NACFB Magazine - October 2017 by NACFB

Issue 51 October 2017

The magazine for the National Association of Commercial Finance Brokers

Are the ‘makers’ still marching? Examining the government’s 2020 £1 trillion export target

In this issue

Are banks and bridging compatible?

Patrons discuss institutional attitudes to flexible lending

BREXIT

The true picture EU

How have the UK’s SMEs really been affected by Brexit?

Reselling a P2P loan

A guide to the resale marketplace

Welcome | NACFB Turning property finance on its head

s a trade association, it is imperative that we act as a conduit for the needs of our Members, and we align our direction with what our Members want. As such, we see our programme of meetings with both Patrons and Members as an opportunity to gather your feedback. Our plan is to facilitate open forums at these meetings, so we can use your opinion to help shape the future of the NACFB – and we are excited to roll out such events across the UK in the coming months. We will seek to ensure that we use this feedback to steer the NACFB, so that it better reflects what our many stakeholders want from the organisation. We will be listening, so if you have feedback, an idea or wish to share ways we can better meet your needs, keep an eye on our website for your nearest meeting. In our 25th year we are proud to stage what will be our largest ever gala dinner, and I genuinely believe we have something important to celebrate. In particular how the Association has grown and prospered following the insight of a handful of brokers who decided, 25 years ago, that a trade association was essential to help direct and protect the professionalism of the industry.

Commercial finance Development finance

This year’s AGM will take place on 30th November, the same day as our gala dinner. We look forward to seeing a strong turn-out to hear first-hand about the direction the NACFB will be taking in the future, and share with you the roadmap for the future of your trade association.

Graham Toy CEO NACFB

In this October issue NACFB News 4-6 6 7

In the news Dates for your diary Notes from our sponsor

Commercial Finance 8-9

Essential news bites

Top Story 10

Gross annual bridging lending grows for third consecutive quarter

Introducing 12

Masthaven responds to broker feedback with short-term product enhancements

Case Studies 14

Two-fold success for start-up 16-17 Asset finance facility helps renovate regional football club 18 Extended revolving credit enables NHS deal

Special Features 30-32 The true picture 34-36 Considering the compatibility of banks and bridging

Spotlight 38

London Members’ day: your NACFB is listening 40-42 The fifth annual ASTL conference

Industry Guides 44

Are we on the same page about upfront fees? 46-48 Reselling a P2P loan

Opinion & Commentary 50 Celebrating versatility 52-53 Brokers need to step up services 54 Finding the UK’s fittest SMEs

Cover Story 20-24 Are the ‘makers’ still marching?

Patron Profile 26-27 Raphaels Bank: Fusing technology and data

Ask the Expert 28

Joe Cockerline

I look forward to seeing you there.

Residential finance

0800 294 6850 sales@octopusproperty.com

Warm regards,

For further information

Graham Toy CEO, NACFB

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

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

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

NACFB Magazine | 3

Welcome | NACFB Turning property finance on its head

Commercial finance Development finance

Graham Toy CEO NACFB

In this October issue NACFB News 4-6 6 7

In the news Dates for your diary Notes from our sponsor

Commercial Finance 8-9

Essential news bites

Top Story 10

Gross annual bridging lending grows for third consecutive quarter

Introducing 12

Masthaven responds to broker feedback with short-term product enhancements

Case Studies 14

Two-fold success for start-up 16-17 Asset finance facility helps renovate regional football club 18 Extended revolving credit enables NHS deal

Special Features 30-32 The true picture 34-36 Considering the compatibility of banks and bridging

Spotlight 38

London Members’ day: your NACFB is listening 40-42 The fifth annual ASTL conference

Industry Guides 44

Are we on the same page about upfront fees? 46-48 Reselling a P2P loan

Opinion & Commentary 50 Celebrating versatility 52-53 Brokers need to step up services 54 Finding the UK’s fittest SMEs

Cover Story 20-24 Are the ‘makers’ still marching?

Patron Profile 26-27 Raphaels Bank: Fusing technology and data

Ask the Expert 28

Joe Cockerline

I look forward to seeing you there.

Residential finance

0800 294 6850 sales@octopusproperty.com

Warm regards,

For further information

Graham Toy CEO, NACFB

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

NACFB Magazine | 3

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

Our new communications manager K

ieran Jones joined the NACFB on 13th September as communications manager. Kieran joins after spending four years in legal public relations. This role saw him working with both national and global law firms, raising their profile in international press and showcasing their expertise on a diverse range of critical business and wider compliance matters. Prior to this role, he worked as a European events and marketing officer for a US health food company. The role saw him produce marketing collateral and stage international events for the company’s pan-European distribution network. Kieran has a degree in journalism and politics, and is producing a podcast for the Chelsea Pensioners in his spare time, as well as volunteering for the Newman Holiday Trust, a non-profit that provides disabled children with an annual holiday.

Compliance update NACFB Compliance Services has now been running for six months and is fast establishing itself as the provider of choice for many of our Members.

he Model Office suite of support documents and templates continues to grow and now has over 50 downloadable items, all designed specifically for the commercial finance broker. We are providing consultancy support to new Members of the Association who are seeking to obtain their FCA authorisations and for existing Members who are looking to extend their permissions. The team has also delivered a business quality workshop to over 100 Members at venues around the country, focusing specifically on evidencing suitable advice, research and client reports.

GDPR is fast becoming a focus for many firms and NACFB Compliance Services will be able to fully support those Members who subscribe to our in-house compliance service. There will be guidance on the new requirements and on the changes you will have to make to your working practices, and the necessary documentation you will require to be compliant with the new regulation. Our GDPR workshop program has been launched and you can register your interest now by pre-registering on the NACFB Compliance Services website.

Tell them you’ve found someone who really understands you.

Compliance Services Express your interest in northern England/Scotland workshop NACFB Compliance Services are planning to hold a compliance workshop in the North of England or Scotland in October/November 2017. Members who are interested can express their preference for attending a workshop in the following cities: Edinburgh, Glasgow and Newcastle

When it comes to property finance, we care about developing something meaningful.

The city that receives the most interest will be selected for the next compliance workshop, which will examine the ways in which FCA regulation impacts companies’ ability to service their clients. To express your interest please email nicholas.murphy@nacfb.org. uk with your city of choice. Call us on 0203 846 6809 or visit intermediaries.lendinvest.com. LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). ICO number ZA179467. Your client’s property may be repossessed if they do not keep up repayments on their mortgage. For intermediaries only.

4 | NACFB Magazine

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

Our new communications manager K

Compliance update NACFB Compliance Services has now been running for six months and is fast establishing itself as the provider of choice for many of our Members.

Tell them you’ve found someone who really understands you.

When it comes to property finance, we care about developing something meaningful.

4 | NACFB Magazine

NACFB NEWS

General Data Protection Regulation (GDPR) module

he GDPR module has now been released and is free for NACFB Compliance Services (CS) subscribers. Non-NACFB CS subscribers can purchase the module for £29.99 + VAT. NACFB CS are also planning on running a number of workshops geared towards GDPR, which will be announced to Members later this month. For further information please visit nacfbcompliance.co.uk.

NACFB Members’ days The NACFB are holding a series of events for our Members throughout October in Birmingham and Manchester. Members’ days provide opportunities for you to give feedback to the NACFB on a number of topics, and provide a forum to discuss current issues impacting the industry. To get a flavour of the events, take a look at this month’s Spotlight feature, or our social media channels, which contain live coverage of our recent Members’ and Patrons’ days in London.

Gala dinner – silent auction donations The NACFB is now collecting donations for the silent auction which will take place at the NACFB gala dinner & awards ceremony on 30th November. All proceeds from the auction will be donated to Young Minds, the UK’s leading charity committed to improving the wellbeing and mental health of children and young people. If you would like to donate a prize please email andrina.dhillon@nacfb.org.uk.

Express your interest – NACFB asset finance day, Bolton The NACFB is looking to hold an asset finance day, catering specifically towards our asset finance Members. The proposed event will take place in Bolton on 16th November and will be sponsored by Shawbrook Finance, Aldermore & Investec. If you are an asset finance broker and would be interested in attending, please email andrina.dhillon@nacfb.org.uk.

Member update At the time of going to print, we count a total of 823 Member firms and 137 Patrons. Our newest Patrons include Ferratum, Roundshield Partners and Asset Finance Partners Limited.

6 | NACFB Magazine

NACFB NEWS

Dates for your diary

Notes from our sponsor

Broker Day - Birmingham When: 9th October Where: Lloyds Bank, Colmore Row NACFB and Barcadia Commercial Finance Roadshows When: 18-19th October Where: Newcastle Racecourse, Barnsley – Tankersley Manor NACFB Members’ Day - Manchester When: 22nd October Where: Lloyds Building, Manchester NACFB and Barcadia Commercial Finance Roadshows When: 1st and 2nd November Where: Reading – Royal Berkshire Conference Stadium, Derby – Pride Park Stadium LendInvest Broker Academy Course When: 22nd November Where: LendInvest, 2 Fitzroy Place, London AGM at the Park Plaza When: 30th November Where: Park Plaza Westminster Bridge, London Gala dinner and industry awards When: 30 November, 6.30pm-12.00pm Where: Park Plaza Westminster Bridge, London Commercial Finance Expo 2018 When: 20th June 2018 Where: NEC, Birmingham

Karen Bennett Managing director of commercial mortgages Shawbrook Bank

Somehow, we are in October already. It seems to me that Christmas is beginning earlier every year, with decorations having been put up in shops for several weeks now.

t’s frightening how quickly 2017 has flown by so far but, as usual, I think we can attribute this to the ongoing change in our industry that we’re all working hard to keep up with. While I’ll be saving my recap of these ongoing changes and their impact until later in the year, it’s my responsibility to address the obvious: the PRA’s second set of BTL underwriting changes, effective from 30th September. Property investors are now officially split into two camps: non-portfolio landlords who hold one to three properties and portfolio landlords who hold four or more. With several elements comprising these changes, the obvious question is: have lending institutions done enough to provide a smooth transition for intermediaries and their clients? A simple yes/no answer would be disingenuous here because it’s simply not that straightforward an issue. It has certainly been encouraging to see many specialist lenders reaching out to the market to clarify their position. However,

more education on what this means for the market and the longerterm impact of these changes should be an area of focus for those operating in this space, and Shawbrook is pleased to support with more detailed content available on request. We are fortunate that a case-by-case approach sits at the heart of our proposition and the transition was an easy one to make. Many others may face sterner challenges in the months to come. The pace of regulatory and governmental change over the past two years has been unrelenting. This highlights the need for brokers to build and maintain strong relationships with specialists, taking advantage of our full support as they shepherd their clients through a shifting financial landscape. By working together we will be in a strong position to provide the type of considered guidance that the specialist market is renowned for during key periods of transition, and this is surely the only way to ensure a sustainable future.

NACFB Magazine | 7

NACFB NEWS

General Data Protection Regulation (GDPR) module

Member update At the time of going to print, we count a total of 823 Member firms and 137 Patrons. Our newest Patrons include Ferratum, Roundshield Partners and Asset Finance Partners Limited.

6 | NACFB Magazine

NACFB NEWS

Dates for your diary

Notes from our sponsor

Karen Bennett Managing director of commercial mortgages Shawbrook Bank

Somehow, we are in October already. It seems to me that Christmas is beginning earlier every year, with decorations having been put up in shops for several weeks now.

NACFB Magazine | 7

Commercial Finance

British Business Bank Investments commits €40m to SME fund

Medium-sized businesses hit hardest by late payments

UKEF widens supply chain finance availability UK Export Finance (UKEF) plans to make supply chain trade finance available to all its banking partners in the near future. UKEF launched its new delivery model and trade finance for suppliers to exporters with the five major banks this year. It is also exploring the opportunity to roll out the new delivery model with other banks. UK’s first development bank to open in Wales The UK’s first development bank has been given the official goahead by the Welsh government. The Development Bank of Wales – which is due to launch in October – will offer the necessary growth finance and business support to attract and retain micro businesses and SMEs within Wales. The aim is to generate over a billion pounds of investment to the Welsh economy over the next five years.

British Business Bank Investments Ltd has committed €40m (£36.4m) in the first closing of the Harbert European Growth Capital Fund II. The commercial arm of the British Business Bank was one of several investors during the fund’s €140m (£127.4m) raise. The fund will allow Harbert Management Corporation to expand its lending of venture debt finance to fast-growing, tech-focused SMEs.

Lloyds extends new-build lending Lloyds Banking Group has introduced a number of changes to its lending policy for new-build properties as it looks to offer a greater choice to homebuyers. The lender has extended its cap on new-build mortgages – available through Halifax – from 80% to 85% LTV, as well as increasing the maximum LTV for those buying through a shared ownership scheme.

RMDL backs two bridging lenders RM Secured Direct Lending (RMDL) has made £10m worth of secured loans to two property bridging finance providers. The closed-ended investment trust has lent £5m to both Interlend – a financing vehicle of Market Financial Solutions – and Quivira Capital. The finance will be used to support Interlend and Quivira Capital’s property bridging activities.

230 SMEs secure funding after referral Small businesses that struggle to access finance from the big banks have received almost £4m of funding from the government’s Bank Referral Scheme, launched in November 2016. In total, 230 small businesses – which were rejected for loans by some of the UK’s biggest banks over the last nine months – have received £3.8m of funding from alternative lenders.

Bridging lending reaches £150m in Q2

Late payments have proven to be a huge challenge for medium-sized companies, with 94% of them reporting that the issue is causing them cash flow problems, according to a new report. Research from Ultimate Finance showed that 81% of SMEs stated that late payments are an issue for them, with medium-sized businesses reporting an average of over £30,000 due to be paid.

Activity within the bridging sector peaked at £150.1m during Q2 2017, according to the latest report from Bridging Trends. This represented a 26% increase on the Q1 gross lending figure and the highest level since the report launched in 2015. Refurbishments proved to be the most popular reason for taking out a bridging loan during Q2 (27% of all lending), followed by mortgage delays (25%).

Enterprise Finance enters development market

FCA to review motor finance market The FCA is looking at the motor finance market to develop its understanding of the products and how they are sold. The regulator is to assess whether the products cause harm to consumers and if the market is functioning as well as it could. The FCA will publish an update on its work in Q1 2018.

Oxford Uni introduces online fintech programme

Saïd Business School, University of Oxford, has announced the launch of a new online fintech programme. The programme will examine current and emerging technologies around money and payments, markets and consumer experience. It will also cover regtech, blockchain and artificial intelligence, as well as crowdfunding and quantum computing.

Together, powering UK businesses to grow With award winning service and over 30 years of expertise, Hitachi Capital Business Finance provides a flexible range of asset finance solutions – powering businesses of all sizes, across sectors and specialities. Asset Finance Block Discounting Stocking Invoice Finance To power your business call us today

01784 227322 hitachicapital.co.uk/business-finance

Enterprise Finance has launched a new development finance broker offering. The distributor’s development finance team has selected an elite panel of lenders and will now offer financing to professional property developers. This includes those working on single or multiple units, or from the ground up as well as individuals looking to self-build.

New conveyancing platform launches The Right Mortgage & Protection Network has launched its new platform, the Right Conveyancing. The platform will give members of the network and the Right DA Club access to a range of exclusive products from leading conveyancing solicitor firms across the UK. The platform provides access to three panels offering the best national, local and panel-managed options.

Commercial Finance

British Business Bank Investments commits €40m to SME fund

Medium-sized businesses hit hardest by late payments

Bridging lending reaches £150m in Q2

Enterprise Finance enters development market

Oxford Uni introduces online fintech programme

01784 227322 hitachicapital.co.uk/business-finance

Top | story Our pick of the latest Patron news

Gross annual bridging lending grows for third consecutive quarter

Danny Waters, CEO of Enra Group, said: “Although we have seen a period of strong

£1.7

£4.0

2014

2015

2016

Apr-17

Jun-17

Feb-17

Oct-16

Dec-16

Jun-16

Aug-16

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Jun-14

Feb-14

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Dec-13

£0Bn

2017

Average bridging loan size £1,200,000

£1,000,000

£800,000

£600,000

2015

growth in the bridging sector, there are still challenges ahead. “The Brexit negotiations will likely cast a shadow over the property market for the foreseeable future, and with inflation continuing to be a problem, it is possible that we could see an interest rate increase in the coming months.

2016

Jun-17

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Mar-17

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Feb-17

Dec-16

Nov-16

Oct-16

Sep-16

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£0 Oct-15

Average loan sizes have shown a slight dip from £1.2m in Q1 to £880,000 with fewer large transactions in the market and fluctuations in individual months falling as low as £600,000. West One claims we may see a higher volume of smaller loans in coming months, especially due to investors turning away from the central London property market and seeking returns in other regions.

£4.3

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.

£2.4

£2.1

£2.0

Nov-15

The index also demonstrated a steady fall in bridging rates, standing at 1.04% in Q1 2017 and followed by a dip below the 1.00% in June, reaching a record low of 0.96%.

£4.2

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

£2.9

£3.0Bn

£2.0Bn

£4.4 £4.3

£3.7

Sep-15

“With this period including the significant political and economic volatility of Article 50 being issued, a snap general election that delivered a hung parliament and then the formal initiation of Brexit negotiations, the continued recovery only serves to underpin the resilience of the bridging market.”

£4.0Bn

Aug-15

Stephen Wasserman, managing director at West One, said: “After a substantial dip in the market’s performance in the immediate aftermath of the referendum, it’s obviously very encouraging that the bridging sector is seeing its third consecutive quarter of annualised growth.

£4.1

Jun-13

Gross annualized lending reached £4.3bn in June – a 4.2% increase compared with results from 2016, approaching the prereferendum high of £4.4bn.

£5.0Bn

Aug-13

he bridging sector has demonstrated solid growth in Q2 2017, according to the latest edition of the West One Bridging Index.

Gross bridging lending (£ billions)

Jul-15

Marie Grundy Sales director West One Loans

Business-boosting loans up to £500,000

2017

“Whatever happens next, the industry needs to be ready with diverse and flexible financing options for property purchasers. The bridging sector has seen a 5-fold growth in lending since 2011 and is well placed to take advantage of economic fluctuations, being able to adapt to changing needs as and when they emerge.”

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.

10 | NACFB Magazine

Top | story Our pick of the latest Patron news

Gross annual bridging lending grows for third consecutive quarter

Danny Waters, CEO of Enra Group, said: “Although we have seen a period of strong

£1.7

£4.0

2014

2015

2016

Apr-17

Jun-17

Feb-17

Oct-16

Dec-16

Jun-16

Aug-16

Apr-16

Feb-16

Oct-15

Dec-15

Jun-15

Aug-15

Apr-15

Feb-15

Oct-14

Dec-14

Aug-14

Apr-14

2013

Jun-14

Feb-14

Oct-13

Dec-13

£0Bn

2017

Average bridging loan size £1,200,000

£1,000,000

£800,000

£600,000

2015

2016

Jun-17

May-17

Apr-17

Mar-17

Jan-17

Feb-17

Dec-16

Nov-16

Oct-16

Sep-16

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Jul-16

Jun-16

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Mar-16

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Dec-15

£0 Oct-15

£4.3

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.

£2.4

£2.1

£2.0

Nov-15

The index also demonstrated a steady fall in bridging rates, standing at 1.04% in Q1 2017 and followed by a dip below the 1.00% in June, reaching a record low of 0.96%.

£4.2

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

£2.9

£3.0Bn

£2.0Bn

£4.4 £4.3

£3.7

Sep-15

£4.0Bn

Aug-15

£4.1

Jun-13

Gross annualized lending reached £4.3bn in June – a 4.2% increase compared with results from 2016, approaching the prereferendum high of £4.4bn.

£5.0Bn

Aug-13

he bridging sector has demonstrated solid growth in Q2 2017, according to the latest edition of the West One Bridging Index.

Gross bridging lending (£ billions)

Jul-15

Marie Grundy Sales director West One Loans

Business-boosting loans up to £500,000

2017

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.

10 | NACFB Magazine

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

Masthaven responds to broker feedback with short-term product enhancements

Masthaven’s refreshed short-term offering now incorporates: Light development Standard bridging Development finance Prime bridging First charge commercial

Richard Deacon Sales director Masthaven

pecialist bank Masthaven has announced the launch of an extended short-term lending solution range in response to feedback from the broker community. Following up on broker partner requirements, the bank worked to provide a simpler borrowing process through flexible short-term lending and a quick turnaround. The enhancement aims to guarantee brokers easy access to the most appropriate lending products for their clients. Jon Hall, managing director at Masthaven, said: “As brokers work hard to service their clients,

we have created a simple and flexible proposition to help them access our competitive products in a time-efficient way.” The enhancement includes the launch of a new, light development product, designed for small-scale development projects such as commercial to residential or single to multi-unit conversions. Light development loans range between £150,000 – £2m. Light development terms range up to 12 months for regulated and 18 months for non-regulated loans. In addition, the bank has extended its bridging range to include both standard and prime products, both with revised pricing. The standard offering includes loans for internal refurbishment, such as renovations or conversions, and will be open for applications from borrowers with adverse credit. The prime

offering incorporates straightforward loans for applicants with good credit and habitable properties. Richard Deacon, sales director, said: “We recognise that time is of the essence in the short-term lending market, and brokers need access to competitively priced lending. “Our new short-term lending solutions reflect feedback we’ve heard directly from our brokers in terms of their clients’ evolving needs. They want simple, flexible, swift solutions, so we’ve simplified our proposition to set a new standard for the short-term lending sector.” Jon added: “Whether it is improving, extending, developing or building, our short-term lending solutions cater for a host of different individual borrower needs.”

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

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

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

12 | NACFB Magazine

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

Masthaven responds to broker feedback with short-term product enhancements

Masthaven’s refreshed short-term offering now incorporates: Light development Standard bridging Development finance Prime bridging First charge commercial

Richard Deacon Sales director Masthaven

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

12 | NACFB Magazine

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

Two-fold success for start-up Jonathan Stern Head of credit risk Merchant Money

ver the years, we have partnered with several businesses across the UK, overseeing their growth from new entrants to major players. In some ways, we are investors more than lenders. A good example of a case where we pushed ourselves to be extremely creative is a proposal that we received last month: an east London-based start-up in the leisure industry that was looking for £200,000 to pay for the final touches on their new premises. They had purchased the franchise from an Australian company and wanted to launch in London. They had a great location and a fantastic website; there was only one problem: the business had only been trading for one month. When we told our introducer that it was going to be a challenge, he wasn’t surprised. The client, as a start-up, was struggling to raise the required £200,000. The introducer provided us with the required documents, but there was simply no track record since the business was so new to the market. If we really wanted to turn this into a deal, we would have to find out more about the client. As a starting point, we compared this start-up with a similar business in Manchester, which was growing steadily. When we started speaking to the client, we established that he also invested in alternative businesses, including care homes. This created

an opportunity whereby we could split the facility over the care home and the start-up. Speaking to the client several times, we found an elegant solution: 50% of the facility could go to the start-up as a cash advance and 50% to the care home in the form of a business loan. Going forward, we would re-evaluate the business every quarter with the intention of refinancing the facility from the care home towards the startup. The introducer told us that he was pleasantly surprised and relayed the words of the borrower: ‘’You told me it was going to be difficult, but in the end it was very easy.’’

his is just one of many cases that illustrates how we have developed a passion to become a client-centric business. We really take the time to get to know our clients better, the person behind the business. It’s the personal approach

that enables us to tailor loans for those businesses that would not be able to find funding elsewhere. Our loans are highly personalised, with terms tailored to a client’s credit profile and ability to repay comfortably. Danny Girnun, director at Merchant Money, said: “We operate under the philosophy that finance not only should be more accessible, but also affordable and repayable – and that it should never be one size fits all. “Working through both formal and informal channels, we strive to get to know a business in a holistic sense, taking into account more than just narrow barometers such as credit ratings and collateral. We’re more interested in where a business is going than where it’s been.”

If we really wanted to turn this into a deal, we would have to find out more about the client

SPEED MEETS FLEXIBILITY 020 7655 3388

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

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

14 | NACFB Magazine

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

Two-fold success for start-up Jonathan Stern Head of credit risk Merchant Money

If we really wanted to turn this into a deal, we would have to find out more about the client

SPEED MEETS FLEXIBILITY 020 7655 3388

14 | NACFB Magazine

CASE STUDIES

Asset finance facility helps renovate regional football club

ivers Leasing specialises in providing lease and asset finance to businesses and organisations in many different industry sectors – including some that are often overlooked by mainstream funders.

16 | NACFB Magazine

By way of example, Rivers was approached by one of its longstanding introducing brokers with a proposal for a regional football club. The broker had originally been introduced to this customer by a supplier of catering equipment. It transpired that the customer’s financing requirements were much broader than originally envisaged. New owners and management had recently taken over the club. Little investment had been made over the years and, as a consequence, the facilities were “tired” and in dire need of an upgrade. Fortunately, there was surplus land within the ground that could be used to fund – or, as it turned out, part-fund – the project. The initial plan was to move the pitch within the existing land and build new seating, a clubhouse and venue, as well as catering facilities. This

would boost revenue by increasing footfall and gates, as well as increasing spend per visitor. In addition, the new clubhouse and venue could be used for external hire. A new pitch was planned that would be an artificial, 3G-type rather than the existing grass. Again, this could be hired out to third parties due to its all-weather capability and having a further advantage of lower maintenance costs. The project was to be funded by releasing the now surplus land for building development. However, part way through, it was realised that there would be a shortfall in funding. The cost of the pitch had increased and the income from the release of land was projected to be lower. The broker engaged with the customer to discuss how best to finance the gap and identified possibilities with the pitch (costing £90,000) and the

As the supplier was in the EU, the customer made the supplier payments, followed by a sale and leaseback catering equipment (£50,000). For the catering equipment, a shortterm solution was needed to bridge a timing gap, pending receipt of a tranche of development income. The broker approached Rivers, who made a joint visit to the customer to gain understanding of the project. Following the visit – where Rivers was satisfied with the viability of the project, future incomes and cash flow – an offer was made and subsequently transacted. The 3G pitch was funded by way of two finance leases of £45,000 each. As the supplier was in the EU (and the invoice was in euros), the customer

made the supplier payments, followed by a sale and leaseback. The catering equipment was funded by way of a short-term loan. Rivers was offered additional security by way of personal guarantees from the principal directors and a property restriction on the ground. The restriction gave Rivers the comfort that the club would not be able to sell the ground without its knowledge during the lease term. The pitch is now in use and most of the ancillary parts of the project have also been completed. At first glance, this may not have looked like a straightforward asset finance proposition. However,

the project fitted neatly into the Rivers way of doing business. Rivers Leasing’s core values are efficiency, flexibility, simplicity and quality. It has a can-do attitude and short communication lines, always focusing on opportunities and positive outcomes. Consideration is given to more challenging sectors, as well as non-standard assets, and businesses of all ages. These attributes enabled a successful outcome for this project. Tim Shand Broker manager Rivers Leasing Limited

NACFB Magazine | 17

CASE STUDIES

Asset finance facility helps renovate regional football club

ivers Leasing specialises in providing lease and asset finance to businesses and organisations in many different industry sectors – including some that are often overlooked by mainstream funders.

16 | NACFB Magazine

NACFB Magazine | 17

CASE STUDIES

Extended revolving credit enables NHS deal We provided a significant extension to the revolving credit facility arrangement WHS had in place with us, which in turn provided them with the confidence that they had the funding they required and could access it at key times when investment was needed to fulfil this contract.

White Horse’s blood analyser

John Davies Director Just Cash Flow PLC

genuine interest in your customers, an understanding of their businesses and timely communication drives the success of Just Cash Flow PLC. A prime example of this came when our growth business manager Jamie Davies called one of our existing customers, White Horse Scientific Ltd (WHS), a leading independent supplier of laboratory equipment. Over the years the company had sourced new and innovative products from established manufacturers from around the world, especially those who did not have a presence in the UK market. The call with Ian Morris, managing director at WHS, went along the lines of ‘how is business?’ and ‘is there anything we can do to help?’. It was a fairly standard call and there wasn’t anything we could do at the time, but the seed had been planted with Ian that we would be there if he needed us. That seed burst into life just three weeks later when Jamie was

18 | NACFB Magazine

asked if we could deliver the fast, flexible financial help promised to WHS when they first started using our facilities in 2016. Ian explained that his company manufactures a very specific blood analyser, used for routine tests on women during pregnancy. Once installed, these analysers are serviced and maintained through a five-year framework agreement with NHS Blood and Transplant (NHSBT) – a very important customer. In order to facilitate the development and manufacture of a large number of analysers for a new agreement, it was essential for the business to secure funding to support this, especially as the cost would be over £100,000 per site. Funding needed to be secured quickly as NHSBT had specified a very short timeframe in which to install all units at a number of sites around the UK. It was, therefore, critical that we did all we could to help Ian and his business as quickly as possible. Jamie’s knowledge of this business meant he could rapidly provide our underwriting colleagues with most of the information they needed. Just 48 hours later everything was agreed and WHS was able to agree to this important contract.

Ian said: “You can’t place a value on having a lender that understands your business and keeps in touch with you. Having a real relationship with your lender is not just about receiving the funds. It is also about developing the sort of understanding and flexibility that, in this case, allowed us to receive funding in just 48 hours to win an extremely important contract. “It’s great to have a flexible finance partner that will support our business both now and in the future.” We have recently further enhanced the flexibility to help businesses like WHS through the launch of a new loan product: Business Builder. The new product provides brokers and intermediaries with the ability to work with clients to design the loan product that best fits their business needs and growth plans. We appreciate that businesses have different finance needs that reflect their growth plans, such as seasonality of income and a range of other factors. This has driven the creation of our new product, along with recognition that professional brokers and intermediaries are ideally placed to work with their business customers to design the most suitable loan facility. Companies such as WHS need access to flexible finance that reflect their changing business needs and that’s exactly what we are providing. This approach supports our offer of an alternative to a bank overdraft or business loan, with loans of up to £500,000 and partnering with well-run businesses by providing fast and flexible financial help.

Unlocking billions of pounds from the portfolios of UK property professionals’ Research by the lender Just Cash Flow PLC revealed that £70bn has been added to buy-to-let equity over the last two years while house prices have risen 15% nationally.

- In a similar way to a bank overdraft to help flatten out cash flow issues such as late rental payments, or flexible funding to carry out repairs and improvements on an as required basis.

The research showed that property professionals are equity rich but options poor. This is because prior to the financial crisis many had the foresight to take out tracker mortgages around just 0.5% to 1% above Base Rate.

As Just Cashflow is a business lender and not a property lender, due diligence is based on how the business is being managed and who is managing it.

Here is how Keys (UK) Ltd worked with Just Cashflow to provide a fast, flexible solution for one of their client’s, a professional landlord. The client, wished to raise funds on their portfolio for refurbishments on a number of properties that they planned to sell. Refinancing wasn’t an option for various reasons such as equity, underlying low rates and not wanting to enter into new term products.

Understandably the last thing they want to do now is unlock the equity in their portfolios by remortgaging as this would increase their overall borrowing costs. For this reason, Just Cashflow developed a flexible solution to support property professionals with funding from £10,000 to £500,000. Especially for established UK property businesses that own at least one commercial property, including buy-to-lets, the solution operates in one of two ways:

Just Cashflow developed a solution for Keys (UK) Ltd and their client that involved raising £100,000 via Just Cashflow. The funding was secured on two properties but using the equity available in four.

- As a replica of a normal bridging loan where much larger funding is required for a new purchase.

No other lender offered such a facility. Their client then used these funds over a 12 month period to carry out a number of refurbishments on some of their existing stock, sold these on and profited by over £100,000 after repayment of the loan.

Lisa Williams who heads up Keys (UK) Ltd said: “Just Cashflow’s Portfolio Builder product is quite unique in the market and the team are very knowledgeable and flexible in their approach”. She also commented that commission payments are fast and without hassle. Lisa added that on speaking to the client some months later he commented: “Being able to use this facility was brilliant. It might have cost me £10k but I made an EXTRA £30k as a result. If I gave you £30k in return for £10k who would say no?!”

*Keys (UK) Ltd is a bespoke finance broker lead by Lisa Williams. While the team are based in Coventry, Lisa prides herself on her business systems and procedures which allow the team to work with clients wherever they are based in the world. They are regulated brokers as well as a Full Member of the NACFB and an Associate Member of the Association of Bridging Professionals.

Get your clients across the finishing line

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

Just call us now

0121 418 5037

Alternatively, find out more

justcashflow.com/partner

Patron Member FS668057

BCMS668054

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

CASE STUDIES

White Horse’s blood analyser

John Davies Director Just Cash Flow PLC

18 | NACFB Magazine

- In a similar way to a bank overdraft to help flatten out cash flow issues such as late rental payments, or flexible funding to carry out repairs and improvements on an as required basis.

As Just Cashflow is a business lender and not a property lender, due diligence is based on how the business is being managed and who is managing it.

- As a replica of a normal bridging loan where much larger funding is required for a new purchase.

Get your clients across the finishing line

Just call us now

0121 418 5037

Alternatively, find out more

justcashflow.com/partner

Patron Member FS668057

BCMS668054

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

Cover Story | feature

Are the ‘makers’ still marching? Examining the government’s 2020 £1 trillion export target

Cover Story | feature

Are the ‘makers’ still marching? Examining the government’s 2020 £1 trillion export target

COVER STORY

In his 2011 Budget, the then chancellor George Osborne set out his vision for Britain to be the favoured destination for international businesses “carried aloft by the march of the makers”.

21%

Export destinations of small firms Source: The Federation of Small Businesses

Beth Fisher Editor Bridging & Commercial

n 2012 the government announced its target to export £1 trillion of goods and services by 2020. However, with the UK now being burdened by the hurdles of Brexit and political doubt, it is yet unclear whether Britain and its ‘makers’ will be any closer to this goalpost by the end of the decade. Fast forward five years, UK Export Finance (UKEF) – the UK’s export credit agency, which works alongside the Department for International Trade – reported in July

22 | NACFB Magazine

that it would partner with five of the UK’s biggest banks to help more businesses – both exporters and supply chain SMEs – access financial support. A month later, UKEF revealed plans to make supply chain trade finance available to all of its banking partners in the near future. On top of this, more businesses are becoming aware of the wider funding options available, such as export invoice financing and discounting facilities from specialist lenders. “Invoice discounting is an increasingly popular tool among businesses, particularly those pursuing growth,” said Andrew Rutherford, regional managing director at Shawbrook Bank.

“As in any market, the landscape of providers will change over time and we see this market as no different.”

“obvious boon” to exporters. However, SMEs were already taking action to export more before the EU referendum.

Export invoice finance allows companies to free up cash from unpaid overseas invoices to improve cash flow and help them continue to grow. Economic and political uncertainty in the UK doesn’t appear to have hindered this sector’s growth: according to the Asset Based Finance Association (ABFA) – now part of UK Finance – export invoice discounting grew by 42% in Q1 2017 compared with the same quarter in 2016.

“Our own research shows that even before the referendum, an increasing number of UK businesses were eyeing up opportunities in overseas markets.

Craig Durnell, managing director of export finance at Bibby Financial Services (BFS), believed that the fall in sterling was an

Andrew added that while an invoice discounting line grew at the same rate as a company’s sales and without any of

“Findings from our research – undertaken in June 2016 ahead of the EU referendum – shows the proportion of businesses investing in overseas trade increased to 12%, more than double that in Q3 2015 and the highest since the start of 2014.”

the ceilings associated with traditional forms of funding, the facility brought greater certainty to businesses looking to expand through international trade. “By releasing working capital from both domestic and overseas invoices immediately, businesses not only improve their cash flow, but can also guard against currency exchange risks. “It is worth noting that invoice discounting is also secure and cannot be ‘called in’, unlike a bank overdraft – a critical consideration for SMEs in times of economic uncertainty.” Darvish Heshejin, head of partnerships at MarketInvoice, said: “This period

of instability is not unique to the UK, but applies also to many of the regions we trade with. “Take the European Union as the classic example. As economic instability squeezes businesses on the continent – from small businesses to larger corporates – the tendency to impose longer payment terms on suppliers grows, which in turn increases the marginal benefit of utilising invoice discounting for an exporting business.” Which markets are the trading hotspots? Darvish explained that MarketInvoice typically saw Europe as the major trading market for its clients, in addition to the US and Asia.

NACFB Magazine | 23

COVER STORY

In his 2011 Budget, the then chancellor George Osborne set out his vision for Britain to be the favoured destination for international businesses “carried aloft by the march of the makers”.

21%

Export destinations of small firms Source: The Federation of Small Businesses

Beth Fisher Editor Bridging & Commercial

22 | NACFB Magazine

“As in any market, the landscape of providers will change over time and we see this market as no different.”

“obvious boon” to exporters. However, SMEs were already taking action to export more before the EU referendum.

“Our own research shows that even before the referendum, an increasing number of UK businesses were eyeing up opportunities in overseas markets.

Craig Durnell, managing director of export finance at Bibby Financial Services (BFS), believed that the fall in sterling was an

Andrew added that while an invoice discounting line grew at the same rate as a company’s sales and without any of

NACFB Magazine | 23

COVER STORY

World trade: annual growth in volume of goods and services

Source: The International Monetary Fund

15% 10% 5%

Regulated bridging

0% -5% -10% -15%

0 20

“We do get enquiries to fund receivables coming out of Africa, South America and other regions that have higher than average country risk.” Andrew added: “The invoice finance export market as a whole should reflect that of the macroeconomic position, mirroring activity with the UK’s top trading partners, including the United States, Germany, France, the Netherlands, Ireland, Switzerland, Belgium, Italy, Spain, Hong Kong, Japan, Canada and Sweden.” Craig explained that BFS supported 90 different sectors, typically involving manufacturers, recruiters, fashion brands, wholesalers and distributers, as well as supporting SMEs trading in over 100 countries that usually traded with their nearest neighbour. “After Brexit this may change, as the UK is expected to sign new trade deals that will open new opportunities for SMEs in other parts of the world.” Research by BFS found that 59% of UK SMEs highlighted

24 | NACFB Magazine

0 20

1 20

Germany as the most important country inside the EU with which to have trade ties. Some 9% believed that the French economy should be a priority for UK trade while just 1% thought that economies in Ireland, Spain, the Netherlands, Italy, Poland and Belgium were key to the UK’s economic prosperity. When asked which countries outside of the EU they saw as most important, 51% of SMEs stated the US and 32% selected China. The future funding outlook “I think uncertainties surrounding Brexit may curb any prospective funders entering the market specifically to fund exports,” stated Darvish. “However, the last few years has seen a sharp rise in the number of alternative funders in the market, some of whom have a more varied and deeper risk appetite, including for exports. “Competition is always a good thing, but it is imperative that the focus remains on servicing businesses in a meaningful and transparent manner.”

1 20

Aiming for £1 trillion In February this year, Liam Fox, the secretary of state for international trade, admitted that while the export target was a “suitable ambition”, he thought it was “unlikely” to be achievable by 2020. “I think it is good for us to have the ambition to do it, but in terms of the level of growth in global trade at the present time, which is below the growth rate of global GDP for the first time in a good number of years, that would make that difficult to achieve,” Mr Fox stated at the time. “[The] UK would have to treble growth at a time when world trade (overall) is shrinking even to hit current projections,” Darvish claimed. “I feel a lot rests on the UKTI working harder to promote UK business abroad, but also raising the awareness of funding options to exporters so they can focus on securing trade.” Craig added: “There is still a lot of work to be done to achieve the UK’s £1 trillion export target by 2020.

1 20

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“BFS’s SME Confidence Tracker from Q2 2017 revealed that only 7% of SMEs surveyed were actively exporting. Our research found that SMEs are worried about the cost of doing business, which was cited by nearly half (46%) of respondents. “There is also a concern that the UK workforce lacks the skills needed to enable competitiveness, which was also cited by 46% of SMEs owners. This raises questions about how the UK will fare in accessing talent once it has officially exited the EU.

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“Whatever the future holds, the UK needs to make sure that public and private sectors work together to address these challenges so that SMEs can feel confident about adopting an exporting strategy. “The support is available and the funding is accessible, but the will must also be there.”

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COVER STORY

World trade: annual growth in volume of goods and services

Source: The International Monetary Fund

15% 10% 5%

Regulated bridging

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24 | NACFB Magazine

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Patron | profile Raphaels Bank: Fusing technology and data

One of the oldest independent banks in the UK, Raphaels Bank traces its roots back to 1787. Through our relationships we offer hire purchase loans for vehicles, which include cars, commercial vehicles, plant, machinery and mobility vehicles. 26 | NACFB Magazine

rucially, we are focused on supporting Members of the NACFB in a challenging and competitive marketplace, using technology to streamline processes and offering rates that give your customers flexible funding for everything from personal car ownership to assets to improve business operations. Our focus At the heart of our lending division, Raphael Finance, is our mission to focus on working exclusively with an extensive network of brokers. We know the relationship with your customer has been hard fought and won; we therefore aim to enhance your proposition by delivering flexibility in our decision-making processes. Speed and accuracy of decisions is vital for brokers to ensure the right customers gain access to

the finance they need. Innovation over the last decade has seen everincreasing automated decision processes for lending, but this risks the exclusion of some otherwise creditworthy customers. Our goal is to enable our underwriters to automate elements of the process without losing our ability to review applications on an individual basis, and there is no rigid, standard credit-scoring system that we follow. This ensures that all customers are judged fairly. Rejecting the full automation philosophy of the larger-volume lenders, Raphael Finance can be more agile and nimble. A fusion of technology and data means we can reduce the risk of rejecting customers who might be perfectly acceptable, but for the fact they don’t fit standard credit-rating rules. That also means we can often write business that others

cannot, thereby providing finance brokers with a vital component in their customer service proposition. The personal touch The personalised approach goes further. While many organisations have moved to one centralised processing unit, we have continued to focus on delivering our bespoke solutions. Each and every broker in the UK gets their own Raphael Finance account manager who takes time to understand their customers’ needs. By understanding how the brokers like to work, we are able to tailor our services, ensuring they are the most appropriate for the broker’s customers’ needs. Supporting business growth We offer flexible lending solutions for the acquisition of assets for business, from cars and commercial vehicles

to plant, equipment and machinery. Underpinned by our unique approach to underwriting, we offer a genuine solution for brokers servicing startups and SMEs. With a focus on the used-car customer experience at point of sale, we have recently invested in a range of new tools designed to help finance brokers offer fast and effective decisions to the motor retail sector. The Raphaels Finance Credit Gateway automatically identifies applications which would be declined. This leaves underwriters with more time to focus on cases that are more likely to be accepted, speeding up the application process for customers. Complementing Credit Gateway, the Raphael Finance ‘Data Waterfall’ delivers greater customer insight for the company’s underwriters. Using

a range of data sources, including credit history and search data, ‘Data Waterfall’ helps increase the speed and accuracy of underwriting decisions. Our continued commitment to the broker marketplace, and our focus on the back-office tools that support the decisions being given to brokers across all areas of commercial finance, means every stage of the process – from application and assessment right through to approvals – ensures customers have a seamless buying experience. That has to be good news for brokers.

Darren Greenyer Deputy head of lending Raphaels Bank

NACFB Magazine | 27

Patron | profile Raphaels Bank: Fusing technology and data

Darren Greenyer Deputy head of lending Raphaels Bank

NACFB Magazine | 27

Ask | the expert

For professional intermediaries only. Not to be relied upon by retail clients.

Your questions answered by the most knowledgeable NACFB associates

Interpreting SM&CR Joe Cockerline, communications manager at the London Institute of Banking & Finance, explains the implications of the extended regime

Get paid for referring your clients to Octopus Choice At Octopus, we pride ourselves on creating fast and flexible solutions, powered by solid underwriting. What if you could use in your investment portfolio, too? Octopus Choice lets everyday investors invest in secured loans that have been carefully selected by the Octopus Property team. Now we're giving loyal brokers a chance to refer their clients – and earn money for doing it...

Octopus Choice: the benefits 1 A great rate

Q A

What is the SM&CR extension?

The announcement of the extension of the FCA’s Senior Managers and Certification Regime (SM&CR) to all regulated firms in the UK is a logical next step for an initiative that’s undoubtedly had a tangible impact on conduct within the banking sector. Predictably, the announcement of the SM&CR’s extension has been met with (perhaps begrudging) acceptance across the financial services industry. For organisations that must bear an increased burden in terms of time, money and capacity, a degree of scepticism is perhaps understandable. However, the principle behind the extension of SM&CR (ie consistency in levels of conduct across the financial services industry) has notably been met with nearly universal approval. The FCA’s consultation paper on the extension of the regime contains little in principle that a reasonable and moral practitioner could object to. The three tenants at the heart of the SM&CR are to: “Encourage staff to take responsibility for their actions, improve conduct at all levels and make sure firms and staff clearly understand and can demonstrate who does what.” None of these should be unachievable goals for any organisation.

Q A

What’s the reason behind it?

The ethos and practice of any organisation can ultimately be traced back to those in senior positions and holding

28 | NACFB Magazine

these individuals accountable to standards set by the regulator provides a benchmark for good conduct across the industry. However, despite the inconveniences inherent in the necessary compliance steps that affected firms must take, giving the regulator the power to take action against individuals who misbehave means that the entire industry is protected. Poor conduct, especially in the most senior cases, damages the reputation of the offending individual/firm and the wider industry.

Q A

How does this affect commercial finance brokerages?

This deliberate approach and desire for consistency from the regulator may make it seem at first glance that commercial finance brokerages will be impacted in the same way as many other firms. The FCA has tailored the application of the extended SM&CR to account for a variety of firms in different positions within the industry. Clearly this is a logical step – expecting a sole trader to comply in the same way as a huge multinational bank is wildly impractical. There are, though, nuances inherent to commercial finance broking that raise some questions. For commercial finance brokerages, the key question for the long-term implementation of SM&CR is the impact on existing firms with Approved Persons Regime status, specifically those who operate as Appointed Representatives of Principal Firms. The current consultation does not account for changes to Appointed Representatives, with a follow-up consultation planned. Clearly

the main question here is whether Approved Persons of Appointed Representatives will be held to the same SM&CR standards as those operating in Principle Firms. To fail to apply SM&CR to those acting as Appointed Representatives would seem counterproductive. After all, the regulatory structure within which these firms operate should not preclude them from maintaining the required standards of conduct.

Q A

What can we expect after the consultation period?

Time and the contents of the FCA’s follow-up consultation will tell us what the regulator’s approach will be. However, and almost regardless of the contents of that consultation, failing to make allowances or present a reasoned argument for their decision is ultimately the most damaging course of action. Clearly, a great deal of thought has been given to the current consultation and the outlook seems good that the regulator will arrive at the most sensible decision for all firms involved. Though it would arguably be difficult to occupy a reasoned and justified objection to the aims of SM&CR, differing opinions about its implementation will exist across the wider financial services sector. This consultation period offers commercial finance brokerages – and others – the chance to have their voice heard. It’s a valuable opportunity that none of us should pass up on.

A variable rate of around 4% per year (gross) – paid monthly.

2 Bricks & mortar Maximum LTV of 75%, current average of around 60%.

3 Skin in the game We invest 5% in every loan. Your money's protected ahead of ours.

4 Simple & flexible Get up and running fast. Ask to withdraw at any time.

Earn your referral fee! If you have any clients – individuals or businesses – that you think will be interested in Octopus Choice, just email us at brokers@octopuschoice.com with the following details: • Your name, company name and company number. • Your client’s name, date of birth and the amount they intend to invest. We'll then pay you 0.5% of that amount, once the investment's been held for three months. Note, to qualify for the referral reward, there must be a minimum investment of £10,000. Investors' capital is at risk and instant access can't be guaranteed. Read our risk statement for more info.

Visit octopuschoice.com to find out more

Past performance is not a reliable indicator of future results. It’s important that investors read and fully understand the risks involved before deciding to invest. Any decision to invest should be made on the basis of the information contained in the Octopus Choice terms and conditions: www.octopuschoice.com/terms. This financial promotion has been issued by Octopus Choice – a trading name of Octopus Co-Lend Limited, 33 Holborn, London EC1N 2HT, which is fully authorised and regulated by the Financial Conduct Authority (reference number 722801). All information is correct at 10 August 2017 and sourced to Octopus unless otherwise stated. Octopus-Choice-NACFB-advert-professional-67-1708

0800 294 6848 support@octopuschoice.com octopuschoice.com

Ask | the expert

For professional intermediaries only. Not to be relied upon by retail clients.

Your questions answered by the most knowledgeable NACFB associates

Interpreting SM&CR Joe Cockerline, communications manager at the London Institute of Banking & Finance, explains the implications of the extended regime

Octopus Choice: the benefits 1 A great rate

Q A

What is the SM&CR extension?

Q A

What’s the reason behind it?

The ethos and practice of any organisation can ultimately be traced back to those in senior positions and holding

28 | NACFB Magazine

Q A

How does this affect commercial finance brokerages?

Q A

What can we expect after the consultation period?

A variable rate of around 4% per year (gross) – paid monthly.

2 Bricks & mortar Maximum LTV of 75%, current average of around 60%.

3 Skin in the game We invest 5% in every loan. Your money's protected ahead of ours.

4 Simple & flexible Get up and running fast. Ask to withdraw at any time.

Visit octopuschoice.com to find out more

0800 294 6848 support@octopuschoice.com octopuschoice.com

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

BREXIT

The true picture

Liberis surveyed over 500 UK SMEs to understand the impact of Brexit on their business.

Did you vote to leave or remain in the EU?

20%

62%

Leave

Emma Doyle Content marketing executive Liberis

Over a year has passed since the UK voted to leave the European Union, and amidst the debate of the negotiation period, the future of the nation’s relationship with Europe and the rest of the world remains unclear. 30 | NACFB Magazine

s the anniversary of Brexit came and went back in June, small business finance provider Liberis wanted to find out how SMEs in the UK have really been affected since the vote, regardless of circulating headlines and perceived business conditions. And so, it surveyed over 500 small business owners to find out. In the survey, 62% of respondents said they had voted to remain in the EU, with 20% voting to leave. The other 18% offered no response. Within the 20% who voted leave, the construction and trade industries took the largest share of the vote, while the healthcare sector took the smallest. The majority (60%) of micro businesses – with a turnover of up to £50,000 a year – voted to remain. At the other end of the spectrum, most businesses with turnovers of over £1m a year voted to leave. Since the triggering of Article 50 earlier in 2017, Brexit negotiations have been portrayed with both a sense of opportunity

and uncertainty. And uncertainty has been a focus for SMEs employing staff originating from overseas, conducting trade internationally, or sourcing supplies or stock from other countries. When Liberis asked business owners if they foresaw Brexit harming their relationships with suppliers, the surveyed respondents presented them with several opinions, both positive and negative, such as that dealing with EU suppliers “will become more expensive” and that “prices of products and tools have gone up already”. But more optimistic anecdotes did appear in the findings – for instance, one business owner said: “We deal primarily with China and leaving the EU will allow the UK to cut out the middleman and get a better trade deal.” So, has Brexit really affected businesses’ ability to source products or services at reasonable prices? Some 57% of survey respondents said that it hasn’t just yet. Against this, 32% said that it has, while 11% provided no comment.

Leave

18%

Prefer not to say

Remain

Prefer not to say

Total

Retail

Hospitality

Healthcare

IT/Tech Agency

114

Construction/Trade

Education/Training

Creative

Other

104 0

100

% People asked Total out of 501 people asked: 102 leave; 311 remain; 88 prefer not to say

NACFB Magazine | 31

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

BREXIT

The true picture

Liberis surveyed over 500 UK SMEs to understand the impact of Brexit on their business.

Did you vote to leave or remain in the EU?

20%

62%

Leave

Emma Doyle Content marketing executive Liberis

Leave

18%

Prefer not to say

Remain

Prefer not to say

Total

Retail

Hospitality

Healthcare

IT/Tech Agency

114

Construction/Trade

Education/Training

Creative

Other

104 0

100

% People asked Total out of 501 people asked: 102 leave; 311 remain; 88 prefer not to say

NACFB Magazine | 31

SPECIAL FEATURES

Since Article 50 was triggered what impact has this had on your business?

41%

Negative

Positiv e ARTICLE 50

54%

32%

57%

Yes

11%

Neither Positive or Negative

N/A

Which areas of your business have been positively affected by Brexit?

Which areas of your business have been negatively affected by Brexit?

12%

23%

14%

27%

15%

24%

16%

(participants could select all that applied)

Sales and leads

Product/service sourcing Bottom lin e

(participants could select all that applied)

Business relationships

Sales and leads

Hiring staff

Business development

The headlines also shout about the risk of changes in employment laws and policies for overseas workers. Somewhat settling these concerns, Liberis’ findings showed that 65% of respondents stated that leaving the EU wouldn’t have an impact on their ability to hire staff. The 21% that claimed that it would suggest that it’s higher prices and a shift in attitudes towards the UK that would cause the most damage. When asked about the overall impact of Brexit on all aspects of a business, less than half (46%) said their business had felt any impact at all.

MFS

Has Brexit affected your ability to source products/services or materials at a reasonable price?

Product/servic e sourcing

76%

Bottom line

None of the above

Overall, 89% of those that had felt an impact said it was a negative one; primarily in relation to product/service sourcing, opportunities to generate sales and the health of their bottom line.

Among such volatile costs and an unpredictable access to stock and staff, many owners will be looking for extra financial security for their businesses. This presents a large opportunity for lenders

COME AND MEET THE MFS TEAM AT THE 2017 FINANCE PROFESSIONAL SHOW

Busines s relationships Hiring staff

Busines s development

and brokers to provide support where it’s really needed; securing peace of mind for SME owners, helping them to make the most of purchasing opportunities and giving businesses’ bottom lines a helpful boost if damaged.

Meanwhile, the remaining 11% of impacted businesses were experiencing a positive shift in business.

WE PROVIDE SOLUTIONS FOR OUR CLIENTS THAT ARE FAST, FLEXIBLE AND EFFICIENT

In the interests of responsible lending and maintaining a positive reputation, it’s important that sustainable solutions are considered, as these are more likely to allow for business uncertainty and fluctuating revenue streams while the path of Brexit unfolds.

47%

None of the above

With a Liberis Business Cash Advance, owners can access anything between £2,500 and £300,000 to help support their businesses, and can get an online quote on their advance in just five minutes. As repayments are then taken automatically at an agreed upon percentage of their daily customer card transactions, it provides a simple, sustainable solution for businesses with irregular cash flow – only paying back when their customers pay them.

S TA N D G 0 4

O LY M P I A C E N T R A L

9:30AM – 4:30PM

8TH NOVEMBER

CONTACT A MEMBER OF THE MFS TEAM TO FIND OUT HOW WE CAN SUPPORT YOUR CLIENTS’ BRIDGING REQUIREMENTS

T: 020 7060 1234 | E: info@mfsuk.com | W: mfsuk.com Berkeley Square House, Berkeley Square, Mayfair, London W1J 6BD, United Kingdom

Will leaving the EU have an impact on your ability to hire staff? We’re hirinig

21% Yes

65% No

14%

N/A

Associate Lender Association of Bridging Professionals

32 | NACFB Magazine

SPECIAL FEATURES

Since Article 50 was triggered what impact has this had on your business?

41%

Negative

Positiv e ARTICLE 50

54%

32%

57%

Yes

11%

Neither Positive or Negative

N/A

Which areas of your business have been positively affected by Brexit?

Which areas of your business have been negatively affected by Brexit?

12%

23%

14%

27%

15%

24%

16%

(participants could select all that applied)

Sales and leads

Product/service sourcing Bottom lin e

(participants could select all that applied)

Business relationships

Sales and leads

Hiring staff

Business development

MFS

Has Brexit affected your ability to source products/services or materials at a reasonable price?

Product/servic e sourcing

76%

Bottom line

None of the above

Overall, 89% of those that had felt an impact said it was a negative one; primarily in relation to product/service sourcing, opportunities to generate sales and the health of their bottom line.

Among such volatile costs and an unpredictable access to stock and staff, many owners will be looking for extra financial security for their businesses. This presents a large opportunity for lenders

COME AND MEET THE MFS TEAM AT THE 2017 FINANCE PROFESSIONAL SHOW

Busines s relationships Hiring staff

Busines s development

Meanwhile, the remaining 11% of impacted businesses were experiencing a positive shift in business.

WE PROVIDE SOLUTIONS FOR OUR CLIENTS THAT ARE FAST, FLEXIBLE AND EFFICIENT

47%

None of the above

S TA N D G 0 4

O LY M P I A C E N T R A L

9:30AM – 4:30PM

8TH NOVEMBER

CONTACT A MEMBER OF THE MFS TEAM TO FIND OUT HOW WE CAN SUPPORT YOUR CLIENTS’ BRIDGING REQUIREMENTS

T: 020 7060 1234 | E: info@mfsuk.com | W: mfsuk.com Berkeley Square House, Berkeley Square, Mayfair, London W1J 6BD, United Kingdom

Will leaving the EU have an impact on your ability to hire staff? We’re hirinig

21% Yes

65% No

14%

N/A

Associate Lender Association of Bridging Professionals

32 | NACFB Magazine

SPECIAL FEATURES

Considering the compatibility of banks and bridging Since emerging as a specialist form of mortgages in the 1960s, bridging finance has become less popular with mainstream banks due to increased restrictions.

Tom Belger Senior reporter Bridging & Commercial

rior to the 2007 crisis, banks mainly provided bridging finance for home purchases and improvements. However, the rise of self-certification in the early 2000s led to more specialist bridging lenders entering the market and offering a wider variety of products. Today, these players are leading the way when it comes to innovation within bridging. In this piece, some Patrons discuss whether, in the current climate, banks are geared to offer bridging finance at all. Could banks do bridging lending? According to Matthew Tooth, COO at LendInvest, being able to offer bridging lending is mainly down to experience and understanding of the sector. “The right structure in bridging finance means staff that really understand what they are doing, and flexible funding supported by fluid processes,” he explained.

34 | NACFB Magazine

“There is no reason a bank can’t deliver on this. In fact, banks already compete in bridging finance and some players have become very effective at improving their processes to be faster and more nimble.” However, many lenders pointed to the necessity of fast decision making and turnaround times as a hindering factor for traditional lenders, claiming they weren’t best placed for this niche type of finance. Mike Strange, managing director of Funding 365, argued that bridging finance was a specialised business where non-standard features required underwriting flexibility.

enter the bridging space due to the required speed in decision making. “The banks’ hierarchical structures mean they rarely have the right experienced staff in the right place at the right time to make decisions on often complex transactions that we have as specialist lenders,” he said. Jonathan Sealey, CEO of Hope Capital, also highlighted issues with banks’ set-up: “In reality, many of these banks simply do not have the right infrastructure in place in order to turn around a bridging loan in the time required.”

“Simply put, the larger a bridging lender gets, the worse its service generally gets – particularly as this relates to specialist loans.”

On the other hand, many specialist banks have risen to the forefront of bridging lending, taking a more nimble approach than their high street counterparts. Jo Edwards, business development and marketing director at United Trust Bank (UTB), felt that although the public perception of a bank was a slow-moving corporation with high street branches, this was wide off the mark when looking at specialist banks such as UTB.

Scott Marshall, managing director of Roma Finance, agreed that, in the past, banks have found it difficult to

“UTB, for example, is structured in such a way that each product and service it provides is run by people

“It is simply the nature of banking that large organisations are required to have strict underwriting rules which must be adhered to, unless a lengthy credit committee process has been completed.

NACFB Magazine | 35

SPECIAL FEATURES

Tom Belger Senior reporter Bridging & Commercial

34 | NACFB Magazine

“Simply put, the larger a bridging lender gets, the worse its service generally gets – particularly as this relates to specialist loans.”

Scott Marshall, managing director of Roma Finance, agreed that, in the past, banks have found it difficult to

“UTB, for example, is structured in such a way that each product and service it provides is run by people

“It is simply the nature of banking that large organisations are required to have strict underwriting rules which must be adhered to, unless a lengthy credit committee process has been completed.

NACFB Magazine | 35

SPECIAL FEATURES

with the necessary expertise and has the support and processes in place to excel at delivering that which it promises to customers and brokers. “A specialist non-bank, where credit decisions are discussed just once a week, or is run by people with little experience of property, is not suited to providing bridging finance. Neither is a huge bank employing hundreds of mandated underwriters, but which dabbles in bridging as a ‘me too’ product. “Being able to offer regulated bridging loans will be vital in some cases, but not in all, especially as non-regulated bridging business now accounts for the majority of transactions.” Richard Deacon, sales director at Masthaven, questioned whether traditional banks had any appetite to provide bridging finance at all. “They seem to have taken a step back from this type of lending since the credit crunch … I can’t really see them coming back into this space after a 10-year hiatus.” Richard felt that challenger banks had a different mindset. “Modern challengers often start as small and niche lenders and they put great

36 | NACFB Magazine

emphasis on customer service and delivery – both speed and quality. “…I firmly believe that challenger banks are here to stay in the bridging sector.” Competing with banks Above all, there remains the question of whether niche lenders and challenger banks are, in fact, set on competing with traditional institutions when it comes to bridging - and if so, which party has the upper hand. Matthew felt that smaller lenders have the advantage over traditional banks in their willingness to consider non-standard cases. “While smaller bridging lenders may struggle to compete with traditional banks on low-risk deals from a price perspective, they often come into their own at the riskier end of the spectrum.” Richard Tugwell, intermediary director at Together, also saw this as a crucial factor. “Specialist lenders have the ability to understand the issues involved and apply commonsense underwriting in more complex situations, whereas mainstream lenders may turn down borrowers because they do not fit their rigid lending criteria.

“Close partnerships with professionals such as lawyers and surveyors also mean specialist bridging lenders can deliver an efficient and timely service to get the best outcome for their customers.” Karen Bennett, managing director of commercial mortgages at Shawbrook Bank, argued that the classification of an institution shouldn’t define their offering. “Rather than looking at it through the lens of whether the lending institution is a large household name or a small, less established bridging lender, it’s the marriage of expert teams and sensible lending decisions which will ultimately provide the best bridging finance outcomes.” “There isn’t any reason to see these two markets as competitive,” agreed Liam Cavanagh, operations director at Ashley Finance, “instead, they are complementary.” According to Jo, ultimately what’s important is that brokers are able to work efficiently with the lender. “A quick and efficient response, reliable decisions, surety of funding and competitive pricing are what matter to brokers and their customers, not whether it says ‘bank’ or something else entirely over the door.”

SPECIAL FEATURES

36 | NACFB Magazine

THE TEAM FOR BRIDGING LOANS

Spotlight Unmissable industry coverage

London Members’ day: your NACFB is listening Kieran Jones Communications manager Communications manager

he first of three NAFCB Members’ days took place in London on 19th September. Representatives from 40 NACFB Member firms joined chief executive Graham Toy, managing director Norman Chambers and members of the NACFB board at a forum designed to outline the Association’s progress and look ahead to future development.

The London Members’ day, therefore, provided a platform to discuss key issues face-to-face, and in the Association’s 25th year, roadmap a plan for future growth with the support and understanding of the membership. The open and frank discourse between the head office team, NACFB board and Members provided lively debate and constructive feedback. Some matters could be quickly addressed, such as offering more time at the end of the annual AGM for Members to ask questions. Other matters that arose are in the process of being addressed; Members expressed their desire to have a greater clarity of communications from the NACFB and more distinctly tailored messages to each broker sector. To this, the NACFB has brought in a new communications manager who

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This was only the second Members’ Day in 2017 and precedes similar forums taking place in Birmingham and Manchester in October. These events form part of a journey that the NACFB is taking in its efforts to become “more transparent, inclusive and engaged”, as chairman Paul Goodman outlined.

COMMERCIAL

is tasked with helping narrow any messaging gap between the NACFB and its Members while increasing engagement levels. The event provided an opportunity for Members to express how they saw the role of the NACFB in relation to their businesses. “The most important thing for me is that the NACFB helps us not to screw up,” proposed one Member. Another saw the role of the Association as “… protecting the broker market, and speaking clearly on behalf of broker Members.” The team and board acknowledged that the NACFB needs to communicate more clearly how it benefits brokers while rethinking the tone of voice used in correspondence – a kindly reminder that we are, and will remain, a Member-driven Association. With GDPR on the regulatory horizon, compliance matters prompted much discussion among the Members, agreeing that an increasing FCA squeeze is a genuine cause for concern. Norman addressed these concerns and directed Members to the NACFB Compliance Services team and

their workshops, specifically designed to help support and advise our broker membership. There are a further 10 such workshops scheduled in 2017 – be sure to register your attendance and stay ahead of the regulatory curve.

CMY

Vice-chairman Adrian Coles further developed on the announcement at this year’s CFE that the Association has completed a review of its internal governance structure. Adrian spoke of this ongoing process and the bid to gain a better grasp of what Members would want to see from the Association in the future, as well as how board restructuring can benefit an NACFB that is growing in both scale and complexity. The board is enthusiastic to implement the review findings to form part of a succession plan, with new blood and fresh faces bringing new ideas and insight to the Association. How can the NACFB work better to help your business? The team is listening and would welcome your thoughts and feedback at the next Members’ day in Birmingham (9th October) and Manchester (24th October). The events are free and you can register online via www.nacfb.org/events.

FACTORIES

OWNER OCCUPIERS

Let’s Talk! COM M ERCIAL

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

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A PRINCIPAL LENDER 38 | NACFB Magazine

DEVELOP ME N T

THE TEAM FOR BRIDGING LOANS

Spotlight Unmissable industry coverage

London Members’ day: your NACFB is listening Kieran Jones Communications manager Communications manager

RETAIL

INDUSTRIAL

SHOPS

ASTs

INVESTMENT

RESIDENTIAL

HOTELS

OFFICES

INVESTORS

ALL!

COMMERCIAL

CMY

FACTORIES

OWNER OCCUPIERS

Let’s Talk! COM M ERCIAL

•

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

RESIDENT I AL

•

A PRINCIPAL LENDER 38 | NACFB Magazine

DEVELOP ME N T

SPOTLIGHT

Source: Life’s Kitchen Ltd, Painters’ Hall

The fifth annual ASTL conference The 2017 conference of the Association of Short Term Lenders (ASTL) took place on 14th September in London, inviting brokers, lenders and finance industry professionals to gather for a deep-dive into current affairs surrounding Brexit and the bridging sector. Vera Sugar, Editor, NACFB Magazine

he ASTL’s fifth annual conference hosted experts from a range of industry areas, including the Bank of England (BoE), the FCA and Savills. A common denominator among speakers on the day was a steer away from the usual tone of uncertainty, and often negativity, surrounding Brexit, adopting instead a measured approach to tackling their respective subjects. Benson Hersch, CEO of the ASTL, opened the conference, along with master of ceremonies Jonathan Newman, senior partner at Brightstone Law. The first speaker of the day was Faisal Choudhry, director of Savills Scottish

40 | NACFB Magazine

Research, who provided an overview of the UK residential and commercial property market, highlighting the driving factors of 2017. These included political and economic uncertainty, hints at an interest rate rise from the BoE, pressure on the buy-to-let market and stamp duty. Faisal also pointed out the long-term effects of the credit crunch on the market that are still present 10 years later, including lower transaction levels, lenders’ cautious approach and higher deposit requirements. However, he claimed that despite rising levels of uncertainty, the state of the commercial market is still stable, with investment appetite and interest in the market holding steady, and transaction levels remaining high.

He added that, for the moment, Brexit had no significant impact on leasing, development or investment deal volumes either. Lorna O’Brien from the FCA gave an in-depth overview of the regulator’s current and future aims. Along with current focuses, including the extension of the Senior Managers & Certification Regime, BTL changes, interest-only maturities and the Mortgages Market Study, Lorna highlighted fintech firms and new business models, such as P2P lending, as potential future areas for consideration. In addition, to prevent poor standards of lending emerging, the FCA is also interested in seeing whether it is able to influence solo-regulated

NACFB Magazine | 41

SPOTLIGHT

Source: Life’s Kitchen Ltd, Painters’ Hall

40 | NACFB Magazine

NACFB Magazine | 41

SPOTLIGHT

SECURE SHORT-TERM FINANCE

firms’ unregulated activity. Rob Lankey, ex-CEO of the NACFB and senior manager at Amicus PLC, spoke about the brokerlender relationship, as well as conduct and transparency in the industry, claiming that partnership is “easier to say than achieve”. Rob called for lenders and brokers to build “big relationships”, and for a narrowing of the mismatch between lenders’ claims and the reality of their proposition, after sharing his predictions for the industry. The second half of the conference saw Michael Booth QC talk about the ‘frightening world of fraud’, reminding attendees that everyone is susceptible to these threats. Michael explained that besides the “direct losers”, there are usually ancillary consequences to fraud which also need to be taken into account. In order to prevent a future attack, Michael recommended that firms make sure nobody’s above suspicion, that they ensure the right

42 | NACFB Magazine

procedures are in place and that staff are taking fraud seriously. “Prevention means [that] although fraud is frightening, you have little to fear,” he concluded. Following Michael, Peter Andrews from the BoE gave an overview of the economic outlook and some of the Bank’s predictions for the upcoming year. The final speaker was Tim Shipman, political editor at the Sunday Times and author of All Out War: The Full Story of How Brexit Sank Britain’s Political Class, giving an entertaining briefing on the state of UK politics and Brexit, and the road that led to it. Tim pointed to parallels between the build-up to the referendum and the uncertain period that followed it, claiming both David Cameron and Prime Minister Theresa May suffered from a lack of accurate data and complacency in their EU campaigns, leading to outcomes different from expectations.

With regards to the Cabinet’s agitated state since the beginning of the negotiation period, he pointed to issues such as austerity and the continuous leadership contest as some of the main causes. Benson’s closing speech was followed by lunch and an opportunity for attendees to network.

Business Product Innovation of the Year

SPOTLIGHT

SECURE SHORT-TERM FINANCE

42 | NACFB Magazine

Business Product Innovation of the Year

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

Are we on the same page about upfront fees? Graham Toy CEO NACFB

Member of the Association recently got in touch with us to check the NACFB’s attitude towards engagement fees.

With Amicus, it’s in the NET

They described a prospective client who had been led to believe that it was illegal to charge an upfront or engagement fee (the terms can be used interchangeably, so long as the client understands what they represent). Whether the client believed this or not, it isn’t correct, and I suspect the original message – passed down from another broker – lost something in transit. The only reason not to choose to charge an upfront fee is if you don’t wish to do so, and that’s perfectly valid in itself. The NACFB, overall, is happy for its Members to charge upfront fees as high as £500. This has been our position for the last few years. But it is not only our position a broker needs to consult when planning to charge such a fee. The client will also have an opinion. Whether such a fee is charged before the engagement of a lender, or in advance of any work at all simply to contribute to the anticipated cost of time and expenses in researching a funding source, is between the broker and the client. The FCA’s own site states that “all credit brokers are banned from charging fees to customers, and from requesting customers’ payment details for that purpose unless they comply with our requirements”. These requirements are that first, firms need to ensure customers are given clear information about who

44 | NACFB Magazine

When is 70% LTV not 70%? Unlike other lenders who lend on GROSS LTV, we lend on NET LTV*. So when we say it’s 70%, it actually is 70%. From complex deals to quick bridges, your client can access the funds they need to get their projects kicked-oﬀ.

they are dealing with, what fee will be payable, when and how – known as the ‘information notice’. Second, firms need to obtain confirmation from each customer that the customer is aware of the information notice and its contents.

guidance. As well as good, reliable, old-fashioned paper, it includes floppy disks (leaving me wondering exactly how durable they are, given that no computer in the NACFB office could actually read one). CDs and hard drives are also acceptable, but not websites and not – if you read between the lines – the cloud or shared file-storing sites such as Dropbox or its many rivals. In truth, nothing is entirely durable. Hard drives can crash or be corrupted, and a CD is likely to find itself in a world lacking the technology to read it, assuming it’s kept out of the light and free from physical damage. Fortunately, no one is asking you to keep records for decades. “Durable” will cover any reasonable non-cloud storage you choose.

That phrase “durable medium” is one that crops up regularly in FCA

The bottom line is that it’s not the customer’s responsibility to be fully up to speed on what is permitted in regulatory terms: it’s yours. ‘The customer is always right’ might be a good starting point for a negotiation, but it’s not wrong – and certainly not illegal – to place a value on your time and expertise.

This is explored further in CONC 4.4, which goes on to say, and I paraphrase in the interest of retaining readers, that the broker needs to let both the client and the lender know about the fee he or she is charging. Transparency and good recordkeeping are, once again, two top priorities to consider. he FCA doesn’t place a limit on the size of the fees but, of course, the client won’t agree to a fee that looks too high. Specifically, the FCA says: “Any fee to be paid by the customer to the firm must be agreed between the customer and the firm, and that agreement must be recorded in writing or other durable medium.”

*Unregulated products only. Fees and interest added to the loan amount. All loans subject to underwriting criteria. Residential

Commercial

Refurbishment

Development

Auction

London 020 3540 5120 Manchester 0161 696 6670 Discover more at amicuspropertyﬁnance.co.uk

For professional intermediary use only. Loans oﬀered subject to underwriting criteria. Amicus Property Finance is a trading name of Amicus Finance plc and Amicus Capital Limited. Both registered in England & Wales, no. 06994954 and 07713376 respectively. Registered oﬃce: 7 Air Street, London W1B 5AD. Amicus Capital Limited is authorised and regulated by the Financial Conduct Authority under reference number 613085.

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

Are we on the same page about upfront fees? Graham Toy CEO NACFB

Member of the Association recently got in touch with us to check the NACFB’s attitude towards engagement fees.

With Amicus, it’s in the NET

44 | NACFB Magazine

That phrase “durable medium” is one that crops up regularly in FCA

*Unregulated products only. Fees and interest added to the loan amount. All loans subject to underwriting criteria. Residential

Commercial

Refurbishment

Development

Auction

London 020 3540 5120 Manchester 0161 696 6670 Discover more at amicuspropertyﬁnance.co.uk

GUIDES

Reselling a P2P loan

The opportunities of the secondary marketplace Matthew Holland Head of marketing Invest & Fund

ending to property developments generally means waiting until a project is complete before receiving any accrued interest. That’s good news if you’re earning a healthy rate of return and you’re happy to see out the term of a loan.

46 | NACFB Magazine

But if your circumstances change and you need access to your capital – and any accrued interest – ahead of schedule, a resale marketplace can help. At Invest & Fund, like several other P2P platforms, we operate two marketplaces: a lending marketplace, where lenders bid to fund new residential bridging and development loans, and a resale marketplace. The latter allows lenders who have successfully bid on loans the

opportunity to sell all or part of a loan they hold to other lenders. Why choose a resale market? Just like property development, lending is not always a straightforward transaction, and a resale marketplace can offer lenders a degree of flexibility if it’s required. A lender may have committed to a loan only to be faced with a change in circumstances, or need access to their capital before the end of the loan term. In this case, lenders can list their loan on a

NACFB Magazine | 47

GUIDES

Reselling a P2P loan

The opportunities of the secondary marketplace Matthew Holland Head of marketing Invest & Fund

46 | NACFB Magazine

NACFB Magazine | 47

GUIDES

Features of the secondary/resale marketplace

Potential buyers can usually buy parts or the entire loan.

The resale marketplace enables investors to sell part or all of their loans to other investors.

Depending on the lender, loans can be sold at their original price, at a profit or at a discount.

The ability to buy or sell loans depends on supply and demand.

The resale marketplace enables the purchase of loans directly from other investors. A loan can normally be resold at any time, so long as it is not in default.

resale marketplace and, if the loan is successfully sold to another lender, access their capital ahead of schedule. That doesn’t mean a lender has to give up any interest they’ve accrued since acquiring the loan. When a lender sells a loan on our resale marketplace, the buyer chooses to fund all or part of the loan, including any accrued interest. This interest is paid directly to the original lender at the time of the transaction. The new lender also starts to earn interest from the day they acquire the loan, as opposed to the day the borrower draws down the loan. Just because a loan is listed on a resale marketplace, it’s no indication of a loss of quality. One of our key strengths as a residential property finance specialist is the process we go through to identify and assess potential lending opportunities. We apply the same robust, thorough process

48 | NACFB Magazine

to every loan we publish to our marketplace, and we monitor every loan through to completion. If a lender lists a loan for sale, it isn’t a reflection of the strength or increased risk of the loan – it’s simply the lender deciding they no longer want to hold the loan. Occasionally we may stop a loan going on the resale marketplace – if, for example, a borrower has a poor repayment history and we were working with them to resolve this. In these types of situations, we’d notify lenders who hold that loan and continue to monitor progress. Listing a loan for resale is a simple process, too. Registered lenders have access to all of the loan documentation, independent monitoring and valuation reports for all loans and can thoroughly assess every opportunity on the resale marketplace before deciding

to lend. If a lender decides to sell, they simply publish their loan to the marketplace via their lending account. Any registered lender interested in the loan can bid and transact easily via our secure platform. Good news for borrowers P2P platforms are reliant on strong relationships with individual and institutional lenders who understand the ins and outs of property finance and are ready to lend. Naturally, one of the questions new developers and brokers sometimes ask lenders such as us is around the certainty of funding. Offering liquidity and flexibility via a resale marketplace helps create an even more diverse group of lenders ready to fund your next development.

GUIDES

Features of the secondary/resale marketplace

Potential buyers can usually buy parts or the entire loan.

The resale marketplace enables investors to sell part or all of their loans to other investors.

Depending on the lender, loans can be sold at their original price, at a profit or at a discount.

The ability to buy or sell loans depends on supply and demand.

The resale marketplace enables the purchase of loans directly from other investors. A loan can normally be resold at any time, so long as it is not in default.

48 | NACFB Magazine

Opinion | & commentary Thought leadership from our Patrons and Members

A FS GROU P

Celebrating versatility Jonathan Sealey CEO Hope Capital

s with most things, when it comes to bridging finance there’s more to it than immediately meets the eye. Traditionally a bridging loan was well-defined and, to be honest, quite restricted. You took out a shortterm loan to bridge the gap between a mortgage on one property while waiting for another to be completed. The definition of a bridging loan these days is open to much debate; the majority of lenders, other institutions and trade bodies would define it as a shortterm loan of no longer than 12 months. However, there are some that define it as anything up to three years in length. In fact, the term ‘bridging loan’ has become something of a catch-all to describe any form of short-term finance. No matter the term, the one significant thing to understand is that there are now many more uses for a bridging loan. Pure bridging, for me, is the original requirement for a regulated bridging loan, where someone wants to buy a new residence but theirs hasn’t yet sold. On top of that, there are now all sorts of products that can be described as bridging finance. At Hope Capital, for instance, we offer bridging solutions for development funding, refurbishment funding, debt forgiveness, commercial bridging loans, property refinance etc. The trick for brokers is to understand just how versatile a bridging loan can be, how many different clients’ needs it can fulfil and how beneficial it can be to look at multiple funding sources. Of course, there will always be the traditional ‘bridge’ and, according to the latest Bridging Trends figures,

mortgage delays continue to be one of the biggest uses for a bridging loan. However, when landlords in the UK are looking at their portfolios in a different light, since new stamp duty and tax changes came into force, we have seen an upsurge in loans for refurbishment. Rather than selling, more landlords are looking to enhance the value of properties already held in their portfolios. To fund these refurbishments, owners are seeking short-term finance with the remortgage of a higher-value property as their exit route.

ne thing that brokers should understand is that many lenders in the bridging market have more flexibility than mainstream lenders, depending on the funding lines each has in place to facilitate their loans. A privately funded and owned bridging lender, like Hope, will be much more flexible on loan terms than institutionally funded lenders, and will work with a broker to find solutions for their clients. For instance, we do a lot of short-term commercial lending. Debt forgiveness deals agreed with mainstream banks are some of the best deals we have facilitated for borrowers. We have also been involved with cases where we worked with asset finance companies to release quick funds on properties owned by their clients.

There are many types of projects and each client’s needs are different – as a result, finance has to be diverse. Lenders need the ability to assess the borrower’s situation and work with them to ensure not just affordability in the short term, but also a realistic exit route. Recently there has been a worrying increase in the amount of re-bridging finance, which shows a number of cases where the agreed exit route has proved unrealistic. There are now more lenders looking at cases with a flexible approach, whether through private funding or because the investment stream is more open to risk. At Hope, as a privately funded lender, we are able to make our own decisions, look at each case with a more entrepreneurial eye and find the right solution, term and repayment method. The most important thing to recognise, when considering options for a client, is that if there is a time limit, whether it’s speed of completion or term, then there is usually a bridging lender that can help. As the saying goes: “If you don’t ask, you don’t get”, and when it comes to bridging finance this is true in more cases than you might have considered.

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OPINION & COMMENTARY

Brokers need to step up services

Open banking is coming. You’ve heard it so many times before, but what does it actually mean for you as a broker?

Colin Goldstein Head of partnerships iwoca

After a detailed investigation into the banking sector, the Competition and Markets Authority published a long list of final recommendations in February 2017.

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hey are wide ranging: from capping unarranged overdraft charges, through introducing service quality metrics, to regulation of how pricing of certain credit products are marketed. But within the list sits a technology gem: “development and adoption of an open API standard”. An API is like a window that can be opened by third parties – such as alternative finance providers or accounting software platforms – to access the core data held by banks. This data includes product, eligibility and pricing information, but critically – with the permission of the customer – also includes the customer’s personal data, such as account details and transaction history. An open API standard means that essentially every bank will provide third parties with the same standardised access to this data. For lenders such as iwoca, this opens up a fantastic opportunity to improve the

customer journey for clients of finance brokers. They will be able to provide us with all the information we need to make a credit decision by linking their bank data through a few simple clicks. We already make automated credit decisions for many of our clients, so the length of the whole process for customers will be shortened even further. For the brokers we work with across the UK, speed and simplicity is paramount, so these improvements to our process will make it even more pleasurable for brokers to work with us.

process of matching customers to products and recommending a mix of products across time. This is the nirvana that a number of tech businesses are aiming for.

Options and Funding Xchange. These pioneers certainly see open banking as the key to providing new levels of automated recommendation of financial services.

But does this new world leave traditional commercial finance brokers redundant? On the face of it, customers will have access to services that provide fully transparent comparisons of eligibility and pricing across a range of products. Does this make it simple for them to choose the best-suited product or mix of products?

However, in addition to the customer benefits created by tech-savvy lenders, the full transparency of an open API standard is transformational for third parties offering value-added services that guide and advise customers in a highly tailored and personalised way, based on the customer’s data. By collating, aggregating and analysing the data of the banks and customers, businesses can automate the

That said, iwoca works closely with all three of these excellent businesses, and there is one interesting feature shared across all three: human advisory services for the section of customers that need them. Broker advisory services are not dead. Not by a long way. However good technology is for collating and analysing the data, it seems to me that we are still a long way off good-quality human advice being redundant.

he Open Up Challenge – run by innovation charity Nesta – has whittled down entrants to an impressive shortlist of challengers, including – I’m pleased to say – my company iwoca. We are all vying for their prize, which acknowledges the use of open banking to transform financial services for consumers. Interestingly, among this shortlist are some new age broking services: Business Finance Compared, Funding

But don’t get me wrong, open banking will mean that broker services need to step up to a whole new level. Telling customers that they are eligible for certain products and explaining the costs will simply not be a good enough service level in this new world. The basic process of listing

options will be automated by open banking apps. What customers will expect and demand is valuable, personalised insight and recommendations based on their personal data. This is the opportunity for brokers. True understanding of the market and the capability of different lenders will be critical and valuable for customers. My guess is that a smart business somewhere in the country is already working on a software application for commercial finance brokers that will use open banking to automate the process of checking eligibility and pricing of products for customers. Brokers will license this service and overlay it with tailored recommendations using their deep market knowledge. Only time will tell. In the meantime, lenders such as iwoca are using open banking to improve our service for brokers and make it fast and simple for small businesses to access credit.

NACFB Magazine | 53

OPINION & COMMENTARY

Brokers need to step up services

Open banking is coming. You’ve heard it so many times before, but what does it actually mean for you as a broker?

Colin Goldstein Head of partnerships iwoca

After a detailed investigation into the banking sector, the Competition and Markets Authority published a long list of final recommendations in February 2017.

52 | NACFB Magazine

process of matching customers to products and recommending a mix of products across time. This is the nirvana that a number of tech businesses are aiming for.

Options and Funding Xchange. These pioneers certainly see open banking as the key to providing new levels of automated recommendation of financial services.

NACFB Magazine | 53

OPINION & COMMENTARY

Finding the UK’s fittest SMEs Damon Walford CDO ThinCats

raditional lenders are struggling to provide many SMEs with the funding that they need. With stricter banking regulations, uncertainty around Brexit and a historical lack of data on small businesses, the size of this funding gap is forecast to increase to £22bn in 2017. Fortunately, following spectacular growth, total alternative business lending reached £1.82bn – 3.43% of gross national banks’ lending to SMEs, based on the Bank of England’s 2014 baseline figure. Institutional involvement has grown nearly three-fold over a two-year period, providing the catalyst for the sector to truly compete with traditional forms of lending. Brokers are increasingly aware that partnering with alternative funders may be the best way to serve their clients. However, they generally lack the brand awareness of the high street banks, so there remains a host of smaller businesses in need of funding who do not know where to turn. Alternative lenders have had to evolve and innovate to gain market share against the larger, more established lenders. An explosion of ideas is occurring in SME credit risk modelling, as lenders uncover patterns in the underserved market segment. This effort will be greatly enhanced by commercial credit data sharing, where nine major banks will have to share credit information on all their (willing) SME clients. The influx of new current account and credit information will help the

alternative finance industry to serve a host of currently overlooked smaller businesses – but it hasn’t happened yet. A key desire for brokers, of course, is to identify the SMEs with good prospects and an immediate need for finance. ThinCats wants to take this one step further, by targeting the companies that are currently overlooked by the banking industry, and may therefore be struggling to know where to access the funding that they need.

We have developed an algorithm to identify these underserved businesses. It is an ensemble of two models: one that assesses a company’s need for borrowing, the other assessing their risk profile. This combination results in a targeted database of companies that have strong business structure, are likely to need funding in the near future, and are overlooked by the banks – the holy grail of databases for alternative funders and brokers. The algorithm is trained – using publicly available data – on a UK SME ‘universe’ of borrowing and non-borrowing enterprises. The borrowing model considers a firm’s past behaviour and access to other funding sources to predict their desire to borrow over the next 12 months. After starting with balance-sheet characteristics, proprietary risk metrics are added that can enhance the view of firms undervalued by mainstream banking. For example, the model can highlight firms that demonstrate adaptability to market fluctuations, a vital characteristic of any resilient business. The model is configured not to discriminate against industry sector, age or location, ensuring a diverse pool of potential candidates across the whole of the spectrum. The intended result is a diverse group of healthy SMEs that are set for successful growth, yet still might not tick the standard boxes of a traditional credit model. This is all part of ThinCats’ effort to find and provide the UK’s fittest SMEs with the funding they need to thrive. Working in tandem with a growing network of partners, brokers and intermediaries across the UK, the strong foundations provided by our advanced data analytics will serve to make these partnerships even more fruitful.

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OPINION & COMMENTARY

Finding the UK’s fittest SMEs Damon Walford CDO ThinCats

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