Issue 75
Broker
NOVEMBER/ DECEMBER 2019
COMMERCIAL
The award-winning magazine for the National Association of Commercial Finance Brokers
32 A FUNDING CORNERSTONE Putting the needs of customers at the centre of what brokers do
38 ASSET ADAPTABILITY Think asset finance lacks a creative approach? Think again
Smarter. Faster. Better. Stronger. Top industry tips to ensure your brokerage prospers
40 END OF THE BEGINNING? Businesses showing signs of a renewed appetite for funding
50 UNTETHERED TECHNOLOGY Businesses are taking a different approach to funding critical kit
Contents
In this issue NACFB News
Special Features
4 6 8 11 12-14
24-25 27-30
Note from Graham Toy Updates from the Association Lloyds: Islands in the stream Industry news round-up Patron news
Lloyds: The funding cycle NACFB: Tips to help brokers prosper 32-33 NatWest: Service to requirements 34 The Sancus Group: A lending revolution 36-37 Barclays: Funding green futures 38-39 Haydock Finance: Adaptable asset
Industry Insight 40-41 42-43
44-45
24 Case Study 16
Business Enterprise Fund: Cup of Rosy Lee
Patron Profile 18-19
BVA BDRC: Out of the woods? Bank of England: It doesn’t grow on trees 1pm: The relationship triangle
Opinion & Commentary 46-47
48
50-51 52 54
Paul Goodman: Tomorrow’s world Purbeck Insurance: Regaining momentum Shawbrook: Untethered tech Wesleyan Bank: Deal or no deal Five minutes with: Jeremy Crinall, Head of Broker, Funding Circle UK
33 Eastcheap | London | EC3M 1DT Kieran.Jones@nacfb.org.uk LAURA MILLS Graphic Designer
Magazine@nacfb.org.uk MACKMAN Design & Production T 01787 388038
Ask the Expert
KIERAN JONES Editor & Feature Writer
MAGAZINE ADVERTISING T 02071 010359
20-21 NACFB: Fraudulent red flags
Gillian Tait: Continued professional development
Further Information
33 Eastcheap | London | EC3M 1DT Laura.Mills@nacfb.org.uk
Liberty Leasing: World in motion
Compliance Update
22
38
40
mackman.co.uk
NACFB | 3
Welcome
Graham’s Note T
hank you for thumbing through your copy of this, the tenth edition of the revitalised NACFB magazine, Commercial Broker. By the close of 2019, we anticipate the print edition will have been read by well over 30,000 brokers, lenders and industry professionals, with just as many reading the digital version online. The magazine has hosted a range of insight from over 130 different lenders, brokers, trade bodies, law firms and other leading authorities in our industry. May I extend a heartfelt thank you to all those who have supported our magazine in 2019, both in terms of editorial thought-leadership and more directly through advertising. I hope you will agree that both elements have led to a discernible raising of the bar this year and we will look to pushing this further still in 2020. I would encourage all our stakeholders to be part of this journey with us.
Graham Toy CEO | NACFB
In this, our final issue of the year, we turn our attention to some of the newer entrants to the industry, providing advice and guidance on how to ensure younger brokerages can establish themselves and prosper. The tips come from a collective of seasoned industry experts but on reflection are as relevant for newer brokers as they are for more experienced finance introducers. This issue also features findings from the latest SME Finance Monitor from the BVA BDRC. Their findings are well worth drilling further into and, after a largely pessimistic year, they reveal some welcome shoots of optimism. If you haven’t already registered to attend our AGM on Thursday 21st November, either in-person or online via webinar, there is still time to register via: nacfb.org/events/2019agm A week after the AGM, we’ll be returning to the Westminster Park Plaza for our annual Gala Dinner and Industry Awards. The event has long-since sold out and I wish to thank all our partners who submitted either a Patron nomination or voted as a broker for this year’s awards. We are very much looking forward to celebrating the successes of collaboration once again and recognising just how important the lender/broker dynamic continues to be for UK businesses.
4 | NACFB
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NACFB News
Association updates for November/December 2019
Association announces CLIC Sargent as inaugural charity partner Tie-up sees the NACFB seek to help improve the lives of children and their families impacted by cancer The Board of the NACFB have selected CLIC Sargent, the leading children’s and young person’s cancer charity, as the Association’s new charity partner. The partnership, which started on 1st October 2019, will last for one year and will see fundraising activities take place to support the UK charity’s work at the Gala Dinner and Commercial Finance Expo as well as at regional events and our Eastcheap headquarters. The NACFB team have set themselves the ambitious target of raising £30,000 towards the charity’s efforts over the next twelve months. CLIC Sargent is the UK’s leading cancer charity for children, young people and their families. Its care teams provide specialist support across the UK. The charity supports people from diagnosis onwards and aims to help the whole family deal with the impact of cancer and its treatment, life after treatment and, in some cases, bereavement. The charity also undertakes research into the impact of cancer 6 | NACFB
on children and young people. It uses this evidence to raise awareness and to seek to influence government and policymakers, and those who provide public services across the UK. Commenting on the partnership Graham Toy, NACFB chief executive, said: “This is a really worthy new partnership and we are delighted to be supporting CLIC Sargent in 2020. “CLIC Sargent’s aim is for everyone under 25 with cancer, and their families, to receive the support and help they need during their treatment and beyond, including bereaved families living with emotional pain.” Paul Goodman, NACFB Chair, recognised the challenging work CLIC Sargent undertakes: “There are few occasions more devastating than witnessing a child bravely battle the terrors of cancer. CLIC Sargent is a wonderful charity that provides direct care to those suffering, this includes compassion and understanding for the parents who fight the disease alongside their child.” Helen Lam, CLIC Sargent fundraising engagement manager said: “We are absolutely thrilled to be working with the NACFB and that they have joined the fight to support children and young people with cancer. We can’t wait for the year ahead and to work closely together to ensure that children and young people with cancer, thrive not just survive.” You can find out more about the NACFB’s chosen charity partner, as well as ways to donate by visiting: clicsargent.org.uk
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Note from our Sponsor
Islands in the stream Julie Ronaldson, head of commercial banking Guernsey at Lloyds Bank International, explains how brokers can help their international clients consider the benefits of banking with Lloyds Bank Corporate Markets
What is Lloyds Bank Corporate Markets and who are its client base? We seek to support an increasingly diverse range of businesses, from clients based outside the European Economic Area (EEA), to those with an offshore ownership structure. We provide a broad suite of lending solutions, as well as multi-currency banking and deposit solutions to help SME, Commercial Real Estate and Large Corporate clients achieve their financial goals.
How do Islands Commercial fit into Lloyds Bank Corporate Markets? Islands Commercial is an integral part of Lloyds Bank Corporate Markets and from our offices in Jersey, Guernsey and the Isle of Man, we cater for a wide range of local and international clientele. Our client base comprises of locally registered trading businesses, or clients with an offshore ownership structure. We utilise our extensive experience to provide a range of financial solutions and take pride in providing bespoke, individualised solutions to meet with our clients’ needs.
What is the key benefit of encouraging clients to bank with Islands Commercial? Islands Commercial has significant expertise in the preservation of wealth and experience in dealing with offshore structures within all the key jurisdictions. We have been able to leverage our local knowledge gained over a significant period of time and build up a strong network of relationships with key local trust companies. As a business we deal with an international client base and as a result understand the needs and challenges of our clients living 8 | NACFB
and working abroad. We can provide a holistic service to those clients who may wish to acquire or raise equity against commercial or residential property in all areas of the UK – we have no local boundaries. We offer a fast and efficient account opening service, completed on site by local experts who focus upon enhancing and strengthening the client experience. Considering our client base, we have significant experience in dealing with multi-currency banking also.
What product range do you offer? We provide a comprehensive range of financial solutions, which include both lending and deposit products, refinancing and term loan facilities which can all be shaped to meet the needs of the client. Our locally based Islands Relationship Management Teams are adept at structuring lending solutions, to meet with the needs of a broad client base in a competitive international market.
Who should I contact to find out more? • Julie Ronaldson, head of commercial banking Guernsey: Julie.Ronaldson@lloydsbanking.com • Nigel Cheesley, head of commercial banking, Isle of Man: Nigel.Cheesley@lloydsbankinternational.com • Stephen Ogborn, head of commercial banking, Jersey: Stephen.Ogborn@lloydsbankinternational.com • Jo Buckross, head of Islands Commercial: Jo.Buckross@lloydsbankinternational.com
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Industry News
Industry News 3. SMEs seeking £250k more funding than at the start of 2019 Growth and funding ambitions have strengthened amongst SMEs over the course of 2019, according to the latest report by Independent Growth Finance (IGF). Seventy-three per cent expect to see their revenues climb in the next 12 months, compared to 69% at the start of the year. Of those seeking to raise funds to support growth, the average amount has also increased by 22%, or £250,000.
1 1. FSB: SMEs fear unpredictable consumer behaviour Michael Mealing, chairperson of employment and pensions policy at the Federation of Small Businesses (FSB), believes ‘uncertainty’ is harming small businesses. Mealing said his biggest fear is consumer behaviour and the unpredictability of it, suggesting that: “...if there is one thing that government preparation cannot take into account, it is the bizarre behaviour on the part of consumers.”
4. London property investment slows in run-up to Brexit New data shows property investors have cut spending on central London offices by nearly £3 billion in the run-up to Brexit. According to property firm Avison Young, £2.2 billion of purchases were agreed in the three months to 30th September, down from £5.1 billion in the third quarter of 2018. So far £1.6 billion of deals have been transacted in the City and £592 million of sales have been completed in the West End.
6 6. Car industry to get £1 billion boost as electric drive shifts gear The government has announced plans to invest £1 billion in the UK’s electric car industry to accelerate the shift towards electric vehicles and reduce carbon emissions. Officials said it will be used to support research and development, as well as major investments in the manufacturing of batteries, electric motors, drives, power electronics and hydrogen fuel cells.
7. Business saw drop in activity in Q3
2. P2P lenders: FCA rules make sector appear more risky Peer-to-peer lenders have warned that new regulations from the Financial Conduct Authority make the sector appear riskier. Starting from 9th December 2019, P2P lenders will have to introduce appropriateness tests and can only market their products to sophisticated, high-networth individuals or to those who commit only to investing a maximum of 10% of their assets.
for National Statistics (ONS) figures, with UK GDP up 1.3% in the year to the second quarter of 2019, 0.1 percentage point above economists’ predictions. The April to June period however saw the biggest fall in production output since 2012 as Brexit stockpiling was relaxed – a downwardly-revised fall of 1.8%.
4 5. Economy beats expectations, credit growth slows The economy beat expectations in the first quarter of the year, according to Office
The CBI’s latest growth indicator shows that a balance of 6% of companies across services and manufacturing reported a drop in sales or output volumes in the three months to September. For the three months to December, a balance of 16% expect falling volumes. “Decision-makers in boardrooms across the country have been watching politics this week with a heavy heart,” said Rain Newton-Smith, the business lobby’s chief economist. NACFB | 11
Patron News
Patron News Charter Court and OneSavings Bank complete merger
RateSetter “within touching distance” of profitability
The merger between Charter Court Financial Services and OneSavings Bank has been completed creating a £1.6 billion lender.
RateSetter, has taken a big step towards profitability with a significant reduction in losses. The NACFB Patron’s losses fell to £4.2 million for the year to March 2019, from £27.5 million in the previous financial year.
The deal unites the specialist mortgage brands of Kent Reliance and Precise Mortgages however both will continue to operate as separate brands. Charter Court, owner of Precise Mortgages, stakeholders will own 45% of the combined group whilst OneSavings Bank, owner of Kent Reliance, stakeholders will own 55%. As well as leveraging the complementary strengths of both businesses, the combined group will use its greater scale and resources to offer an enhanced proposition to customers, brokers and distribution partners. The Competition and Markets Authority (CMA) cleared the acquisition in July. The group brands; Precise Mortgages, Kent Reliance for Intermediaries, InterBay Commercial, Heritable and Prestige Finance, will remain separate, as will propositions, service, contacts, procuration fees and product offerings. New group managing director Alan Cleary said: “Intermediaries have always been at the very heart of our propositions and I’d like to take this opportunity to reassure brokers that operationally they’ll notice absolutely no change. It will be business as usual with all the brands of the new group remaining committed to the intermediary market.” 12 | NACFB
RateSetter’s CEO, Rhydian Lewis OBE, commented: “It is very encouraging that we are now within touching distance of profitability. “Our model has always been differentiated from other Peer-to-peer lenders because we have focussed on a low risk and liquid product for investors. On the borrower side, we compete in traditional and deep markets where we do not need to take undue risk to build a sizeable business. “We believe this makes RateSetter the sustainable challenger to the banking model of deposit-backed lending. Some fintechs may have raced off quicker than us, but we think the tortoise will overtake the hare.” RateSetter say they are leading the way in making Peer-to-peer lending a more mainstream investment, with the number of active investors rising by 26%. Three years since its launch their Innovative Finance ISA is attracting strong demand with over £1 billion invested. In April this year, RateSetter’s approach to financial services was recognised with the prestigious Queen’s Award for Enterprise.
Know-how? No problem We pride ourselves on our financial expertise at Accredo. Years of experience has taught us to look past the numbers and view the complete picture of the clients we’re providing solutions for. And the most suitable terms and finance options for each individual case. We offer commercial loans and leases from £25,000 to £1,000,000, often lending when others won’t, with terms from 3 months to 10 years. Our experienced teams also understand that you’re providing a service and therefore we’re dedicated to providing our introducers with a fast, friendly and informative experience every time. Ease and expertise from Accredo Send your proposals to props@accredoltd.co.uk or call us on 01444 255915 for more details.
Patron News
Patron News Oblix Capital calls for higher short-term lending standards
Shawbrook reports resilient post-Brexit outlook amongst brokers
Oblix Capital has supported calls to drive industry standards and transparency higher, ahead of the potential regulation of commercial short-term lending.
Despite the current political climate, commercial mortgage brokers remain optimistic about the year ahead, according to Shawbrook Bank’s Broker Barometer. With a resilient outlook, almost seven in ten (67%) stated that they feel confident about the lending environment in 2020.
Following a Treasury Committee in July, in which it was stated that justification for leaving commercial lending outside the regulatory perimeter is “feeble”, speculation has grown that the FCA will extend its regulation of the bridging sector to include investment and business finance. Ahead of any potential regulation, Oblix Capital has called on the industry to work together to raise standards. Andy Reid, sales director at Oblix Capital, said: “There are arguments both for and against the regulation of commercial bridging. The current situation can be confusing for consumers who may not understand how the purpose of a loan can impact their regulatory protection, and regulation across the whole market will help to create a level playing field and more simple choices. “Full regulation would likely increase costs for lenders and brokers. These additional costs could be passed onto the customer in the form of higher interest rates and fees or could stifle product innovation. While some brokers who currently deal exclusively in unregulated loans will change their business model should the market become fully regulated, others could choose to leave the industry altogether.” 14 | NACFB
Other key findings from Shawbrook’s Broker Barometer reveal that over half (53%) of brokers feel confident about business growth in 2020, whilst a quarter (25%) of respondents have seen no change in business volumes in 2019. Even more positively, over a quarter cited a healthy 10%+ increase in business volumes in 2019, compared with 2018. In addition, 22% have cited a 20%+ rise, up from the 18% who reported the same increase in business volumes in 2018. Emma Cox, sales director for Commercial Mortgages said: “Despite the broker community showing some concern around the impact of Brexit as the deadline draws near, their confidence in business and the commercial property market for 2020 is still high. “There is still opportunity for experienced investors to grow and diversify their portfolios, providing they do their homework and seek appropriate advice. The barometer results have further highlighted this trend with a number of commercial mortgage brokers citing a large increase in the number of investors diversifying into the market.”
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Case Study
No storms in any teacups Cake making duo save the day and the jobs of ten staff as they take over a community tearoom Ruth Sullivan Marketing Co-ordinator Business Enterprise Fund
L
ocated in the historic market town of Howden in Yorkshire, ‘That Tea Room’ is a family-run tea shop at the heart of the neighbourhood. Its proud new owners, Sam Barker and Jo Hunter, are local ladies who serve up a selection of wonderful homemade cakes, scones, hearty food and a choice of 18 loose leaf teas from around the world. Sam and Jo who both live in East Riding had been working at That Tea Room for two years alongside eight colleagues when the owner decided to sell up and move on. With a love for the tearoom now formed and the prospect of unemployment for all the staff, the pair decided to act. They purchased the business by combining their entire inheritance and a £12,000 start-up loan from BEF. Going from working in the tearoom to owning it was a huge leap, Jo said: “We’ve both turned 40 and if we didn’t do it now, we never would. We tried every avenue we could think of and the high street banks just didn’t want to know. We got quite a few knock backs along the way and at one point felt it would never happen for us. My Grandpa Eric, our biggest fan, who has now passed suggested BEF and they were willing to help and provided us with the finance we needed to get going.” In addition to the tea room, the business provides outside catering for parties, wedding and events. Since the investment their catering services have been in high demand and they have been booked up every weekend. However, the heart of ‘That Tea Room’ truly is its dedicated team, its traditional Georgian building with quirky tea pots lining the ceiling, and the regular customers, who come in week in,
16 | NACFB
week out and are described as family. This really is the cup that cheers. Sam explained how pleased she was with her BEF experience: “Our investment manager, Julie, was very helpful and the BEF team were so approachable. Nothing was too much trouble. I could ring anytime if I had a problem and they would advise me. We could not have achieved this without them.” Julie Micklethwaite, start-up loans manager at BEF, said: “Sam and Jo are great. It has been a joy to help two hardworking family women achieve their dream. While Grandpa Eric is unable to witness the transformation of the business under Sam and Jo’s leadership, I’m confident that he would have been proud of their dedication and all they have achieved so far.”
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With a love for the tearoom now formed and the prospect of unemployment for all the staff, the pair decided to act. They purchased the business by combining their entire inheritance and a £12,000 start-up loan
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Patron Profile
Big wheels keep on turning Our relationship with brokers is one of mutual respect Allan Clegg Managing Director Liberty Leasing
L
iberty Leasing was established in 2001 and over the last 18 years the business has grown to become one of the UK’s largest independent and privately-owned finance companies. Our success and reputation are built on the traditional personal approach taken with brokers and clients whilst embracing technology to streamline business processes. Working with SME businesses from day one, Liberty has seen many of them grow to become leaders in their respective industries and, whilst supporting those clients through both good and difficult times Liberty’s commitment has been rewarded with loyalty and growth. Liberty’s core focus is providing asset and vehicle finance to a wide spectrum of businesses and high net worth clients across the country. In fact, 91.8% of our lending portfolio is made up of hard assets, i.e. all types of wheeled assets as well as plant and machinery. Liberty can also finance specialist vehicles such as, classic cars, supercars and race cars. It is unusual for a lender of Liberty’s size to be privately owned and this allows the business to refocus and be reactive to changes and challenges in the marketplace when necessary. We operate on the basis that each proposal is judged on a case-by-case basis and the benefits of human underwriting over an automated process cannot be underestimated. Liberty is not afraid to take risks and to go above and beyond to put a deal together. 18 | NACFB
Vital to our growth has been the importance that the organisation places on finding the right staff to fit the ethos of the business. Today, the business is comprised of almost fifty staff in multiple departments and it continues to grow. As Liberty has grown, dedicated departments have been developed to handle specific aspects of the business, bringing in experienced staff to usher through changes where needed. In 2014 Alan Cooper was appointed as Financial Director and in 2015 the Asset and Legal Departments were established with the appointment of Nigel Wilkinson as Asset Manager and Laura Roberts as Legal Director. Investing in these dedicated departments meant that the reliance on third-parties was reduced and processes benefited from enhanced speed and efficiency. The recruitment process at Liberty
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It is unusual for a lender of Liberty’s size to be privately owned and this allows the business to refocus and be reactive to changes and challenges in the marketplace when necessary
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We are fortunate enough to have a loyal broker network, along with strong support from our funders, to enable us to continue to write new business
focusses on ‘people’ and if they’re the right fit for the business, they are taken through a robust training program, regardless of experience, to become a member of the Liberty family. Lewis Banford is one of our longest serving area managers and he joined the business in 2005. He shared with me his thoughts on the vital relationship that Liberty has with its broker network: “Our business model has been built almost exclusively around the broker channel. Therefore we rely on brokers for introductions to customers and our relationship with them is one of mutual respect. We don’t set minimum volume targets, so whether it’s just one introduction a year, or many, we give each broker our very best service, and we remember them if customers come back to us directly. “The broking industry has seen a shift in recent years towards the ‘super-brokers’, which has allowed younger people to get started in the industry, reducing the barriers to entry and giving them access to a wealth of experience and support – especially with compliance. At Liberty we welcome the influx of the younger generation and our own recruitment has always been focussed on developing talent.” The 2019 market remains challenging with the ongoing uncertainty around our future in the European Union. Businesses are being more cautious in their investment approach and there is less
appetite in the marketplace for larger ticket deals. However, we are continuing to work closely with our brokers and their customers and pushing forward with a strong start to 2019. March was the strongest month of Q1 with £7.5 million of new business written across all sectors. Throughout the rest of the year demand for asset finance and refinance has been strong with the FLA recently reporting that new business had increased by 6% in the first half of 2019. As we come towards the close of 2019, we are determined to futureproof the business with the necessary infrastructure and systems. We are fortunate enough to have a loyal broker network, along with strong support from our funders, to enable us to continue to write new business. We currently have debt facilities of over £120 million, of which there is £47 million of headroom to support further levels of new business going into the final months of 2019. 2018 was a great year with a few landmark achievements, including our best month ever, but we know it’s important to not lose sight of our goals. I feel we are all motivated by this success to keep moving forward whilst not forgetting how important it is to continue delivering an exceptional service to our brokers and their customers. NACFB | 19
Compliance
Spotting the red flags Brokers have a responsibility to identify when all is not what it appears
Claire Cheung Compliance Officer NACFB
I
f it was easy to detect fraud, then it wouldn’t be an issue for the industry. The reality is that fraudsters are becoming more sophisticated and we all need to be on our guard. What is slightly frustrating is that victims of a commercial lending fraud are understandably tight-lipped about the matter, which means that broader education, insight and discussion around the subject can be rather muted.
The proposition Do you understand it, and does it make sense? Don’t allow yourself to be blinded by field specific lexicon. A smoke screen set up by the fraudster to put you off the scent is an easy trap to fall into. Be on your guard if the deal is urgent and the borrower is putting you under undue pressure. Question, challenge and validate your way through the request and use your experience and knowledge. Often in fraud cases the people close to the deal will retroactively admit that the request didn’t feel quite right at the time.
The valuer
What follows is a step through the customer journey with pauses along the way to focus on fraudulent threats, alongside suggestions to minimise the risk.
Most lenders will have a panel of valuers. Despite these business partners being professional and qualified, this stage is a potential weak link. Don’t be tempted to use or recommend a valuer promoted by the borrower. A valuation instructed by the borrower and used to support the deal should put you on notice.
The borrower
The lawyer
Do you really know who you are dealing with? KYC and AML regulations are there for a reason – don’t trivialise their importance. Do the job properly and have an enquiring mind. There are some very credible forgeries in place which will deceive even the most forensic analysis, this is where verification plays its part. Have you met the borrower and seen the whites of their eyes? Don’t underestimate your own personal instincts. Fraudsters won’t have their occupation printed on their t-shirt, but a face-to-face meeting will help you form a judgement. If a meeting is not appropriate due to the nature of the deal, your other due diligence becomes even more important. Is the borrower just a front to disguise the fact that the deal is being controlled by an unknown operator?
A similar argument applies to lawyers as it does to a valuer. Remember they are looking after the documentation and security, so any skulduggery in this area will leave everyone high and dry. Do your due diligence on the firm, the partners and then keep in touch with the deal, seeking evidence of progress as the loan proceeds.
The introducer Who introduced the deal to you? Your due diligence on the origins of this proposal will either build or undermine your confidence in the probity of what you are being told. Be very careful if you are being asked to rely on information or documents that have been produced from introductory parties that are not known to you. 20 | NACFB
Third-party involvement If the proposal involves guarantors of any description, assure yourself that they are in the full knowledge of what they are being asked to do. Ensure that they are not being coerced and that they actually exist. A fictitious guarantor will only be revealed when the backer is called upon, by which time the whole matter will look disappointing.
Follow the money This is a well-used phrase, but it helps challenge and discover anomalies. Ask simple and obvious questions such as the source of any deposit and seek evidence and proof of its origins and
whereabouts. Do the sums at the outset and understand where the money is going.
Is the deal affordable? Verify serviceability from financial statements and projections, check their validity, the qualifications of their accountants and whether the cash in the balance sheet matches the bank statements. Use your experience to test accounting components such as gross profit margin, business seasonality or inconsistencies with prior years’ performance. Look out for round amounts and window dressing to make the statements look too good to be true.
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Often in fraud cases the people close to the deal will retroactively admit that the request didn’t feel quite right at the time
Working scenarios •
£600,000 commercial mortgage on a flat in Manchester. Over valued by £200,000 and shortfall sustained on foreclosure. Borrower used false ID, so shortfall sustained when trying unsuccessfully to locate the individual.
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Fraudster used dishonest lawyers who did not obtain title to security. BTL mortgage totally unsecured. Borrower subsequently identified as serious criminal.
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Solicitor borrowed to bolster working capital for his firm. Loan secured by guarantee from father. Guarantee executed by same solicitor. When firm failed, father claimed no knowledge of the guarantee.
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Certified copy of passport presented to support a loan application which was confirmed to be a forgery. In collaboration with the police, the applicant was asked to send in the original, which they did, confident that they could still pull off the scam.
NACFB NACFB || 21 21
Ask the Expert
Your professional development journey
Q Gillian Tait Managing Director Competent Adviser
What is CPD?
CPD or as it is more formally known Continual (or Continuous) Professional Development is the term used to describe the activities you undertake to improve your existing knowledge and skills and to ensure you keep up-to-date with changes as they occur in the industry. Simply put, it encompasses everything you need to know to keep up-to-date in your industry and to give the best advice to your clients.
Why is it important for brokers to partake in mandatory learning?
Mandatory learning, and in particular the need to demonstrate you have spent a specific amount of time effectively updating your knowledge, whilst it may at first feel like an additional task, in reality needs to become something you feel is important to include in your life – for you, your business and your clients. We only have to look at the introduction of the Statement of Professional Standing (SPS) and the fact that failure to comply with the annual 35 hours of CPD required to achieve this, will see an IFA unable to continue to trade, to understand the importance the FCA place on the need to continuously update and enhance knowledge. 22 | NACFB
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So how can you use what you have learnt to demonstrate competency to your clients?
you are a broker or a lender. As a further indication of this, the FCA have now announced that they are looking at the preferential treatment of new customers over existing clients, with particular emphasis on business practices that offer better rates to new clients and business models that drive unaffordable lending. Further, the introduction of the extension of the Senior Managers & Certification Regime in December of this year, will see a significant change to the responsibilities and accountability of those in senior management or in a certified role.
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One of the great things about undertaking CPD specifically relevant to your role is the ability it gives you not only to upskill your knowledge but to demonstrate this enhanced knowledge to both new and existing clients. This can be done in a variety of ways, from having the confidence to discuss more complex issues and how they relate to a client’s situation to being able to cross-sell or identify new opportunities for your clients in areas you were previously inexperienced to discuss.
How can learnings from modules be applied practically to everyday deals?
Whilst modules aimed at raising awareness of new products are self-evident in their ability to be applied practically to everyday deals, not all learning needs to be product or regulatory focussed. Many modules also address the skills required to successfully fact find and recommend the most appropriate product to meet your client’s needs.
What upcoming regulatory changes do you anticipate impacting the lending community? Fair Treatment of Customers, whilst not new, continues to have a major impact on nearly all activities you undertake, whether
How can brokers best stay up-to-date with regulatory changes? A regular review of the FCA website is a great place to start, with a quick glance at its home page showing links to Policy Statements on Optimising the Senior Managers & Certification Regime and how the FCA is preparing for Brexit as leading articles. For those who prefer their information a bit more sector focussed, a review of the Regulatory CBT modules within the MyNACFB portal is an excellent point of reference. And finally, don’t forget magazines such as Commercial Broker, all of which are specifically designed to highlight issues that impact you and your clients. The good news is that, whichever option you choose, as long as you record the activity you have undertaken, the time spent and the relevance to your role within your CPD log, all of the above count towards your annual CPD total.
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Financing through the cycle Working together to back Britain’s businesses Andy Bishop National Director of Business Development SME Banking Lloyds Bank
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o far this year we have £825 million of committed term lending, £339 million of Asset Finance lending and 147 Invoice Finance deals through the broker channel. Accessing the right finance and banking relationship for your clients’ businesses is essential during these times of continued uncertainty across the UK’s economic and political landscape. Our message from earlier on in the year continues and reflects our ‘through the cycle’ approach; namely that businesses need to balance investing in growth with weathering turbulent financial conditions. Increasing pressures on cash flow in these challenging times means businesses are having to think differently about how they finance their future activity in order to compete.
How brokers can benefit from our products and services We offer a full range of traditional and specialist banking products 24 | NACFB
including finance; term lending; working capital facilities and asset-based lending. The brokers we work with have access to a dedicated business development manager for every deal, who ensures that they fully assess and understand the clients’ needs in order to shape and personally deliver committed lending solutions. We also have accredited specialists in sectors ranging from manufacturing and real estate to healthcare and legal, who can provide the expertise to source the appropriate solutions for your clients. Our regular broker satisfaction surveys and broker research earlier this year highlight the importance that brokers place on the BDM having personal accountability, not just for their relationship with us, but also for delivering personally for the client. It’s what sets us apart. Our single point of contact approach ensures we will deal with referrals promptly; keep brokers informed every step of the way and pay competitive commissions quickly and conveniently.
Invoice and Asset Finance In addition to our dedicated business development managers, we offer specialist teams for the provision of Invoice Finance. Brokers
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Brokers who refer their clients to us can receive a 40% share of the Invoice Finance service fee for the lifetime of the bank’s relationship with the client
who refer their clients to us can receive a 40% share of the Invoice Finance service fee for the lifetime of the bank’s relationship with the client. These contracts are zero month, have no minimum service fee and have a notice period of only one month for the first six months. Since we launched this proposition, the number of broker deals we’ve completed has more than doubled, which has reiterated the requirement for a dedicated team servicing the needs of the commercial finance broker market. Likewise, we offer specialist teams for brokers offering Asset Finance provision. Whether your clients are looking to invest in plant and machinery or commercial transport, our hire purchase and leasing solutions can help support their growth plans.
Increase in coverage We have significantly increased the number of dedicated BDMs working with our brokers to support their clients, whatever the size of that client, to ensure that every deal has that personal touch. We have extended our turnover ceiling from £25 million to £100 million and at the other end of the scale, we have an additional 40 local business development managers to support lending requirements of less than £250,000.
Supporting wider opportunities for your clients Our BDMs can also assist with connecting you to our Private Banking teams for clients who have bespoke personal lending requirements. We also work with Lloyds Bank Corporate Markets who can support with any commercial offshore borrowing requirements.
Commitment to service We recognise that, as commercial finance brokers, your professional reputation is built on trust, and we take our responsibility to maintain that reputation seriously. That’s why we work hard to support you in finding the ideal solution for your clients’ unique needs. Our commitment to creating long-term, sustainable relationships that benefit both broker and client has been recognised at the NACFB awards for the last seven years – and we look forward to meeting many of you again at this year’s Gala Dinner. If you would like to find out more about what Lloyds Bank can offer or to join our Broker panel, please visit Lloydsbank.com/businessintermediaries Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 119278 NACFB | 25
Giving cash flow a boost with asset finance We understand that without cash the vision of growing a business can quickly become a blur. Our straightforward capital release options can help businesses unlock cash held in existing assets and gain a clear perspective on their finance. Taking control of cash flow with Close Brothers Business Finance
0330 134 6787 www.closebusinessfinance.co.uk/refocus
Close Brothers Business Finance is a trading style of Close Brothers Limited. Close Brothers Limited is registered in England and Wales (Company Number 00195626) and its registered office is 10 Crown Place, London, EC2A 4FT.
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Smarter. Faster. Better. Stronger. We approached experienced brokers, lenders, and other key industry players for their top tips to help your brokerage prosper
“Always be professional and know your products. Remain confident and ensure you follow up any conversations with an email thanking them for the opportunity for you to support with their request for business finance. Lastly, abide by the ‘Ronseal principle’ of doing what you say.”
“Build a reputation for reliability and efficiency. Manage expectations. You may be tempted on occasion to cut corners. Don’t. Take the time and care to write detailed, well-presented enquiries to lenders. Embrace the challenge of thinking of inventive solutions. Keep on top of the admin. Enjoy the industry camaraderie.”
Norman Chambers, Managing Director of the NACFB, shares his ‘Ronseal Principle’.
Erika Harris, Director, at NACFB brokerage Red Eight encouraging brokers to embrace the challenge.
“Decide the product areas you are going to focus on and invest time to build strong relations with the key lenders in all tiers of the market. Know their underwriting criteria and USPs well. Research and target the clients in your business location that you want to work with, build your database of contacts and target clients and communicate regularly via a basic e-newsletter with engaging content.” Geoff Wilson, NACFB Board Director, on the importance of building a network of connections.
“The most successful commercial brokers nurture their client relationships throughout their active investing lifecycle, taking the time to understand them and their investment strategy over the short, medium and longer-term whilst forming essential relationships with specialist lenders through their dedicated BDMs. It can really help get those complex cases over the line.” Darrell Walker, Head of Sales at InterBay Commercial, on sticking with your client throughout the full deal cycle.
“Keep an eye on what the regulator is saying regarding markets other than just your own. Thematic Reviews will often have read-across to a number of different markets and sectors. A good recent example is the final findings of the FCA motor finance review. Understanding what the regulator is after before the competition will give you the agility to respond quickly and effectively.” Joanne Davis, Partner at law firm Locke Lord (UK), on seeing the bigger regulatory picture.
“There’s often a home for most cases so always think outside the box. If that big deal does get over the line don’t spend all the commission at once, remember to keep funds back for next year’s tax bill. Always reply quickly to leads and don’t forget there is a high drop-out rate. Think carefully about charging up-front fees.” Bob Bennett, Principal at Carlton Business Finance, on the value of thinking ahead.
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“Document the reasons why you have chosen the lender you are going with – whilst most commercial markets are unregulated, if you are registered with the FCA then the principles always apply, and I would imagine it incredibly hard to understand the rationale on every single deal written by memory alone. Whilst documenting, you can also use this opportunity to highlight any elements of the products recommended to the client, to ensure transparency.” Karen Bennett, Partner at FinanceWell, on being able to tell the story behind your presented options.
Engage effectively with your lenders says Michelle Dean, Relationship Manager at Peritus Corporate Finance. “We take the time to understand our client’s requirements fully by completing a lender case summary. We then shortlist relevant lenders and speak to each one before the summary is issued. This ensures the lender has the right information to issue terms quickly and effectively.”
“You must strive to provide the client with excellent service by way of regular updates on their proposal, chasing the lender, valuer and legal team as necessary. Then, and hopefully with a satisfied client, you’re likely to gain more introductions from their business colleagues, friends and other professional advisors.” Kevin Power, Business Development Manager at Newable Commercial Finance, on doing the legwork for your clients.
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“No business or client fits in a box. Working with a lender that understands that their funding needs might be more complex than they first appear, is critical. The solution needs to support their business ambitions now, and in the future. No two deals are the same.” Josh Levy, CEO of Ultimate Finance, on the unfolding complexities of a deal.
Step-up to the task of being a reliable introducer, says Andy Bishop, UK Director Business Development – SME & Mid Corporate Banking at Lloyds Bank. “Play to your strengths. Invest in compliance support from the NACFB. Identify your target market. Be clear about your proposition – sustainable income streams. Be obsessive about continuous personal development. Set the highest client and conduct standards. Drive client advocacy through frequency, recency and value-add contact strategy. Be a trusted advisor.”
“Never stop learning and sharing knowledge with clients, lenders, finance professionals and your broker peers. Givers gain by doing this – I certainly do.” Mike Deacon, Director at the NACFB, on why every day is a school day.
Adopt a client-first approach says Evette Orams, Managing Director at Hilton-Baird Financial Solutions. “The focus for any broker has to be on their service and standards. All activity should be based on each client’s best interests, with aspects such as commerciality and reciprocity never considered. High standards are paramount as, ultimately, the trust and confidence customers have in you will define your business.”
“Commercial mortgages can be complex, so it is important to forge good relationships with lender BDMs who are a vital source of support in finding the right solutions for clients. Making time to meet with BDMs and getting the latest updates on lending criteria can help to broaden your knowledge and understanding of the different options available.” Jane Simpson, Managing Director at TBMC, on the value of really knowing your BDMs.
“There are many lenders that provide different offerings. The key is to build strong relationships with your clients and those lenders, understand what they can offer in terms of product and also how they can help you add value to your clients whilst being abreast of any changes.” Mike Morris, Funding Circle’s Regional Manager for the North, on knowing which lender to approach to make the deal fit.
“When putting together a proposal to a lender remember the CAMPARI & ICE method. Character (borrower background and CV), Ability (experience, ability to repay), Means (assets and liabilities), Purpose, Amount, Repayment, Insurance (security), Interest (loan terms sought), Commission (fees) and Extras (insurances and protection). If you cover all these points you stand a much better chance of getting a positive response.” Steve Olejnik, NACFB Board Director, prefers his guidance on the rocks.
“To gain new clients through existing ones, it’s imperative to define client satisfaction and deliver the same service whether for a deal of thousands or millions. Existing clients should be able to tell others what makes you different. Our office is full of reminders of our differentiators for this very reason.”
“In the words of Jerry Maguire: ‘Help me help you’. If we’re given the right information at the right time, we are more likely to be able to give you the right answer. The more information we have, the easier it is to get a decision back to you, quicker.”
Mike Coates, Managing Director at Commercial Expert Ltd, on keeping clients satisfied.
Ric Simmons, Sales Director at Praetura Asset Finance, on your efforts before he ‘shows you the money’.
You are your sourcing software insists Lisa Williams, Managing Director at Keys (UK) Limited. “Staying in contact with your lenders and BDMs is crucial, as is attending specialist lending events. Unlike the residential and vanilla mortgage marketplace there is no sourcing software for commercial lending. Rates and fees are often deal specific and understanding what whets each lenders’ appetite and avoiding contacting every lender with each deal will mean a much quicker and hopefully successful outcome for you and your clients.”
“Research suggests that 27% of landlords plan to remortgage in the next year, that’s a lot of potential new business already on your books.” Liza Campion, Head of Key Accounts at Precise Mortgages, on extracting value from existing clients.
Stay relevant says Alicia Pattihis, Partner at Philip Ross Solicitors.
Don’t waste your lenders’ time, says David Sampson, NACFB Director. “Keep abreast of what lenders will and won’t do, and the probable terms available if they are likely to agree a deal. This might sound obvious, but the next bit may not be – following this ethos allows a broker to send the full deal into one or maybe two lenders at a push. One of the things lenders hate is being aware that a broker is submitting the same application into half a dozen lenders just so they can put six sets of terms in front of their client to choose from – no matter what happens, five of those lenders will have had their precious time wasted.”
“Spend time investing in both yourself and your knowledge; the more you understand about your clients’ business and the industry, the better you can serve them. This will in turn result in repeat business and referrals. The NACFB is great at hosting events to educate and update you as well as network.”
“Never underestimate the power of social media for finding new clients. You have to be up-todate with the likes of LinkedIn, Facebook, Twitter and Instagram by posting content that’s both engaging and interesting. If you don’t understand it – get some training. It’s been vital for us at VIBE.”
“Make sure you understand your client’s financial information. Ask your client for as much information that is proportionate to the deal and then make sure you can present a sound case focussing on serviceability of the finance being requested. Have an enquiring mind so that you can identify and then explain any nuances in the accounts.”
Kim McGinley, Director at VIBE Finance understands the benefits of social.
Graham Toy, Chief Executive of the NACFB, on maintaining an enquiring mind.
“Maintain your dedication to doing a good job and working with integrity on all sides of a transaction. Your dealings with your clients, lenders, and other professionals will cement your reputation and reputation is vital in this market. Rigor and passion in what you do will also put you in good stead.”
“The better brokers really understand the lenders’ appetite as well as the clients’ full background and aspirations, they don’t just concentrate on the deal presented. The broker would present clear and full information upon which a decision can be made.”
Lucy Barrett, Managing Director, Vantage Finance on why your reputation is everything.
“Authorised firms need to be able to evidence adherence to rules and regulation. Think about how you could demonstrate that you are compliant with the rules and guidance, rather than speaking about it. If there is an area of your business which you cannot demonstrate, then consider how you can evidence this.” James Hinch, NACFB Compliance Consultant on the ‘show me, don’t tell me’ philosophy.
Caroline Luxmore, Head of Commercial Mortgages at Aldermore, reiterates the value of knowing your lenders’ scope.
“As a soft asset lender, information that can assist our underwriters at proposal stage include: a debt schedule (so we can better assess service ability) and brief details around guarantor’s net worth and even better – enclose an asset and liability schedule.” Paul Bradbury, Operations Director at Kingsway Asset Finance, on enclosing all pertinent information.
Being open and transparent is the best way forward, says Marc Goldberg, Commercial CEO at Together. “Brokers need to get all the facts, straight from day one and work together with lenders throughout the whole process. They need to challenge clients for the relevant information and tackle any issues head on. A clear picture of the client’s situation will prevent any problems surfacing later on.”
“Ensure you and the client sign the Terms of Business Agreement at the commencement of the relationship. Why? Because it lays out what your expectations are of them and the level of service clients can expect from you. As well as the approximate costs they will incur, details of how they can complain, all your contact details and what their requirements are.” Erica Meredith, NACFB Compliance Consultant, on making your terms clear.
“Want to expand your network fast and for free? Get on LinkedIn. It’s one of the best ways to make introductions, keep in touch with contacts and know what’s going on. Start with 15 minutes every day and you’ll soon see the benefits to your business’ bottom line.” Veronica Cominetto, Partnership Manager at Spotcap UK, on socialising your efforts online.
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Your clients look after the orders. The workflow and forecasts. The customers, suppliers and staff. And together, we take care of their business finance. Boost their business at aldermore.co.uk/businessfinance
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Service to requirements An approach that puts the needs of customers at the centre of what brokers do, will far better meet future challenges Dave Furnival Head of Brokers NatWest
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he idea of putting the customer first has become the cornerstone of success for leading businesses in every part of the economy. The likes of Apple, Dyson and Ikea are known to be more effective in identifying, anticipating and meeting client needs and thereby set themselves apart from their rivals. So what does a ‘client-first’ attitude look like in the commercial finance sector, and why is this kind of approach more important today than it has ever been? Traditionally, brokers have looked at client needs in a very transactional way: they have aimed simply to deliver what their SME customers say they want, whether this is finance to grow a business through an equipment purchase, or funding to acquire a new business entirely. In a narrow, short-term sense, this approach appears to meet the customer’s requirements. But dig a little deeper and potential problems start to emerge – particularly in light of the increasingly strict regulatory climate operating in the UK. Can a broker or lender who does not fully understand the implications of a specific finance solution for an SME customer really be said to be putting that customer first?
With the right mindset, brokers will ask a series of questions when assessing the possible impact a finance package will have on the business. Is it going to generate or absorb cash? What are the client’s fallback positions if something goes wrong, and is there a Plan B or Plan C? And have they considered the customer’s ability to fulfil their side of the transaction? Brokers should not be afraid to challenge any assumptions SME owners make about the impact of any deal on their business, as well as the potential benefits. Consider also the Financial Conduct Authority’s increasing focus on aspects such as customer vulnerability and mental capacity. Health or even the breakdown of a personal relationship were once considered well beyond the remit or purview of a finance broker – but that is no longer the case. At the moment, there is a high-level of liquidity in the market and, in historic terms, it is relatively easy to place debt. But that does not mean it is always appropriate to do so, or in the client’s interests. The suitability of each solution for a particular client also needs to be taken into account. So if a borrower is being recommended to put a depreciating asset on a working capital facility, say, there needs to be a clear justification for choosing this route. If not, is that broker treating their customer fairly? But the focus should not only fall on brokers – lenders also have an important role to play. As regulation becomes more embedded, we will need to work with brokers to ensure, for example, that remuneration structures don’t reward behaviour that could be detrimental to customers – and that brokers have the right skill sets and systems to ensure compliance throughout their businesses. There is no doubt that the regulatory burden on brokers has become particularly onerous in recent times – but this has, at the same time, created an important opportunity. Those businesses that are able to grasp their responsibilities, make the right investments in compliance and have the technology systems needed to meet these stricter requirements will put themselves at a significant competitive advantage.
But be in no doubt: the foundation of this competitive advantage must be the ability to deliver the best long-term outcomes for customers. Here, I am talking about solutions that take into account a comprehensive, honest appraisal of each customer’s strengths and weaknesses – as well as the areas in which the business may need future support. Lenders and brokers need to be able to understand exactly how the solution will give the business the platform to achieve its goals over the long-term. But they also need to be realistic about what the options might be if things go wrong, and today’s forecasts are wrong. By working transparently and in close partnership, you are giving yourself the best chance of meeting your customer’s needs. And remember: their success equals your success. As we enter more uncertain economic times, brokers who are able to genuinely put clients first and develop finance solutions that are fit for purpose – for today and further down the line – will stand a far better chance of becoming sustainable, successful businesses. That’s why now is the time for brokers to invest time and resources into making sure their systems and processes can meet the evolving challenges ahead.
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At the moment, there is a highlevel of liquidity in the market and, in historic terms, it is relatively easy to place debt. But that does not mean it is always appropriate to do so
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Special Feature
Leading a lending revolution Why brokers should use an alternative lender and what to look out for Richard Whitehouse Sales Director The Sancus Group
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lients have high expectations from their brokers when it comes to finding the correct finance and the right lender, balancing speed and agility with reliability and price.
Many brokers now recommend alternative lenders. They tend to be smaller, allowing for faster decision-making, greater flexibility with more sensitivity to the needs of borrowers. The alternative finance market is now estimated to be worth in excess of £6.2 billion. Whilst the sector continues to grow, there have recently been some high-profile failures in the Altfi space, which has shaken confidence in the sector, including Lendy in May of this year and Collateral in June 2018. As a broker, there are a few areas that you should be aware of when choosing an alternative lender.
Funding and capital base How is the platform funded, how broad and reliable are the capital pools? Those that rely on a single pool and lack diversity within the pool will be vulnerable to changes in sentiment or policy. Once Lendy lost the confidence of the crowd, funding loans became almost impossible. Sancus supports three funding sources, its own proprietary capital, institutional investors and co-funders (family offices, HNWI and private clients). As Sancus uses its own capital to underwrite and ‘close’ loans, the client is not exposed to loans being funded slowly or not being funded at all, we very much “put our money where our mouth is”.
Team experience and third-party advisors Alternative lending is relatively new, but lending is not. The experience levels of the team, particularly those involved in
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proposing, making decisions and managing credit within the lender is crucial. Does the platform run a valuation panel? Do they have a full understanding of the asset(s) and location? Do all parties move quickly and, perhaps more importantly, thoroughly together? The lender’s team and their advisors combine to affect the outcome and speed of decision-making. With less bureaucracy and ‘flatter’ decision-making structures alternative lenders have the ability to be ‘fleet of foot’ and move faster than traditional finance providers.
How robust is the lender? Platforms with high default rates and losses should trigger alarm bells to any broker, particularly in the area of property development finance and where drawdowns take place over a period of time. Some of the problems experienced by Lendy’s borrowers were a direct result of projects failing because later drawdown requests could not be honoured by Lendy as their funders were getting nervous. A broker needs the confidence to be able to rely on the speed and reliability of their lender. Standing back and taking a holistic view of the lender goes some way to help prevent problems further down the line.
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Many brokers now recommend alternative lenders. They tend to be smaller, allowing for faster decision making, greater flexibility with more sensitivity to the needs of borrowers
Special Feature
It’s not easy being green More and more businesses across the UK are seeing the benefits of investing in sustainability Tony Geary National Head of Business Development Barclays UK
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ot only is ‘going green’ helping to tackle the threat of climate change, it could enhance a company’s reputation, meet regulatory requirements and deliver commercial advantage. The broker community has a role to play in driving this trend and helping businesses transition successfully to thrive in the low-carbon economy of the future. With daily headlines about climate change, it’s perhaps not surprising that our research found that 45% of Brits say they actively seek out products and services that are environmentally friendly. The same survey found 59% of consumers will pay more for a green product or service, while 44% say they would boycott a business they considered to be bad for the environment. With environmental regulation and the government's pledge to achieve net zero greenhouse gas emissions by 2050, it's clear the pressure is increasing on companies to pursue sustainable policies like switching to renewable energy sources. Investing in green measures now could put businesses on the front foot in meeting these challenges and can help them stand
out from competitors. Delivering customers’ green expectations and complying with regulation are just some of the drivers of sustainability. Our research shows it might also help recruitment, with 70% of employees saying it’s important their employer is considered to be a green business. And, of course, sustainability can have a very real impact on a company’s bottom line through cutting energy costs. As a lender, we estimate that around 60% of our ‘green’ financing is aimed at energy savings.
Farms lead the way Agriculture is perhaps the sector that’s been quickest to embrace sustainability. Many farms produce renewable energy to reduce reliance on the National Grid for their business activities – and sell surplus energy back to it. We’ve lent approximately £200 million to agriculture for renewable energy projects over the past five years, including wind, solar and biofuels. The National Farmers Union says between 35-40% of the sector uses renewable energy.
Small changes can have a big impact
Greener supply chains The green agenda is driving change throughout the supply chain and this is having a big impact on another key industry sector – logistics. In our recently published Logistics Confidence Index survey, more than two thirds of logistics businesses say they’ll be investing in sustainable, environmental or green projects in the next 12 months. Just over 40% of survey respondents say their main motive is commercial rationale. For example, upgrading vehicles so they comply with air pollution rules means they can continue to deliver to the Clean Air Zones being introduced in cities around the UK. This highlights the importance of responding to environmental pressures for all types of companies involved in the supply chain to future-proof their businesses.
How we can help To ensure your clients have access to the finance needed to pursue their green goals, we’ve developed a range of green solutions, including green loans and green asset finance.
Take-up of sustainable measures is nowhere near as high in other sectors. Many SMEs, who don’t have land on which to put a wind turbine or an anaerobic digester, mistakenly think sustainability is less relevant to them.
Clients’ plans are assessed against the Barclays Green Product Framework, developed in partnership with Sustainalytics – a leading global provider of environmental research and ratings. This offers customers valuable reassurance on the sustainable credentials of the investments they’re making.
In fact, SMEs could make significant savings through relatively small changes to lighting, heating, water and waste management. An amazing array of energy-saving technology products is already out there, but companies often simply aren’t aware of them.
But it’s not just about finance – we’re absolutely committed to driving the green agenda forward and to sharing knowledge with brokers about sustainable technologies and the commercial benefits they bring.
Our research also reveals that SMEs are starting to listen to consumer demands, with 22% actively making changes to reduce their carbon footprint and a further 41% looking to make changes within the next year. Almost half of SMEs have improved their recycling facilities and 42% have reduced paper usage. Unsurprisingly, the biggest barrier to undertaking green initiatives is cost. If bank funding is available though, the green initiatives SMEs say they’re most keen on are renewable energy and improving recycling facilities.
So why not start your next conversation with a client by asking them if they’ve considered the advantages of going green? It could make all the difference in helping them reduce costs, staying ahead of new regulation and winning approval from both customers and employees. If you’d like to discuss a client lending case or become one of our approved brokers, contact one of our BDMs. NACFB | 37
Special Feature
An adaptable approach Think asset finance lacks a creative approach? Think again John Jenkins Chief Executive Officer Haydock Finance
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he asset finance industry is seldom thought of as a hot bed of innovation and creativity and, say its critics, continues to rely on tried and tested products and solutions to meet the needs of its customers. Most praise for innovation recently has been directed at online lenders or fintechs – which I sometimes feel unfairly celebrates the means rather than the end. What I have observed, on the contrary over recent months, is considerable creativity by brokers and lenders alike where it really matters – working creatively to solve a client’s problem and deliver an effective solution. I do not suggest for a moment that Haydock is alone in working creatively with its brokers, but the cases I have highlighted are intended to show the sort of challenges that can be overcome with a creative approach. The first example is perhaps the most commonplace – that of supporting a growing asset base whilst not eroding working capital. The answer here is often to explore the current asset base to see if, by rescheduling or refinancing the current pool, sufficient equity can be released to finance the deposit or installation elements of new asset acquisitions. Many established businesses carry long life assets that are fully paid down or have been paid down sufficiently on their original funding facility to have created some equity. We saw this recently with a coach hire business looking to refinance some existing mature agreements to release the deposit for the additional purchase of new coaches. We settled their existing agreements and replaced them at a lower monthly cost over a new term (we can finance coaches up to 15 years old at the end of an agreement). This released the deposit for
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the new coaches that were financed by a tier one lender who, having had the older agreements settled could now accommodate the increased exposure within their policy. An example of close co-operation between the broker, ourselves and the existing lenders to get a good result. In a similar vein, we were approached by one of our brokers to see how we might be able to help his client to buy out a retiring shareholder. Again, the answer lay in looking at the existing asset pool and underlying funding to establish what could comfortably be released by re-financing and re-scheduling existing assets and agreements. The business is a long-established specialist engineering business with a mix of old and nearly new equipment across a number of sites. We worked with the broker and specialist valuers to work out a level of security cover that allowed Haydock to release adequate funding, ensured the business could support the new cash outflow and, importantly didn’t create any significant tax or VAT issues with the most advantageous structure. We then worked with the client’s advisers, existing lenders and their bank, under whose debenture some of the paid down assets sat, to get the deal done. The final example is perhaps a little different. As asset financiers, we have to find the right level of advance at the right sort of price
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Most praise for innovation recently has been directed at online lenders or fintechs – which I sometimes feel unfairly celebrates the means rather than the end
in a particular set of circumstances to make a deal work for all sides. For newer start businesses, or perhaps turnarounds with a good and credible story but not much of a track record, this is often a challenge – especially where the client needs to invest in significant assets to underpin the business. We saw a recent example of this in a start-up business – credible management and good story, but very limited resources and so needing every bit of finance they could afford to invest in their asset base. The ask against the security (new assets) was almost zero deposit and, given the lack of track record was a huge stretch. We worked with our very experienced broker and the customer to put in place a facility using the Enterprise Finance Guarantee
product. This is a government backed insurance policy available to approved lenders designed to help in just these sorts of circumstances. It enables a deal to be done where otherwise the lender may have needed additional security or sought to charge a much higher price for the risk. The scheme provides a top-up insurance to the lender at a modest cost to the borrower and, whilst the process was a bit rigid, the outcome was a workable and affordable deal that met the client’s needs and provided a solution for the broker that might otherwise have been impossible. So, I would challenge those who suggest asset finance lacks creativity. I think when we as lenders and you as brokers put our minds to a challenge, we can be very creative in finding a solution for our clients – and long may that continue.
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NACFB | 39
Industry Insight
Green shoots of optimism Lifting the lid on the UK’s trading context Shiona Davies Director BVA BDRC Seeking to repay
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ur large-scale survey, respected and used by the government, banks and business groups, has been running since 2011 and is based on 18,000 SME interviews each year. It covers the use of, and attitude towards finance, as well as broader contextual matters such as growth, profitability and barriers to business. Our latest SME Finance Monitor was published in mid-September. All the reporting and underlying data is made freely available to anyone via the BVA BDRC website.
•
In H1 2019, 13% of SMEs expected to apply for finance in the coming months but slightly more, 16%, expected to reduce the amount of finance they were using.
•
Most SMEs had been (83%), and expected to be (77%), Happy non-seekers of finance. These are SMEs who might be using finance, but had not applied, or felt the need to apply for any (more).
It would be impossible to cover everything that is in the main report, and I would encourage you to drill down into the detail, but some key themes are summarised below.
•
Half of the 2% of SMEs that had been Would-be seekers (SMEs that wanted to apply but something had stopped them) were put off by the process of borrowing (time, expense and hassle) while, looking forward, the current economic climate remained the main barrier to Future would-be seekers (11% of SMEs).
In short, SMEs are exhibiting a fair amount of caution, but there remain shoots of optimism, in many ways mirroring the uncertain times we live in.
Use of external finance
•
(19%) but not in the third core form of finance, bank loans and commercial mortgages (9%).
In H1 2019, for the first time since 2014, there were more SMEs using finance (46% up from 36% in 2018) than met the definition of a ‘Permanent non borrower’ who is not using, and seems unlikely to use, finance (41% down from 48% in 2018).
• SMEs typically used a form of core finance (39%) with increased use in H1 2019 of flexible finance such as overdrafts (used by 23% of SMEs) and credit cards
40 | NACFB
•
There has not though been much change in attitudes to finance, with SMEs remaining cautious and self-reliant. In H1 2019, 29% of SMEs agreed that they were happy to borrow to help the business grow, down from 32% in 2018 and 45% in 2015.
Trading context • Most SMEs we surveyed were profitable (80% YEQ2), but an increasing proportion said that improving profit margins was a priority (36% in H1 2019).
Applications for finance •
A consistent minority of SMEs reported a need for funding in the previous 12 months (4%) but most of those who had a need took some action, of which six in ten made an application for finance, mostly to the main bank.
•
In H1 2019 there were fewer applications as a result of a need for funding than in 2018 (down from 63% to 55%), with more SMEs self-funding, in whole or in part (up from 13% to 33% of those taking action on a need for funding), a trend we will be monitoring over time.
•
Three quarters of all applications for new or renewed finance (76%) resulted in a facility – success rates were highest for leasing/hp (94% successful) and lowest for bank loans (63%) and also higher for larger SMEs (91% if applicant had 50-249 employees compared to 74% if they had no employees).
•
Eight in ten applications were thought to have been handled satisfactorily, but amongst those declined (18% overall) a third have not been able to expand as they wanted, and a similar proportion have found running their business more of a struggle.
•
Slightly fewer SMEs reported growth in the past 12 months (36% H1 2019) with one in five SMEs reporting a decline, but there was an increase in SMEs expecting future growth (to 50% H1 2019). It is usual for more SMEs to be planning to grow than to have actually grown, but this gap is slightly wider than has been seen more recently.
•
Four in ten SMEs saw one or more of political uncertainty, the economic climate and/or legislation and red tape as a barrier to future business with all three having increased as barriers since 2016.
•
Levels of international trade were stable, but those trading overseas were more concerned about political uncertainty. They were also somewhat more cautious about growth and future appetite for finance. Those employing overseas staff have become more concerned about changes to migration rules.
NACFB | 41
Industry Insight
Less cash, not cash-less The future of money – tackling counterfeits and the new £20 note Sarah John Chief Cashier Bank of England
A
s chief cashier, I know first-hand that people really do care about their banknotes – with an average of almost four billion banknotes, worth about £75 billion, in circulation at any one time, cash touches people’s lives on a daily basis. However, people are using banknotes less frequently to purchase goods and services. Cashless technology, digital currencies and other payment evolutions are rapidly changing how we use and perceive money. Cash is now only the second most frequently used payment method – behind debit cards, whose growth has been supported by the popularity of contactless payments. According to UK Finance, in 2018 cash was used to make 28% of all transactions, down from 60% in 2008. And 5.4 million consumers now almost never use cash at all. But even so, it is unlikely that cash usage will decline to zero in the foreseeable future. For many, using cash is not only a choice but a necessity. There are an estimated 1.3 million people in the UK that do not have a bank account and an estimated 1.9 million people that rely almost exclusively on cash for their everyday spending. For others, it is a choice. The physicality of cash can be very important. With cash, you can hold it and feel it, you can count it, and when it’s gone, it’s gone, which helps many people feel in control of their money. So, even though people are likely to continue to shift towards digital payments, I think cash is likely to remain an important part of the payments landscape for some time. We’re probably looking at a future that uses less cash, but it is not completely cash-less. 42 | NACFB
The Bank remains committed to meeting public demand for cash. Our job is not about promoting one payment method over another but to fulfil the Bank’s role in maintaining confidence in the currency. Within this we seek to ensure choice and diversity in payments in a way that maintains the stability of our financial system and meets demand from the public in an efficient and effective way – both by facilitating electronic payments and issuing high quality physical banknotes. I’m very excited about the forthcoming polymer £20 note – not least because it will be the first note to have my signature on it. We’re printing over one billion of these notes, which will feature the artist JMW Turner, ready for launch early next year. This note follows the change to polymer of the £5 and £10 notes, and it will be followed by the issuance of a new polymer £50 note featuring Alan Turing, which we expect to be in circulation by the end of 2021. Not only is the current paper £20 note the most commonly used note, it is also currently the most counterfeited. The new polymer £20 note will be more secure, which will benefit everyone. This also includes retailers and cash-handling businesses who are on the front line and carry the cost of any fake notes that they accept as payment.
“
Our job is not about promoting one payment method over another but to fulfil the Bank’s role in maintaining confidence in the currency
Although counterfeit banknotes are very rare, it is important to remain vigilant. With that in mind our free Banknote Checking Scheme helps businesses promote banknote checking through targeted training. The aim is to reduce the number of counterfeit notes being accepted and prevent counterfeits being a cost to businesses, their customers or their reputations. The scheme has proved to be highly popular, with more than 150 supporters
representing more than 10,000 stores across the UK. We’re always on the lookout for more businesses to sign up to the Banknote Checking Scheme, so if you know of any organisations that might be interested or have friends and family in cash-handling businesses, please encourage them to join for free at our Banknote Checking Scheme portal.
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NACFB | 43
Industry Insight
The relationship triangle Building stronger personal ties with clients is the key to SME growth Edward Rimmer Chief Operating Officer 1pm
T
here is no doubt that the world today is an uncertain one, both from a political and economic standpoint. Recent figures suggest that the UK is sliding into recession causing a lack of confidence which is damaging to future prospects. I believe that financial advisors and funders have a key role to play in encouraging confidence and growth across the UK’s SME population. The current climate has left many SMEs cautious to invest and instead focussing on building up cash reserves. The recent BVA BDRC SME Finance Monitor found that 80% of SMEs have become increasingly self-reliant and concerned about the uncertain future with business plans developed based only on what they can afford. In fact, only one third of SMEs are happy to use external finance. For those not using external finance, are they missing out on opportunities to grow and help build the UK economy? We all know that businesses who look for external finance do so because they want to boost their working capital to support cashflow, invest in new plant and machinery or fund expansion plans. The use of external funding has remained static in recent years with 36% of SMEs using some form of finance. Not surprisingly, the larger the firm the more likely they are to gear up and use external finance to support growth. The type of finance used remains familiar with 32% using either loans, overdrafts or credit cards and 12% using Leasing or Hire Purchase. As brokers and funders, we operate in a fast-paced environment, responding to our clients’ needs as they arise ensuring they have the support they require when looking to grow their businesses. Representing 99% of the UK’s business population, SME’s are vital 44 | NACFB
in the generation of jobs and wealth within our economy. Without an effective source of finance, these businesses could be held back. So how do we encourage our clients and inspire greater levels of confidence that help them push forward with growth plans? Fast access to finance is crucial and we can see examples of how the increasing use of technology can deliver fast decisions on funding proposals. Quick decisions are important and technology can deliver this, but will it deliver the trust and confidence that businesses need to grow their businesses? A global study of financial services by Accenture revealed that businesses and consumers alike, increasingly want fully personalised offerings and integration between physical and digital channels offering a seamless service. This is why I believe that collectively advisors and funders have a crucial role to play in developing stronger and more personal relationships with our clients to fuel their business growth. Advisors and funders invest their time getting to know their clients and their businesses: what they do, what markets they operate in, seasonal changes, challenges they face, and their aspirations for future growth. In doing so it enables us to personalise the funding package ensuring it is right for them and is flexible enough to support their ongoing growth. By working closely with our
“
The use of external funding has remained static in recent years with 36% of SMEs using some form of finance
clients we can identify times when they may experience cashflow shortages to aid preparation and ensure continued financial health. A crucial part of the relationship triangle is the funder and the advisor working together to ensure they understand the finance solutions available and in what situation they prove most beneficial. For example, if a firm is suffering cashflow shortages to pay suppliers then invoice finance is a great solution. If the requirement is to invest in vital equipment to support business growth then asset finance may be the answer. Businesses today expect their advisors to have the answers and the knowledge of what financial solutions are on offer and which one may be more relevant. Getting the balance between developing strong and open personal
relationships and integrating technology to support businesses is the key that is needed by brokers and funders to unlock continued success for UK businesses. At 1pm, we put clients at the heart of everything we do. It’s why we build strong relationships with advisors and invest in offering a comprehensive suite of funding solutions to meet every requirement from business and property loans, invoice finance, asset finance and vehicle finance. The ability to offer our clients a single funding solution or a packaged solution which meets their needs is what drives us. Working with advisors and getting to know the client is what makes the difference when delivering a finance solution which in turn inspires confidence.
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NACFB | 45
Broker Voice
Entering tomorrow’s world Modern finance brokers must embrace change to thrive
Paul Goodman Chair NACFB
what an algorithm can’t – meet with a client, really understand the company and its funding requirements, and tailor the best deal for today, tomorrow and the future.
T
Maintaining high standards
While it’s important that commercial finance brokers keep up with these day-to-day changes, there are some fundamental shifts taking place in our industry that are even more important – namely, digitisation, regulation and, as a result, our responsibilities to our clients.
In response to the regulation, the NACFB put together model office templates advising brokers on areas such as sales procedures, risk, data protection and compliance plans, and those that have adopted the models will have seen a significant improvement in the way their business runs, with benefits passed on to the SMEs they work with.
he economic environment has been fast-changing over the last couple of years, with political upheaval and Brexit-related uncertainty having an impact on commercial decision-making across the UK. I expect similar uncertainty will last well into 2020 as the Brexit fall-out continues, with all the challenges and opportunities it brings for business.
Digitisation – threat or opportunity? With its offer of access to information and online services, the digital world is growing ever stronger in influence. We are seeing increasing numbers of digital players emerging, with online, algorithm-based lending platforms disrupting what was previously an analogue space – and those brokers who don’t keep up with the digital revolution risk falling behind. Digitisation is rife in the world we work in, where SMEs are doing more business online and becoming increasingly savvy about our market thanks to the emergence of the digital disruptors. However, digitisation doesn’t have to represent a threat. It’s also a facilitator that all brokers should be investing in to deliver the best possible service through more efficient systems and processes. We don’t all need to be developing our own algorithms – far from it – but we do need to go digital as much as we can, to reduce any barriers to working with our clients. For example, digitisation will facilitate a better flow of paperwork through digital documents and signatures and utilising open banking to access bank records without needing printed copies will significantly ease the admin burden on clients when arranging a deal. The modern finance broker needs to stand with a foot in both worlds – offer the benefits of modern working practices by embracing digital technology while at the same time continuing to deliver the traditional added value that can only be gained from a personal relationship with a client. Every business and its needs are different, and brokers can do
Digitisation is also a facilitator for keeping up with the requirements of our new regulatory framework. ‘Regulation Day’ in 2014 was a turning point for the modern finance broker, and those that have embraced regulation will probably admit that they are leaner and meaner today than they have ever been.
Brokers need to stay ahead of the pace of change in regulation and being a Member of a forward gazing trade association like the NACFB is vital for brokers to address the changes before they hit. For example, we are currently supporting Members as needed with the new senior management regulation which will be coming into place early next year (with the deadline for applications in December this year).
Our responsibilities to clients The relationship between broker and client is becoming ever more important. Coming out of the last recession we saw a surge in new funders, making it very easy for SMEs to get funding, just not necessarily the right funding. Over the last year I’ve personally supported an increasing number of SMEs who have sadly come to us too late in the cycle, when they have already received short-term finance, and it’s difficult to now arrange the best long-term, sustainable solution. Brokers are in an ideal position to save businesses’ time, money and stress, and it’s important that we help our clients navigate what is now a complicated lending landscape. After all, why should SMEs spend hours researching funders – around 500 at any time in the UK – and thinking about the best form of finance for them, when they could simply hold a face-to-face meeting with a trusted broker to do the heavy lifting and source and arrange the right deal for them? There will always be a need for an NACFB advisor in the SME’s kit bag – alongside a lawyer and an accountant. Such services will remain of utmost importance and the remit of commercial finance brokers will be to form part of a ring of valued professionals orbiting UK enterprises.
NACFB | 47
Opinion
Regaining momentum Analysing the impact of Personal Guarantee Insurance in 2019 Todd Davison Director Purbeck Insurance
W
ith the uncertainties of Brexit still looming over the UK’s small businesses, it appears that some firms are holding off substantial investment until the picture becomes clearer. Lending to SMEs shrank from £700 million in 2017 to £500 million last year, according to a report from the British Business Bank. The picture isn’t likely to improve any time soon, with more than a third of small businesses expecting Brexit to make it more difficult to access finance. For finance facilitators, then, the challenge is two-fold: to provide a risk-mitigating solution, encouraging small businesses to invest for growth in this uncertain economic climate, while improving the security of the lender’s lending book. Personal Guarantee Insurance can do both. By covering the borrower’s risk in the event of a Personal Guarantee being called in, insurance guarantees lenders that a percentage (up to 80%) of their loan is repaid to them.
SMEs play it ‘safe’ As a condition of raising business finance, directors are increasingly being asked to sign a Personal Guarantee. But the prospect of putting their personal assets on the line could see directors defer making any big investment decisions for at least 12 months. While not all directors are overly concerned about the shape of the economy – four in ten SMEs don’t think that Brexit will affect them in the slightest – they might still be inclined to play it ‘safe’ and use 48 | NACFB
any cash reserves to fund growth, rather than seek external finance and put their personal estates at risk. Somewhat ironically, if all SMEs were to refrain from heavy investment, it could be counterproductive for the economy – but businesses can rarely afford to think as a collective. Representing over 99% of UK businesses, SMEs provide 60% of private sector jobs and account for almost 50% of all private sector turnover. Our SMEs drive up growth and provide high-skilled jobs across the country, and together they form the cornerstone of a vibrant, twenty-first century economy. When they stagnate, so too does the economy. Britain’s economy looks set for its weakest growth in ten years in 2019, according to Bank of England projections.
Could PGI help drive the economy? Personal Guarantee Insurance provides business directors with cover if, following insolvency of their business, the lender calls on their Personal Guarantee. Knowing that they’re protected in the event that things don’t play out as planned, directors might be more inclined to sign a Personal Guarantee in order to fund the growth of their business. Available against a wide range of business loans (both secured and unsecured), Personal Guarantee Insurance could feasibly play a part in helping the UK economy regain some momentum. After all, the more money UK SMEs are generating, the stronger the economy. Instead of SMEs playing it safe – which could prove costly for them if it results in missed opportunities, competitors gaining an upper hand, and becoming over dependent on a small customer base – Personal Guarantee Insurance moderates their risk so that they can make their move now and invest for growth.
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Opinion
Untethering tech assets Businesses are taking a different approach to funding critical kit Kevin Flowerday Head of Technology Finance Shawbrook Bank
T
echnology has come a long way. Businesses can no longer simply invest in office desktops, install applications and expect this set up to last for years. Instead, they are faced with constant updates and the need to subscribe to new applications that promise improved customer service and client communications. As a result, many businesses today view technology as an operating cost, rather than a capital expense, and they need their vendor partners or bankers to offer payment terms and profiles to suit.
Challenges in the cloud Possibly most obvious are the funding challenges following the move in recent years toward cloud-based environments, both for businesses using these facilities and for technology providers who had to rapidly evolve from on-site installations to cloud-based solutions. For technology providers this has meant substantial spend on additional software development, as they moved from charging a large one-off fee for a new server or a perpetual software license to billing for monthly subscriptions. For cloud users, the issue is two-fold. Firstly, new subscription models are often highly complex and internal processes need 50 | NACFB
to change as technology is no longer treated as capex; and secondly, how does one find an asset finance solution for something that is not physically located on your own business premises? With this in mind, we support clients who establish their servers offsite, both within the UK and across the globe. We realise the world is now a more connected place with traditional views of assets located at customer premises no longer an option.
The tech budget of today Hardware was the budget breaker a dozen or so years back and customised on-site software applications became the focus five years ago. Today we’re investing in storage, access, mobile technology, security software and cloud-based applications that deliver innovation and efficiency. Unsurprisingly, tech firms have seen a decline in desktops and other traditional hardware, whilst the high-end infrastructure market of servers and switches remains strong as cloud technology needs industrial-level support to ensure scale, speed and reliability.
Finance to support technology investment Cash is fundamental for any business looking to evolve and grow. If your client’s return on equity is greater than the interest rate charged on a finance agreement, then it makes sense to utilise debt facilities to purchase business critical assets – thus freeing up cash to work harder elsewhere. The crucial point is to take
“
Unsurprisingly, tech firms have seen a decline in desktops and other traditional hardware, whilst the high-end infrastructure market of servers and switches remains strong as cloud technology needs industrial-level support to ensure scale, speed and reliability
on an appropriate level of debt whilst maintaining headroom to ensure flexibility when required. This is something all lenders should help their clients to evaluate and manage. Funding depends on the investment your client has undertaken that financial year, other key reporting financial drivers for that business and the flexibility needed for hardware upgrades and variations in license usage etc. Understanding the implications each funding option has on a client’s business is critical. One should always ensure the term of any finance agreement doesn’t exceed the working life of the equipment; always know what happens at the end of the finance agreement; and the arrangement needs to allow for your client to capitalise on new technology. Our solutions enable the development of future products by helping clients invest in the intangible costs required for the integration of new technology. We know that not all transactions have equal splits of tangible and intangible elements and our funding is designed to accommodate this.
Funding to cater for most assets and terms Almost any piece of technology can be funded if it’s intrinsically critical to the business, whether hardware, software or related ancillary services. These could range from annual maintenance packages to hosted software license agreements, third-party data storage to e-commerce trading tools.
Specialists take the time to understand what benefits the technology brings to the business, and how these translate to business improvement, before proposing a facility accordingly. Funding ranges typically from £5,000 to update MS Office environments to multi-million-pound enterprise resource planning (ERP) transactions delivered over an 18-month period.
Understanding the payment structure and costs Payment options vary depending on the software product and license agreement. If funding an off-the-shelf product (MS Office, anti-virus software, basic accountancy packages) you will be charged a one-off payment up-front for continued use or for a predefined period, or you’ll be charged on a monthly basis until you cancel. For bespoke off-the-shelf products, software vendors normally consult with their clients to customise products and provide personalised systems. These purchases can have complex charging structures with up-front customisation and bulk license costs, annual support costs and ongoing license fees. Specialists typically take the complexity out of the payment structure by managing the supplier payments and providing a simple monthly payment option. Whether the technology revolves around funding systems, media equipment or telecommunications, our team will work closely with the broker, introducer and client to understand and fully support the TMT set-up required. Each new relationship is born from discovering the art of the possible and every solution is crafted to suit the client’s individual requirements. NACFB | 51
Listicle
Deal or no deal? Our five tips for gaining credit approval Richard Baker Head of Broker Sales Wesleyan Bank
W
hen applying for business financing on behalf of your customers, the experience can sometimes be a frustrating one for both brokers and lenders alike due to misunderstandings and seemingly endless requests for further information.
decision. Ensure you include their last full accounts and any management accounts, along with the last three months of the business’s bank statements. In addition, it is recommended to include the customer’s financial forecasts, balance sheet projections, any business plans and company structure charts. It’s important to mention if your client’s turnover and profitability are impacted by any specific trends, for example higher production and staff costs or seasonal cash flow sensitivities.
Although the credit approval process has been simplified and streamlined by technology, it still relies heavily on human interaction and cultivating relationships with underwriters. This article will offer five top tips as to how brokers can accelerate loan approvals and gain the right outcome for their clients.
2. Provide clear and concise financial information The financial performance of your client forms a significant part of the underwriting 52 | NACFB
One of the most common reasons finance applications can be delayed, is due to a lack of detailed descriptions of the assets. Merely stating ‘IT software and hardware’ or ‘printing presses’ is insufficient. Be specific by stating whether it’s new or used, the make, model, year of manufacture and list any serial numbers. Where possible, include quotes from suppliers and copies of original invoices. The more knowledge a broker can supply to help the credit team make a decision, the more likely your client will get a favourable outcome.
5. Nurture your relationships
1. Don’t forget the basics It’s surprising how many brokers fail to provide basic information about their customer from the outset when submitting a proposal. Remember, lenders won’t know your clients as well as you do and therefore can’t assess an application without some key financial and non-financial details. These should include, but not be limited to, a summary of the customer by outlining when the business was established, where it is based, what it does and its strengths and weaknesses within the sectors it operates in.
4. Include detailed descriptions
3. Are there any skeletons in the cupboard? Applications that fail to provide accurate financial information will be rejected which results in a waste of time for everyone concerned. If your client has any skeletons in their cupboard, whether this relates to defaulted payments or past financial vulnerabilities, don’t attempt to hide them from prospective lenders, as invariably they will show up and your entire application will be undermined. Honesty, really is the best policy, so be sure to present any issues upfront so you can find the right lender who is willing to be flexible and consider a bespoke funding solution.
Brokers play a vital role in securing flexible funding solutions from alternative finance sources, at a time when some traditional high street banks are risk averse. But for this model to be successful, it requires a mutual understanding and trust, between brokers and their finance partners. Providing essential information upfront and offering transparency at all times, makes it easier for lenders and reassures them, that your request for finance is worthy of serious consideration.
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Five Minutes With
ive F Minutes with: Jeremy Crinall Jeremy Crinall Head of Broker Funding Circle UK Describe your role in ten words or less? Growing and developing Funding Circle’s award-winning broker team.
In your view what are the key elements to a successful deal? In my view, communication between the introducer and lending platform has to be consistent and transparent. It is really important to understand what the customer wants/needs and provide them with fast decisions.
If you were to start your own small business, what would it sell? I would have an ice cream parlour, ‘Crinall’s Cones’. Ice cream gets me in the good books with my children, so it’s a winner for me.
What professional accomplishment are you most proud of? I am most proud of the successes of the people in my team that I have coached and supported. It’s amazing to see them develop on their career journeys. That’s what I really love about my job, helping my team develop themselves. 54 | NACFB
What is your favourite piece of management/leadership advice?
What is the best live music experience you’ve ever had?
You miss 100% of the shots you don’t take.
Which person has inspired you the most?
Best live music experience is an evening of karaoke with our Business Development team. I’ll admit that not all of us had the most amazing voices, but I have great memories of that night.
Hulk Hogan, he represents continuing to try and work hard in the face of adversity, with the best intentions and believing in his purpose.
If you could have dinner with anyone from history, who would it be and why?
What was the last great book you read? As a football fan, I have read a lot of football autobiographies. Some modern day footballers have written great books but the best for me was definitely Sir Alex Ferguson’s.
Where is your favourite place in the world? Outside of Funding Circle’s offices of course, my favourite place is definitely at home with my wife, children and beloved dog.
There have been loads of great leaders and pioneers in history but it would probably have to be Neil Armstrong.
What was the last show you binge-watched? Peaky Blinders.
If there was an Olympics for everyday activities, what activity would you have a good chance at winning a medal in? Making a great cup of tea.
SPECIALIST LENDING SOLUTIONS BUY TO LET MORTGAGES
Buy to Let Mortgages for complex cases Here at Precise Mortgages we’re proud to help landlords with complex lending needs as well as those who have been underserved by high street lenders. Whatever their circumstances we have a broad range of specialist lending solutions. Liza Campion, Head of Key Accounts
ÂŁ Refurbishment Buy to Let Maximise rental yield and increase capital growth
Top slicing Top slicing available where ICR meets 110% calculated at pay rate on 2 and 5 year fixed rates
Portfolio landlords A dedicated team to do the heavy lifting for you
Speed of service Instant DIP decisions
HMOs and Limited Companies
Range of calculators Easy to use buy to let and portfolio calculators
YEARS
5
Get in touch
Multi-units and Holiday Lets
5 year Fixed rates Affordability assessed at pay rate
Contact your local BDM 0800 116 4385 precisemortgages.co.uk
FOR INTERMEDIARY USE ONLY.
Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549). Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.
We understand
United Trust Bank understands that you are looking to work with an approachable, adaptable and dependable finance partner who will look for reasons to say ‘yes’ to your proposals. That's why our book stays open.
Tel: 020 7190 5555 Email: info@utbank.co.uk www.utbank.co.uk we understand specialist banking