Opinion | & commentary Thought leadership from our Patrons and Members

Financing, planning and building for the future James Bloom MD - development finance Masthaven

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

46 | NACFB Magazine

OPINION & COMMENTARY

The benefits of refurbishment are worth unlocking Thomas Walker Junior underwriter Affirmative Finance

hen looking to turn a profit on a property – be it via sale or investment – refurbishment finance is often overlooked as it can seem unnecessary to carry out works on a property that will not be used by the seller or investor. However, I believe the benefits of refurbishing before putting the property on the market should not be ignored. Love at first sight A newly-refurbished property can dramatically increase viewer interest. Potential buyers can often be put off by a property that is clearly in need of renovation works, not only because this delays the date they can start using the property for their own purposes, but also because often they are simply in the market for somewhere to live or work without having to carry out any additional works. Speed is key. A property that is ready to be occupied by the new owner will increase the amount of interested parties, which in turn will allow the seller to push for the asking price. It is worth noting that applying for development or refurbishment finance with a specialist lender – rather than a high street establishment – can significantly speed up the process of bringing a property up to scratch to maximise the value of a future sale, due to experience and sector expertise. Added value A successful refurbishment can also increase the value of sale compared with the actual cost of the works themselves. Affirmative sees this on a daily basis. One of our customers – who had a small property valued at £140,000 – decided to undertake some minimal refurbishment works, such as internal reconfiguration, fixing the bath panels and general decoration. Overall these refurbishment works cost her £25,000. The revaluation of the property made the cost worthwhile. The property was now worth £210,000 – meaning she would see a profit of £45,000. While this is a relatively small refurbishment, additional

works, such as the building of an extension, can potentially bring in even more profit. Although you are never guaranteed to gain value, research carried out by Nationwide suggests that an extension could add 21% to the value of your property. A newly refurbished property can also help owners who are willing to look at alternative options beside sale. Refurbishment can turn a weak property into a strong asset for an investor, allowing them to tap into the buy-to-let demand, for example. An improvement of an existing rental property can help increase the profits gained. Additionally, quick financing allows for an efficient process of conversion of a commercial asset into residential or vice versa, which is another great opportunity for property investors. Speeding it up Whether your client requires funds for a large extension or just needs the money for a thorough redecoration project, there are ways to access this money quickly. The more specific your client’s plans are, the easier it is to gain access to funding. When it comes to Affirmative, these could include anything from refurbishing offices, commercial spaces,

houses or apartments through conversions to even ground-up developments. If development finance is part of your lender’s core offering, there is a good chance that funding will be arranged more quickly and efficiently than by turning to a bank. So if speed is crucial for your client’s project, a skilled lender is most likely your best choice. At Affirmative, we often help clients finance their refurbishments through bridging loans, which is a fast funding option that can be arranged within as little as 24 hours. Whatever the case, turning to an experienced lender to fund a refurbishment certainly has benefits that are, as of yet, less well-known to the market. It is time to recognise the wide variety of purposes that this type of finance is the right match for.

WORKING TOGETHER TO BUILD YOUR BUSINESS Asset Advantage is an award winning, privately owned, finance business specialising in providing asset finance and loans to SME businesses throughout the UK via a premium panel of introducers. Our finance products utilise a combination of experience, expertise and uncompromising business processes to deliver the perfect solution to our clients. To find out more about joining our select panel of introducers and our award winning SME finance solutions please call Tracy Millsom on:

01256 316 200 or visit our website on:

www.assetadvantage.co.uk Efficient Finance is our Advantage Third Floor, Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ

48 | NACFB Magazine

OPINION & COMMENTARY

The benefits of refurbishment are worth unlocking Thomas Walker Junior underwriter Affirmative Finance

01256 316 200 or visit our website on:

www.assetadvantage.co.uk Efficient Finance is our Advantage Third Floor, Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ

48 | NACFB Magazine

BRIDGING FINANCE OPINION & COMMENTARY

Philip Knight Credit and risk director Asset Advantage

Making a good case to a lender isn’t just about the deal you are doing. Brokers need to think about how to make their clients’ proposal stand out – arguably, this is one of the most crucial steps in the process.

Giving it time There is a clear case for spending a little bit of time on preparing a proposal for a funder. It is extremely tempting to skimp on the information, particularly when funders vary so much in their requirements. However, I think that a little bit of extra work can reap benefits way beyond just getting the deal approved. No funders are expecting a 2,500-word essay, but all funders are avid devourers of information that isn’t in the public domain. In particular, those funders – such as Asset Advantage – that manually underwrite proposals use a plethora of data sources to research potential customers and their industry sectors. However, it is rare that that information is specific to the customer and so any insights that you may have gleaned about the business in even the briefest of chats will be of interest. Yes, it is of interest to us that they have just won a large new contract. And we do take comfort from the fact that their local competitor just retired. It’s not exactly Sherlock Holmes or CSI, but sometimes it’s the little details that can make the difference in a proposal. Stick to what you know Additionally, while it is flattering, I sometimes think brokers credit (no pun intended) funders with more knowledge than they actually have. Of course, there is a fine line between imparting knowledge and being patronising but, for example, a brief outline of the customer’s business model never goes amiss. Does the café rely on regular commuting traffic or is it a

50 | NACFB Magazine

seasonal business which makes most of its money in the summer? What proportion of the widgets are exported and to whom? It’s worth acknowledging that while you may have a long-standing relationship with the customer and indeed may have submitted several proposals to the same funder, they will have looked at thousands of proposals in the interim and so will be most unlikely to remember your last submission, however brilliantly put together it was. Treat each proposal as a standalone submission. Teasing out this information from the customer can also help the broker build a picture of the business which ought to facilitate their own sales effort. In my experience, most customers like to talk about their business and particularly some of the challenges they are facing. A conversation that was initially about a new telephone system could easily morph into the uncovering of an office refurbishment deal and an appetite for an invoice discounting facility. Building a reputation for comprehensive and well-prepared proposals is – in my view – invaluable. Underwriters are only human and so, when given the choice, will naturally gravitate to the easy-to-understand and comprehensive proposal first. Once you – as an introducer – have that reputation for quality proposals, then you build up a body of trust with the funder which undoubtedly leads to swifter decisions, less questions and more approvals.

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

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0800 116 4385

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

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BRIDGING FINANCE OPINION & COMMENTARY

Philip Knight Credit and risk director Asset Advantage

50 | NACFB Magazine

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0800 116 4385

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