Commercial Broker (NACFB Magazine) October 2020

Issue 83 OCTOBER 2020

Broker COMMERCIAL

The award-winning magazine for the National Association of Commercial Finance Brokers

18 FIT AND PROPER REPRESENTATION Analysing the dynamic between ARs and their principal

30 WEIGHING UP OPPORTUNITY COVID’s potential impact on lenders’ appetite and reach

50 lessons from lockdown How we coped and what we learned

42 THE SKY CAN’T BE THE LIMIT Why intervention is needed to slow spiralling PII

46 STRIKING THE RIGHT MATCH The challenges of establishing your brokerage in a crisis

Contents

In this October issue NACFB News

Special Features

4 6 8

10-11 12-14

Note from Norman Chambers Updates from the Association Note from headline sponsor, Lloyds Bank Industry news round-up Patron news

20-21 23-28

30-32

34-35

36

38

Avamore Capital: Let’s get creative NACFB: 50 lessons from lockdown FRP Advisory: Weighing up opportunity Merchant Money: A deeper understanding Market Financial Solutions: Extending your reach Esme Loans: An allied recovery

Industry Insight 40-41

Ultimate Finance: Candle in the dark 42-43 Association of Mortgage Intermediaries: Sky’s the limit?

44 MarketFinance: Elephant

in the room

Opinion & Commentary 46-47

48-49

16

50-51 52 54

Matchbox Finance: Striking a match Commercial Sense Limited: From the frontline Barclays UK: Talking real estate Listicle: Autumn’s Virtual Expo Five minutes with: Tony Smedley, Head of SME Business Development, Channel Capital

Patron Profile 16-17

18-19 NACFB: The right representation

Further Information KIERAN JONES Editor & Feature Writer

33 Eastcheap | London | EC3M 1DT Kieran.Jones@nacfb.org.uk LAURA MILLS Graphic Designer

33 Eastcheap | London | EC3M 1DT Laura.Mills@nacfb.org.uk MAGAZINE ADVERTISING T 02071 010359

Reward Finance Group: Common sense

Compliance

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NACFB | 3

Welcome

Norman’s Note

W

hat will the UK look like in 2030? We have lived through decades of upheaval in the last five years alone, and at this relentless pace, few things will be certain. Perhaps we will have just come through yet another ‘once in a generation’ global crisis. Humanity may by then have made vast medical advances or slowed global warming. England's football team may even have lifted silverware – the future really is that uncertain.

Norman Chambers Managing Director | NACFB

I do feel confident in making a few predictions though. UK entrepreneurs will still be finding their way. Small businesses will continue to bloom, new talent and new ideas will persist and flourish, and new opportunities will present themselves. If I had a penny for every time someone has said technology will replace the broker within the decade, I wouldn’t be sat here writing this.

But I can also confidently predict that by 2030, the need for a personal trusted advisor may even be greater than it is today.

For now, at least, 2030 remains a long way away. We thought it best to use this issue of Commercial Broker as a form of time capsule to collate and share the insights, experiences, and lessons from our proud community. Within this issue you’ll find 50 unique perceptions of how life under lockdown has been for commercial finance professionals. The lessons range from the professional – and ways of adapting – to the more personal achievements and, at times, the struggles.

Reading through the shared insights has though filled me with optimism. A lot has been thrown at us all, and more may yet come, but I mean it quite sincerely when I say that we will ride this wave together. Together we shall embrace our position as trusted advisors. Together we shall continue to operate as part of the largest community of finance intermediaries. And together, we shall remain bound by a common duty, that of Moving Britain Forward.

4 | NACFB

Not the end, nor the beginning of the end.

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NACFB News

Association updates for October 2020

NACFB news NACFB announces departure of CEO, Graham Toy

NACFB announces subscription freeze ahead of virtual AGM

In response to the COVID-19 pandemic, the NACFB is redesigning its operating model; to ensure longevity and to maintain its position as the professional Association of choice for all Members and Patrons.

The NACFB’s first-ever fully virtual AGM will be held from 14.00 on Thursday 19th November. The Association is proposing eight resolutions to be voted on at this year’s AGM, including a freezing of all subscriptions for Members and Patrons for 2021.

Part of this redesign has involved reviewing the structure of the head office team to ensure the NACFB can deliver future goals. These are always painful decisions – even more so in the current climate – and reluctantly the Association is saying goodbye to its CEO, Graham Toy. In a statement to the membership, NACFB Chair Paul Goodman, shared: “Whilst we are delighted that we continue to benefit from strong support from Members and Patrons, the NACFB needs to plan for potentially harsher times and be in a strong position to deal with both the complexity and unknowns we all may face.

“There is no doubt that the Association has benefitted greatly from Graham's experience, insight, and leadership which has been evidenced by the significant strides the trade body has made since he joined. The NACFB family wish him well with his future career in the industry.”

6 | NACFB

This follows a four-month fee moratorium from April to August of this year, which saved each firm a minimum of £240 throughout the lockdown period.

A further proposed resolution will seek to extend the tenure of the Association’s Chair, Paul Goodman. The NACFB’s Board of Directors have outlined their desire to ensure continuity and stable leadership as the trade body navigates the choppy waters of COVID recovery.

All full NACFB Members will have three ways to participate in this year’s AGM. Members are invited to engage via live webinar on the day, with a postal or email proxy form, or through a simple online voting mechanism.

For more details on how to have your say, register to attend the virtual meeting, and cast your vote visit nacfb.org/2020AGM

Note from our Sponsor

Be the trusted advisor As we enter the recovery phase

Andy Bishop UK Director, Commercial Broker Development Lloyds Banking Group

I

t feels strange that our ‘new normal’ has already lasted seven months. Looking back it has been inspiring to see how brokers have adapted just as all businesses have had to adapt and equally it is pleasing to see market activity rebound over the summer months with commercial broker activity at Lloyds Bank back to (if not above) pre-COVID levels.

Looking ahead there remain many uncertainties. We know that the government support schemes have a shelf life, and some may have ended by the time you read this article. We know that many businesses that froze their capital repayments will need to unwind those arrangements. We know that vast swathes of businesses have benefitted from a shot in the arm from help, such as furlough or VAT deferral, again all of which will come to an end. At the same time, the external landscape is constantly changing with localised lockdowns and changes to quarantine rules. All these moving parts only increase the difficulty for businesses not only trying to open and get back up and running but also for some to expand, further diversify and invest.

This is where commercial brokers have a key role to play – you are the trusted advisor for your clients and can help them navigate both the challenges and opportunities that lie ahead – whether that be refinancing, restructuring, increasing working capital, purchasing assets or indeed expanding into new areas and markets.

In addition to the support that brokers already provide there are an 8 | NACFB

additional four areas of learning to think about and for businesses to consider when planning and looking for additional or new funding: • Assessing the resilience of the business and its operations to all sorts of shocks; • Thinking about ways in which you can drive productivity through all parts of your business operations; • Reflecting on what opportunities the digital economy represents for your business model, distribution and revenue generation; and • How we all use this phase to accelerate businesses’ sustainability efforts as we transition to a low carbon economy, focussing on building back greener.

So, as we enter the autumn I believe the opportunity for commercial brokers over the coming year will increase as businesses start to plan ahead – as we move into the recovery phase, businesses will be looking to their brokers to provide guidance and reassurance, to be their trusted advisor and to create sustainable financial structures for the long term which enable and ensure there is financial capacity to recover and continue to grow.

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Industry News

Industry News 1. Chancellor unveils Winter Economy Plan Chancellor Rishi Sunak has announced new measures to support the economy following the implementation of further COVID-19 restrictions. The ‘Winter Economy Plan’ replaces the planned Autumn Budget, which has now been delayed until next year. The measures include an extension of the government-backed schemes, a new Jobs Support Scheme to replace the existing furlough scheme, further options to defer their VAT payments, and delays to changes to the Corporate Insolvency and Governance Act.

2 2. Court rules on insurers over COVID business interruption claims Business owners forced to close their doors amid the coronavirus lockdown have been told their insurance claims must be paid following a High Court judgment.

The FCA brought a test case in front of the High Court earlier this year after insurers rejected business interruption insurance claims – even where lost earnings due to a pandemic appeared to be covered in policy wordings. Last month, the Court ruled on a representative sample of policy wordings.

10 | NACFB

5. MP to review competition laws

3 3. Pandemic saw 60% of SMEs change the way they operate Santander research shows that 57% of SMEs adapted and changed the way they do business as a result of COVID-19.

The poll of 2,050 senior leaders in UK SMEs shows that 18% rolled out alternative operating hours, 14% moved their business online and 13% changed products or services. On the speed with which smaller firms adapted to the pandemic and lockdown, it was found that over seven in ten of those who actioned changes did so before the end of March.

4. Landlords call for end of eviction ban Commercial landlords have called on the government to drop a ban on evictions so they can serve notice on retailers who fail to pay their rent. Vivienne King, chief executive of real estate lobby group Revo, has asked Suella Braverman, the Attorney General, to prevent the freeze on evictions from being extended. King said: “While we recognise the moratoria were imposed as an emergency measure, that emergency must now be treated as having passed with the requirement coming to an end.”

MP John Penrose has been appointed to lead a review of Britain’s competition laws, with the former minister understood to have been asked to draw up proposals on the matter in time for the Autumn Budget.

Chancellor Mr Sunak, who ordered the review along with Business Secretary Alok Sharma, has said he wants to “turbo-charge our competition policy to make sure it is fit, especially for the digital age”.

6. Small businesses face local lockdown hit Business groups have warned of the impact local coronavirus lockdowns could have on small firms, with British Chambers of Commerce director-general Adam Marshall saying that as local restrictions are likely to become more frequent, “a comprehensive package of support will be needed for affected firms”. Ministers have announced that smaller firms with a rates valuation, annual rent or mortgage bill below £51,000 that are forced to shut amid a lockdown would be eligible for £1,000 every three weeks.

7. Jobless total could pass three million Economists have warned that new restrictions to halt the spread of coronavirus could push unemployment above three million by the end of the year, estimating that the jobless total could rise above the 3.28 million recorded in 1984. Economic Perspectives estimates the jobless total could reach 11%, or 3.75 million people, while Professor Trevor Williams, a former chief economist with Lloyds Bank Commercial Banking, says unemployment could hit 13%. The Bank of England last month predicted unemployment could reach 7.5% by the end of 2020.

9. TheCityUK: UK firms swimming in £70bn of debt

8 8. Shopper numbers slip Market research firm Springboard has revealed that shopper numbers across UK retail destinations were down 6.3% last month compared with the month before, with the first month-on-month decline since April. Footfall across UK high streets declined 5.4% and by 5.2% at retail parks.

While regional cities saw a 7.9% fall in footfall, the decline in central London was just 3%. Springboard said a dip in the month when the school year starts is common, but the scale is greater this year.

The annual decline in shopper numbers stood at 27.5% last month, compared with a 25% dip recorded in August.

UK firms have racked up £70 billion worth of debt, according to a new report from TheCityUK, with more than £20 billion of that coming from government-backed COVID loan schemes. The figure is down on the previous estimation of £102 billion, partially due to government stimulus packages introduced this year, the industry group said. Its research also revealed that nearly 40% of businesses will encounter difficulties in repaying their loans, up from the previous figure of 30%.

9

10 10. FCA told to delay changes to its complaints scheme The Financial Conduct Authority is being urged to extend a consultation that proposes a cap on compensation from its complaints process, with MPs concerned the timetable for completing it is unnecessarily short. The consultation on a cap of £10,000 for most compensation for losses in cases where the regulator’s actions or oversights were the “sole or primary cause of the loss” was being rushed, Mel Stride, chair of the Treasury committee, said.

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Patron News

Patron News SMEs showing resilience despite losing 30% of income

Allica: Staff training ‘crucial’ for post-COVID SME recovery

New research from Aldermore revealed that the pandemic has caused a 30% loss in monthly business income, a small improvement from 34% in April for the average SME.

A study commissioned by Allica Bank has revealed that the practice of regular training correlates strongly with high performance in SMEs and will be vital to businesses’ prospects of a swift recovery post-COVID.

Nearly one in five (18%) small businesses have seen a decrease of more than 70% of their business income. To ensure their survival, many businesses are proactively taking steps to protect their business.

Two in five (38%) SMEs have adjusted their business plans due to the pandemic as they anticipate future issues such as a fall in revenue (38%), another period of lockdown (32%) and an ongoing period of economic downturn (30%).

The study analysed data from over 1,000 companies and ranked their success on a scale that evaluated factors including productivity, growth, consistency, and outlook. The NACFB Patron’s study showed that routine staff training is a common characteristic among the most successful SMEs.

The NACFB Patron has created a dedicated campaign hub on its website which features inspiring case studies of small businesses and brokers from across the UK. Tim Boag, group managing director, business finance at the NACFB Patron, said: “We’ve launched our ‘Small But Mighty’ business campaign to share real stories and experiences of SMEs who are tackling the challenges of COVID-19, as well as providing businesses with special guides that offer tips on a range of measures such as how to reduce costs, ways to adapt their business, or find suitable funding opportunities in these uncertain times.”

12 | NACFB

47% of the 100 highest scorers on the SME Performance Index provided training for employees at least on a quarterly basis. However, nearly half of all small businesses (46%) only provide training once a year or less, inadvertently hindering their growth and success prospects. Frequency of training also differed across sectors. 34% of legal businesses provide training for staff once a month compared to just 6% in the hospitality and leisure sector.

Chris Weller, chief commercial officer, Allica Bank, said: “The provision of regular training not only builds these characteristics into teams but serves to maintain a sense of value and togetherness that will boost morale, aide retention and improve performance – all of which contribute to the ongoing success of a business.”

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Patron News

Patron News Martine Catton joins Just Cashflow as CCO

Haydock secures £5m block discounting facility

Martine Catton has been appointed chief commercial officer for Just Cashflow PLC. The NACFB Patron’s executive chairman, John Davies, said: “Martine will further strengthen our management team with her extensive industry experience that includes key roles with Catalyst Business Finance, Aldermore Bank, Barclays and Hitachi Capital.

Haydock Finance has negotiated a £5 million block discounting facility with fellow NACFB Patron Wesleyan Bank. During the height of the pandemic, Haydock maintained their commitment to supporting SMEs across all sectors which has resulted in a surge of asset finance applications.

“Over the past three years I’ve worked closely with Martine as a fellow Board member of the Association of Alternative Business Finance and have been tremendously impressed with her industry knowledge and the fact she shares my passion for helping UK SMEs invest and grow.”

With net receivables exceeding £320 million, Haydock has reported a 42% increase in new business levels for July 2020 against July 2019, and a further increase of 70% for August 2020 against August 2019.

Martine, who also sits on the NACFB Board of Directors, said: “I’m delighted to be joining such a well-managed, ambitious business that shares my desire to deliver innovative solutions for the SME community.

“I’m pleased to be able to continue to develop relevant and creative facilities as COVID has changed the landscape and the toughest challenges surrounding working capital are still to come. SMEs are going to be key to the economic recovery and they will need the support of innovative alternative lenders.”

14 | NACFB

Andy Taylor, sales director at Haydock Finance, explains: “We explored other block discounting providers, but Wesleyan’s prompt service met our demands. Their facility will allow us to support both existing and new customers with asset finance investments plus provide us with the flexibility to help with cashflow related applications.”

Wesleyan’s new funding facility will be used to help meet some of this continued growth in demand. Richard Baker, head of block discounting at Wesleyan Bank, says: “Haydock Finance has become our fifth new block customer this year. Not only have we secured the business, but those that have partnered with us are already talking to us about future funding requirements.”

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Patron Profile

More than just a tick in the box Our roles have never been more important in getting the economy back on track Nick Smith Group Managing Director Reward Finance Group

O

ver the next 12 months brokers and lenders are all going to have to work even closer to help SMEs survive, recover, and prosper.

It was one thing for businesses to prepare to be COVID-19 ready and get used to the new way of working. However, dealing with the financial fallout, which is looming over the horizon, will be a much more difficult hurdle to overcome.

Cash balances have been significantly depleted. In addition, pressure is mounting as deferred financial obligations become due such as VAT, PAYE, rent, rates, and invoices held back by understanding suppliers. At the same time, companies have been encouraged to unfurlough staff with the Government offering a modest £1,000 sweetener for every employee they bring back. We also had the enormously successful ‘Eat Out to Help’ out initiative which resulted in 100 million meals being claimed in August.

Broker expertise is invaluable Many will need to borrow to ease their way through the recovery, some for the first time.

16 | NACFB

And we all know how complicated that can be with an extensive choice of short term loans, long term play, interest only, capital repayments, early settlements, working capital solutions, secured, unsecured, equity investments – the list goes on.

That’s why we are strongly advising SMEs needing additional working capital to tap into broker expertise before committing themselves to a particular lender or product.

“

That’s why we are strongly advising SMEs needing additional working capital to tap into broker expertise before committing themselves to a particular lender or product

Valued partner with good track record Having become a Patron of NACFB in July, we believe Reward Finance Group is quickly becoming a valued partner for its broker Members.

Although we may not be well-known throughout the UK, we’ve built an excellent reputation across the North of England for our flexibility and speed.

From our offices in Leeds and Manchester, we have enjoyed nine years’ continuous growth with last year’s income increasing by 16% from £12.8 million to £14.9 million and total lending growing by 12% to £78 million. During the year 142 deals were completed, with client numbers now standing at 276 across both offices.

These results come against a background of continued investment in a very experienced team and IT, and a strong contribution from both our regional offices. Having reached critical mass, and with money to lend, we believed the time was right to bring attention about our products to brokers nationwide with the help of NACFB. Unlike some other lenders we are not restricted by arbitrary policies or procedures. So, rather than box-ticking, we visit each business to quickly get to know them and understand their ambitions. We then do all we can to help achieve them, whether that is to build on success or to simply navigate through these testing times, by providing the right finance, at the right time and on the right terms.

Our Business Finance product enables companies to take out a loan ranging from £50,000 to £3 million for up to 24-months.

Secured against assets, we charge interest monthly with no capital repayment, so they can make use of the full amount.

At the end of the term they can pay off the loan or renew it under a fresh agreement.

It can be used like a traditional overdraft, enabling your clients to borrow only what is needed, with interest being charged on what is drawn down. In fact, it is like dealing with a bank without the red tape, delays and underwriting restrictions.

We also offer Invoice Finance Plus, which is more than traditional invoice finance. As well as releasing money tied up in unpaid invoices, we can look at other company assets. So, if your client needs to borrow more, we can lend more, up to £3 million.

Getting the deal done Throughout these testing times, our approach has remained unchanged and whilst new deals have been a little more difficult to complete, we have always found a way by being flexible, agile and having a ‘can do’ approach to providing the funds and supporting the clients.

Keep lending simple

Over the years we have lent to companies across most sectors including engineering, manufacturing, print and packaging, clothing and footwear, retail, leisure and hospitality, property, and care.

In our opinion, borrowing doesn’t need to be complicated, so we have adopted a straightforward approach that works for brokers and their clients by narrowing down our lending to two products, which are both proven to suit businesses across all sectors.

As for the way we work, I will leave the last word to broker Brian Snape of Mighty Oak Business Finance, who said: “I just like Reward’s common sense and pragmatic approach towards lending. It will continue to serve the market well as we enter the ‘new normal’.”

NACFB | 17

Compliance

Appointing the right representation Ensuring the apple doesn’t fall too far from the tree Dean Williams Compliance Officer NACFB

B

ack in February, the Financial Conduct Authority (FCA) wrote to all regulated firms confirming the key risks identified within different sectors of financial services subject to regulatory oversight. In relation to credit broking, the FCA highlighted a key emerging risk of firms having poor oversight of their staff and/or Appointed Representatives (ARs).

This article seeks to clarify the concerns the FCA has relating to ARs and should act as a prompt for principals to review their existing systems and controls, ensuring they are appropriate and meet FCA requirements.

FCA concerns The regulator underlined a lack of oversight by a principal of their ARs highlighting how some sales practices are going unchecked.

This potentially increases the risk of misselling, fraud, or other poor consumer outcomes.

The role of the principal The AR is appointed by a principal. Both parties must enter a written contract to this effect. The contract must contain certain required terms as required by the regulations.

Acting as a firm’s principal places a considerable burden on the role 18 | NACFB

in terms of costs and time, this burden only increases as more ARs are added. For some authorised firms, this can make them reluctant to take on ARs, with concerns often concentrating on the strict requirements to take responsibility for the AR’s actions, alongside the potential detrimental impact on the principal’s reputation in the event that the AR acts negligently or outside their remit.

Principal obligations Prior to entering the contract, the principal is obliged by FCA rules to ensure that any AR is fit and proper to deal with customers in their name and that clients dealing with a principal’s AR are afforded the same level of protection as if they had dealt with the principal directly. Simply, this is because the principal is responsible to the same extent as if they themselves had expressly permitted an action.

The principal therefore assumes responsibility for anything the AR does – or omits to do – in carrying out the process of placing a deal.

“

The regulator underlined a lack of oversight by a principal of their ARs highlighting how some sales practices are going unchecked

The principal must therefore establish on reasonable grounds that: • The appointment does not prevent the principal from satisfying and continuing to satisfy its own threshold conditions; • The AR is solvent, is otherwise suitable to act for the principal and has no close links which would prevent them from being effectively supervised by the principal; • They have adequate control over the AR’s regulated activities for which the principal is responsible; • The principal has the resources to monitor and enforce compliance by the AR;

“

The onus is therefore on a firm’s principal to keep record of its AR structure, including oversight of any multiple principal arrangements

• SUP 12 in the FCA Handbook provides further clarification as to how a principal can determine the solvency and suitability of a proposed AR; • The AR is ready and organised to comply with other applicable requirements in SUP 12.

Continuing obligations During the AR appointment, the principal will be responsible for the acts and omissions of the AR at senior management level, continued monitoring of the AR’s suitability, and financial checks.

It is imperative that the principal ensures the AR does not hold client money and obtains approval of an AR’s staff under the approved persons regime.

It is the principal’s responsibility to further ensure that the AR satisfies the FCA’s training and competence requirements, whilst monitoring the AR’s compliance within the terms of the aforementioned AR agreement.

The onus is therefore on a firm’s principal to keep record of its AR structure, including oversight of any multiple principal arrangements. The principal is obliged to notify the FCA of certain events, such as the termination of the AR’s appointment or any change in information or conditions of appointment or any approved person ceasing to perform a controlled function.

An AR can have more than one principal, albeit that certain activities prohibit multiple principals, for example any designated business for retail clients. If a principal appoints an AR which is already an AR for another firm, the principal must enter into a written agreement, a multiple principal agreement, with every other principal the AR may have. Again, the multiple principal agreement must contain certain required terms set out in the FCA’s supervision manual.

Increasing scrutiny Principal and AR dynamics remain an area of focus for the FCA. The NACFB encourages all Member firms to review their existing arrangements and consider if they remain fit for purpose. As the saying goes, one bad apple spoils the barrel, so if you currently have ARs appointed, can you confidently say that each and every one of them is providing services to customers which meet both your own and the FCA’s requirements?

The NACFB can provide guidance and support to ensure all firms with an AR network are operating compliantly, treating customers fairly always and are able to evidence best practice.

NACFB | 19

Special Feature

Advertising Feature

It’s time to get creative We all need to start thinking outside of the box Amit Majithia Principal Avamore Capital

I

n Q2 2020, the ONS reported that output in the

construction sector fell by 35%, the most dramatic drop in the last ten years. Boris’ mantra of ‘build, build, build’ announced in June 2020 is designed to offset this and create a stimulus for the housebuilding market; long term, it will incentivise developers to build more, however these changes do not address some of the more immediate challenges the market will face. The availability of finance remains an important factor for developers and home buyers; without funds to transact, government reforms are unlikely to have the desired impact.

Early in the COVID crisis, the government introduced CBILS loans which were set to provide financial relief to smaller businesses.

Whilst this has provided some support for developers facing exit challenges, the scheme inevitably has a shelf life; many may not have qualified and others will still be navigating the problems that COVID caused on site. In the medium-term it will fall to the development finance market to become increasingly creative in the support it can offer. Payment holidays and extensions were a temporary fix at the start of the crisis, but six months on, there are new problems. One solution is Avamore’s own Finish & Exit product, designed to help developers stuck on part complete projects due to cost overruns or unexpected delays. Through this, immediate developer needs can be addressed including certainty of funding to complete as well as breathing space to refinance or sell units.

On the buyers’ side, the market also needs to see more support from banks. Historically, the two biggest factors that impact purchasing decisions are the availability of equity deposits and long-term mortgage finance. The latter has returned to normality, but the level 20 | NACFB

“

Despite planning reforms set out by the UK government, limits around the availability of long-term funding still exist

of deposits required from first-time buyers remains high.

Banks should be encouraged to be less cautious, but short of a guarantee being provided it is difficult to see how government can influence this.

On a more positive note the government’s extension to the Help-to-Buy scheme as well as the reduction in Stamp Duty rates is making the lower end of the market more accessible. To make a greater impact Stamp Duty rates could also be reduced for the higher thresholds encouraging parents with adult children to downsize, move without significant tax bills and re-direct equity from the sale back to first-time buyer children. We therefore need to see more holistic reforms to stimulate the buyers’ market.

Despite planning reforms set out by the UK government, limits around the availability of long-term funding still exist. Whilst the government’s primary concern should be to support the wider economy in order to increase wealth and employment, further changes such as significant reductions in Stamp Duty across higher thresholds or even VAT holidays on construction materials would be a boost for this crucial industry.

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Special Feature

50 lessons from lockdown We are all in this together

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et’s face it, the summer was a washout. One to remember for all the wrong reasons. Whilst we may be teetering on the edge of a second national lockdown, the shock and impact of the first continues to reverberate.

Last month, Commercial Broker approached the NACFB community seeking to understand key learnings from the year so far. The learnings range from professional developments, ways of adapting

1.

“Before lockdown I had a healthy pipeline of business, then CBILS and BBLS landed. They’re great schemes and a life saver for SMEs. However, this crippled me financially. Businesses borrowed from their own banks. Many alternative funders weren’t yet accredited, so business dried up. I’m still here rebuilding lost revenues – but remaining positive!”

to the pace of change, or simply the personal ways that some have coped.

The responses are honest, reflective, and hopeful. This collation acts as a snapshot of the time we have lived through and emphasises that the NACFB membership is a genuine community – one that continues to remain resilient.

2.

“Lockdown has allowed me to establish a better work/life balance, I have utilised the commuting time to better effect for a new healthier training regime.

I have spent 102 hours in the saddle, covered 2,134 km and lost 30lbs since the start of lockdown. This is the new norm for me.”

Paul Goodman, Chair – NACFB.

Tamara Renshaw, Managing Director – Acorn to Oak Business Finance.

4.

3.

“If you are not a shining example of good attitude, your team won’t be optimistic either. It is this awareness of being responsible for others that keeps me on the right track and keeping in mind that this situation is temporary and just another hurdle on the entrepreneurial journey.”

Aga Moczynska, Managing Director – Hussaria Group.

“Pivot is not a word that I usually would use, but it’s become more a word I use to describe my actions during lockdown. We pivoted to meet client expectations on customer service and loyalty, with Zoom for one-to-one meetings, alongside telephone, email and text. This has helped further build a deeper knowledge of what the client loves, be it a favourite football team or hobbies. Really getting to know your customer.

We've been getting new government-backed funding out to clients creating awareness of what’s available – making access to funds easy, painless, and stress free. Saying thank you to customers with a surprise gift. People always remember how you make them feel. Personally, I valued my health, garden, office space, and the simple pleasures in life like a walk with a friend in the forest. Also, a staycation in Cornwall, with no stress of quarantining when you get back! We have never come through a pandemic before so there is no precedent. We pivot as we go!”

Jo Malyon, Managing Director – Blue Badger Financial.

23 | NACFB

5.

“2020 has certainly been different and not like anything we expected as the clock struck midnight on New Year’s Eve. After the initial shock of COVID, we settled into a great way of working and we took each day as it came, keeping calm and carrying on is the Watts Commercial way!”

6.

“COVID is not all negative. I’m not naïve to the challenges but our systems and processes were designed to be agile and mobile. Clients want more of our time, seeking opinion and guidance, clients lean on us more than I realise. Now, we’re closer to our clients and lenders than ever, they are our partners, part of our family. COVID has taught me how much this matters.”

David Farmer, Commercial Finance Specialist – Lime Consultancy.

Phil Gray, Board Director – NACFB.

8.

7.

“You need a lot of volume when margins are capped at 1-2%.

Nevertheless, CBILS allowed us to really help many SMEs, particularly where we were able to restructure existing higher cost debt to give breathing space, real cash savings and reduce Personal Guarantee exposure.”

Nick Ray, Director – Claratus.

10.

“Lockdown revealed three primary facets: about our clients, about our lenders and about ourselves. We discovered which clients knew how to plan, had maintained reserves and were survivors. We discovered which lenders were reliable, with experienced staff and we realised that we work too hard. We will remember these lessons.”

Richard Alliston, Director – Corporate Finance Leasing.

“Stick to a daily routine. Take regular breaks to ensure your sanity, do a little household chore. Take a full lunch break and make a proper lunch. Try not to graze (this is my guilty pleasure). Set small goals – call three or four people a day – don’t try and take 30. Make calls purposeful, not just to hear someone’s voice. Take a walk – it’s great thinking time, clears the head and helps with the calories. Take a phone call into the garden not just your office. Have a project.”

Paul Cox, Director – Asset Finance Northampton Limited.

9.

“Without trepidation, we decided to open Matchbox Finance during this historic pandemic (see p. 46). Despite limited access to BDMs, unpredictable call waiting times, and whiplash causing volatility, we have been forged to be adaptive and accepting of a world of new digital norms and virtual relationships.

It’s certainly an exciting time.”

Ishbir Singh Rakhra, Director – Matchbox Finance.

12.

11.

“The business interruption in the office was zero. But the business interruption in the market was tough until June – it’s been better since.

There will likely be further interruptions in future – and their impacts are unknown. There’s been an opportunity to pivot my business. I’ve been able to expand the range and scope of funders, products and clients. The environment remains challenging but certainly brighter than in March. 2021 is simultaneously interesting and scary!”

Mike Deacon, Board Director – NACFB.

“Most people have a busy and hectic work life, but lockdown has reduced the possibility of me missing out on memorable moments with family.

Having such limited and restricted contact led us to stay close to our loved ones which wouldn’t be possible when in the rat race. Family time has become so much more important and enjoyable. Working from home has provided productivity gains due to fewer interruptions and a lack of daily commute. The disadvantages are missing the wonderful people I work with and not being able to give them a hug or go for a drink.”

Caroline Boughenou, Senior Business Support Officer – NACFB.

13.

“2020 brought a plethora of challenges – ones which we all faced together. For me, it has been a year of resilience. The team came together when we all needed it most. Through that camaraderie, I knew we would get through any challenge we faced.”

Jo Sutton, Managing Director – Empire Finance.

14.

“Not only have we proved that productivity is not affected by working remotely, it’s come with the added benefit of reducing our carbon footprint and improving staff work/life balances. If anything, us old dogs have been taught new tricks and we’re questioning why we’d ever go back to the old days.”

Steve Olejnik, Board Director – NACFB.

16.

15.

“In lockdown I realised that after four years in business I was too busy helping clients and had not captured the data of all the people I had met networking over the years and I had no way of communicating with everyone about the daily changes in our industry during COVID. So, I invested in the digital side of my business and took on a specialist. He moved my CRM to a more marketing focussed system, added lots of content to my website so people could be informed of our products and services and started to do more social media posts. Now I am communicating with the people I meet and keeping our clients updated on our services, ahead of the race to the CBILS finish line.”

Gillian Palmer, Director & Owner – Lending Made Simple.

“Anticipating a severe economic downturn, we started to warn various contacts beforehand. When lockdown occurred, we immediately prepared a document to signpost clients, professional contacts and the wider business community as to where they could potentially obtain cash flow help – the local council linked to the document.”

Sarwan S. Ghatoura, Managing Director – Montana Corporate Finance.

17.

“We coped having been able to draw heavily upon the experience of trading through the credit crunch. Don’t panic, do what you do best and speak to your customers soon to calm their nerves around what will happen next. Our customers need us more than ever now, we’ve got this!”

Andrew Pritchard, Director – Simple Commercial Finance.

18.

“Over recent months it is clear to see the businesses which provided clients support from the outset of the pandemic shall experience strength for future with both funders and end user relationships.

Throughout lockdown Chatsbrook kept in touch with clients to support challenges that were faced facilitating arrangement with funders.”

Adrian Brooks, Director – Chatsbrook.

19.

“Lockdown was time to reflect on the last thirteen years. We have made big decisions over this time; relocating out of the city centre and utilising cloud-based technology, whilst retaining profits in the company. These wise choices enabled us to emerge even stronger – refreshing to pat yourself on the back once in a while!”

Robert Winfield, Managing Director – Chartwell Funding.

20.

“Shock, disbelief, confusion – the creation of an emotional roller coaster came with the declaration of a global pandemic. Rainbows of Hope supporting our NHS. Bounce-Back-Loans/CBILS announced. Calls silenced. Conversations hushed with distancing rules. Regular NACFB updates reinvigorating businesses. Agile broker thinking via Zoom, marketing, technical developments, and additional funding partners. Community support – new life-long friends. Inexhaustible perseverance.”

Helen Boylett-Smith, Owner & Founder – Go-Factor Limited.

21.

“We’ve learnt that we’re all in it together. Lenders, professionals, clients, brokers are all in the same situation making the adjustment easier. Therefore, if the signal is bad on Zoom and you sound robotic, or your toddler runs in screaming for a hug whilst you’re on a conference call, carry on being sympathetic.”

Nimesh Sanghrajka, Managing Director – Mantra Capital Group.

23.

“Although a time filled with challenges, there have been positives to take from it too.

We have proved both at Praetura and as an industry, that we are robust, accommodating and adaptable. I believe we are an even stronger team at Praetura because of the obstacles we have faced and overcome together.”

Ric Simmons, Sales Director – Praetura Asset Finance.

22.

“I think taking 87 calls on the first day of the CBILS announcement. This took us all by surprise and the lack of clarity around what the schemes looked like and the changes around security and PGs didn’t help matters. We were accessible to all our clients and emailed out within a few hours of the announcements which put us on the front foot. But judging by some of the calls I see big concerns ahead with many clients not able or willing to support their businesses with their own cash or assets.

I am sure the schemes were designed with good intention, but I can't help feel there is further trouble ahead particularly around the Bounce Back scheme.”

Darren Willoughby, Managing Director – 2XL Commercial Finance.

24.

“I believe the biggest lesson learnt from going into lockdown was to keep as much routine as possible, which allowed working life to continue.

We carried on business as normal which meant we had a lot of structure to our days. This massively helped all our mental health as we were still working for a purpose. Not only that, we had a lot of customers comment that we were one of the only companies pro-actively reaching out through lockdown and they were all grateful. I personally carried on training and took up running as it kept my head clear and took my mind off the surrounding situation.”

James McGregor, Director – Mesa Financial.

25.

“Diversity of products has helped ensure we turn survival into a thriving business once again. We diverted resource from second charges to mainstream mortgages, while demand for bridging finance has never been higher. Our pipeline collapsed in April but is now as high as it was 12 months ago – it just looks different!”

Alistair Ewing, Managing Director – The Lending Channel.

26.

“Trusted business relationships proved their worth during these challenging times. We’ve all had to change mindsets and ways of doing business to adapt. Last minute obstacles became the norm – so being able to have very open and honest dialogue with clients and contacts ensured we could always find a solution.”

Ed J Ogden, Managing Director – Knox Lending.

27.

“It’s not what you say, it’s how you say it. Biggest learning came from how quickly people adapted to using technology when working from home, even those more senior had fun looking at themselves, how they project to clients on live screens, understanding the importance of smiling, listening and building rapport.”

Rob Penman, Managing Director – Simpli Financial Solutions.

28.

“The biggest thing I have learned over the last few months is how adaptable we have all become. COVID has certainly altered my outlook to change. It has taught me that in business you have to be constantly evolving and be prepared to diversify when things aren’t going as you hope.”

Joe Barbera, Managing Director – Liquid Commercial Finance.

29.

“I started to plan early for my team to remote work so when lockdown came, we were ready, but it has been challenging. We are used to working independently, but the lack of personal contact has been hard. We have missed engaging with business owners in their own environment. Zoom was okay to help conclude deals and keep in touch. Having been through it all as a team we are more together now than ever.”

Gary Cain, Director – Reach Commercial Finance.

30.

“Lockdown has really made us evaluate how we do business; we have all become experts at Zoom/Teams and have learnt ways of being more efficient that we will take forward into the ‘new normal’. It has been great to work for a company who really values family time and flexible working.”

Natalie Charteris, Operations Director – South West Business Finance.

32.

“Within lockdown we learnt that our team at Aureum Finance is very strong and have built even stronger communications and relationships with our clients. We have worked hard to diversify and support our clients within an ever-changing environment, successfully placing many requirements within a challenging market.”

Elise Taylor, Relationship Manager – Aureum Finance.

31.

“For me, it’s all about people, some we love, some we like, some we have a different view on. One thing is for sure, without people we cannot survive. I continue to be amazed by the compassion of some but there are still too many with a selfish streak which undermines the great work of the few.

Family and friends have never been so important in times like these, hopefully with everyone supporting each other through work and play we will all become stronger and provide a legacy to future generations of how to navigate through troubled periods and enjoy the better times ahead.”

Norman Chambers, Managing Director – NACFB.

33. “The finance sector really had to come to the fore during lockdown as it was a lifeline for so

many SMEs. I kept up with the constant changes in the banks and created solutions daily for clients to help them access the much-needed funding. It was exhausting but so satisfying to support businesses during the ongoing challenging times. Pilates and a very understanding husband helped me throughout!”

Julia Wilkinson, Director – Funding Ground.

34.

“We have a specialist team focussed on helping our customers succeed. Armed with quickly developed software, that surveyed the extent of the threat to our customers, they were rapidly able to identify those that most needed support. The ability for customers to talk to someone who emphasised with their situation and could help was hugely valued.”

John Davies, Executive Chairman – Just Cashflow.

35.

“The learnings I have taken is the importance of pivoting your business by having a Plan B, which means diversifying your income streams, being creative when focussing on customer demand, being disciplined when it comes to investing in yourself and believing in your strategy.

The results will eventually come.”

Razvan Syyed, Director – Sword Finance and Investments.

38. “I have learnt of the value

we placed on excess – the excess of spending on names and brands.

Since lockdown, we have not met face-to-face, this has meant that people do not see your brand or the maker of clothing, or your laptop, watch, or shoes. I think we have lost our care for brands and it means we can focus our spending on more meaningful attributes.”

James Hinch, Senior Compliance Officer – NACFB.

40.

36.

“Try and anticipate the unexpected.

Redwood’s fully cloud hosted infrastructure meant that it was well placed operationally but benefitted significantly from lessons learned from a business continuity event simulation exercise only a few months before COVID. This enabled the whole workforce to immediately and seamlessly transition to working from home.”

Gary Wilkinson, CEO and Co-Founder – Redwood Bank.

39. “We created a website to help with

CBILS, whilst sending e-shots on aspects of mental health and working from home.

As a team, we helped with volunteering for those that were shielding and charities.

I also chaired a Facebook interview with Lord Bilimoria & Baroness McGregor-Smith on the ‘New Norm’ for Businesses & Professions, viewed by 9,000 people.”

Sanjay C. Rughani, Senior Manager – Sterling Professional Finance.

“For the property market in general, it has forced everyone to embrace the technology that’s out there. AVM’s are becoming more commonplace on straightforward residential investment purchases. For the more specialist sector, there will always be the need for a surveyor visit, although there is technology that can support speeding up this process. We are a flexible industry that I feel has adapted well and made changes to keep the doors open.”

Martin Kemp, Commercial Manager - FinanceWell.

37.

“Lockdown 2020 has been a roller coaster ride for the duration.

New financial products launched within a matter of weeks; bank policy and products changing on an hourly basis; clients in distress as their businesses ground to a halt overnight.

And don’t get me on to home schooling! Empathy, being methodical and a sense of humour were needed throughout. The dog and running helped my sanity too!”

Lucy Painter, Director – Funding Ground.

41.

“This period has been very challenging for everyone at Norton but has made the company more versatile. It has shown us that technology is more useful than ever and has enabled us to allow our staff to continue to work from home seamlessly. The main positive to take from this has been it allowed time to concentrate on Norton launching our new bridging department to all intermediaries to refer their enquiries into. We are confident of this being a success.”

Sonny Gosai, Senior Sales & Development Manager – Norton Finance.

42.

“What I’ve learnt from lockdown is to always be open to change. This is for both personal and professional life. Businesses need to be innovative at the best of times, but an ability to change rapidly can be the difference between success or failure during momentous events such as this.”

43.

“Whilst my blood pressure has lowered, I did have to cancel my wedding – you win some you lose some. Although not a natural optimist, I’ve tried to see the positives. When again in our adult lives will we be given the opportunity to step off the treadmill in such a way? The acceleration of working attitudes has brought us forward a decade in a matter of months. It does make you wonder what other social norms are similarly archaic. I used to use the cycle commute as a time to decompress and transition between states, and on some days, I miss that distinct separation.”

Kieran Jones, Communications Manager – NACFB.

Tiba Raja, Executive Director – Market Financial Solutions.

45.

44.

“I have really enjoyed the flexibility of working from home and it has increased my awareness of a healthier work/life balance.

However, during lockdown I have had time to reflect how much I miss human interaction with my colleagues. I miss the social pint after work and the opportunity to relax with them.”

“What I have learnt in lockdown is to truly appreciate and master a work/life balance. Whilst being a pivotal moment for many companies determining the future of their businesses, it has certainly made Aureum Finance stronger, embracing our roles and encouraging us to stay productive.”

Natasha Howe, Relationship Manager – Aureum Finance.

Dean Williams, Compliance Officer – NACFB.

Claire McGovern, Financial Controller – NACFB.

48.

“Although we all stepped into this new normal with slight apprehension, we soon got the hang of it and, more importantly, have started to appreciate our new working environment. No more rush hour commute and the money this saves, no more standing at the ironing board every morning, and no more expensive Pret lunches.

Although working from home has alleviated some pressures of modern office working, I can’t help but miss the old routines. Wearing a suit, in my opinion, changes the way you walk, the way you interact with people and, importantly, provides a distinction between work and relaxation, one thing I think we all need to have when working from home. I’m even missing the cufflinks and collar stiffeners.”

Nicholas Murphy, Business Engagement Officer – NACFB.

46.

“Lockdown presented challenges for all. A common problem was how one should occupy all the newfound time. I personally took up cycling, investing in a new bicycle with much excitement and enthusiasm.

To date, I have covered over 500 miles, which isn’t a huge amount by some standards. But, having the option to escape from the ‘new normal’ for a few hours was – and is – highly enjoyable.

Next stop, Tour de France 2021…”

47.

“In a world where we are constantly on the go, why do we then feel an overwhelming sense of guilt when we stop and do nothing? At the start of lockdown, I would have the constant need to fill any spare time. I would have real dread on a Sunday evening at the thought of returning to work on Monday having not produced or achieved anything. But being productive 100% of the time is not actually productive. Doing nothing is not ‘lazy’ and you should feel no guilt for simply relaxing. It is more than okay to simply do nothing.”

Laura Mills, Graphic Designer – NACFB.

49.

“At Blaise Commercial Finance, so many things changed. We all started working from home. Communication was key, with weekly online meetings introduced this has had a positive impact.

It allows us to keep up to speed quickly with government support schemes with bank lending policies changing so quickly – but delivery for clients remained key.”

Aled Morris, Director – Blaise Commercial Finance.

50.

“Properly used technology is your friend, COVID-19 dragged a lot of us kicking and screaming into the 21st century and now we have arrived we are wondering why we didn’t get here before.

Humans got sick, but the planet got better. Also, my fuel bill has halved.”

Rod Whitehead, Director – Independent Banking Professionals.

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Special Feature

Weighing up opportunity How are direct lenders responding to the pandemic?

Tom Cox Partner FRP Advisory

Ian Corfield Partner FRP Advisory

T

his year has already been a significant year for the direct lending market, with historic portfolio selection by all funds tested in full. The ongoing crisis has enveloped global economies, bringing disruption and uncertainty, and the behaviour of the private credit market will continue to be stress-tested in the face of significant borrower performance volatility – even if it is not of their own making.

Despite the private credit market having operated for over a decade, many borrowers and sponsors have continually questioned how direct lenders would behave in a recession. While the crisis has already seen major banks facing extraordinary levels of funding requests linked to wider government support, it could now represent a major opportunity for fund capital deployment as a lifeblood to many companies – particularly with initiatives like the Coronavirus Business Interruption Loan Scheme drawing to a close.

However, direct lenders have not – and will not continue to be – immune to pressures that have enveloped the banks, as the size of portfolios has grown rapidly in recent years. Some of the largest funds operate portfolios of more than 100 assets.

The reality is that everyone will suffer to some degree, such is the portfolio effect. The limited bandwidth of many direct lending teams (and understandable lack of genuine restructuring capabilities) will therefore continue to be tested in full.

On the front foot As lenders continue to navigate a challenging environment, we expect them to act proactively and rationally, such is the structure of their capital and the incentive mechanisms of their managers.

At the onset of the pandemic, we saw many lenders react swiftly to triage their portfolios and focus on fighting the fires burning brightest. The absence of large committees or processes for decision making will continue to prove beneficial as direct dialogue with sponsors and management teams can take place on a near daily basis and stakeholders quickly react to any new developments.

Our discussions with the wider community suggest most, if not all, funds have remained open for business albeit with a caveat: the portfolio has come first, and they have prioritised supporting existing borrowers where possible. Regular detailed dialogue with LPs has increased considerably and we are now seeing lenders demonstrate their credibility as a true funding partner to more complex or stressed businesses.

Whilst private credit portfolios have grown considerably over recent years, they remain relatively small in comparison to the major banks and they will continue to react in a nimble fashion as the pandemic, and our exit from it, continues to present funding challenges. We predict that direct lenders will support borrowers where requests for funding are credible and defensive, even if it potentially increases optical leverage for a period.

offering shorter credit decision-making lines to plot a route through the current crisis.

While covenants became somewhat irrelevant at the start of the crisis, we anticipate the development of a suitable suite of lenders protections to come back into focus once the operational landscape has become clearer. In the early stages of the pandemic, lenders offered short-term cash flow solutions to help with stretched liquidity through forbearance on cash sweep mechanics, extension of maturities and conversion of cash margins to PIK, and while this will likely continue for sustainable businesses encountering difficulty in the next few months, rather than crystalise a loss, we expect attitudes to evolve next year.

As the genuine impact of the crisis begins to unfold in 2021, we expect direct lenders to work closely with borrowers to establish revised covenants and information packages that, while presenting some operational flexibility, ensure warning flags emerge early and corrective action can be taken without an uncontrolled crisis unfolding.

“

Borrowers shouldn’t expect lenders to simply offer an easy ride. Fund structures cannot truly afford significant write offs, despite offering shorter credit decision-making lines to plot a route through the current crisis

Borrowers shouldn’t expect lenders to simply offer an easy ride.

Fund structures cannot truly afford significant write offs, despite NACFB | 31

Direct lenders are likely to be pragmatic about other liquidity injection solutions, but we would not expect a blanket opportunity for super senior rescue finance that subordinates the senior secured lender to flood into deals unless alternative solutions have been exhausted. Ultimately, it will be important for primary secured lenders to stay in control of their destinies as we look ahead to a more stable business landscape.

Where businesses enter distress in the months ahead, lenders will likely continue to first look proactively to sponsors and other equity holders to support assets. To date, the most collaborative approaches from equity have secured the most favourable or co-operative response from lenders. We expect that to continue as both components of the capital stack seek to protect their interests.

If equity support is not available or forthcoming, lenders won’t be afraid to seek risk-weighted returns or perhaps even go as far as ‘taking the keys’. Ultimately, the fund must protect the position of its LPs and equity recoveries may be the only option if a borrower would otherwise simply end up in insolvency.

Hope for new deals?

Several of the funds that we have spoken to believe a market correction was ultimately due. The biggest issue now will be pricing risk in a market that is still uncertain. For relative value funds, this will simply mean upward re-pricing of paper given temporary dislocation in the liquid markets witnessed at the start of the crisis.

We envisage: •

Leverage will continue to contract across the wider market as lenders are forced to take a more cautious approach, with the core focus on structuring EBITDA, outturn forecasts and longer-term supply chain risk in new deals. This in turn creates opportunity for funds with different risk appetites, horizons, and flexibility on debt structures/products.

•

By contrast the strongest credits may still attract eye-watering terms as a lack of supply in the most defensive sectors (pharmaceuticals, healthcare, technology and e-based logistics) potentially attracts a feeding frenzy with continuing deployment still necessary amongst the larger funds.

• There continues to be significant dry powder across the direct lender market in the form of committed long-term capital that lenders are incentivised to deploy. We are aware that some are 32 | NACFB

continuing unabated, but we expect others to remain cautious in committing significant new capital until we see further market stability and/or borrowers are restructured. Indeed, new capital may be conditional upon such restructurings.

• New money deals will continue to emerge as new winners come out of the crisis, but portfolio selection will be more important than ever.

•

In the short-term, newer smaller cap funds with limited portfolios may see genuine opportunity with reduced competition from the banking market and more bandwidth to assess new money opportunities. Similarly, lenders may retrench somewhat to focus on more asset-backed situations.

This may see a growth in more hybrid structures where the underlying collateral and cash flow are combined to solve the financing ask.

•

In the mid-term, we are seeing some lenders re-purpose new fund raises into credit opportunity or corporate dislocation capital as there will inevitably be an extended hiatus in vanilla M&A opportunities. Those lenders with more flexible capital pools may be better placed in the near-term to deploy into more opportunistic or rescue financing situations.

The current crisis will be an existential threat for many and there will no doubt be some significant fund and borrower casualties as a result. The next few months will continue to be important in this journey.

“

To date, the most collaborative approaches from equity have secured the most favourable or co-operative response from lenders

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Special Feature

Fostering a deeper understanding Working together toward success in a post-pandemic landscape Thomas Shave Director of Broker and Intermediary Sales Merchant Money

A

s lockdown measures ease and the UK economy reawakens, the challenge of successfully supporting the SME market will be one best faced together.

UK SMEs have been significantly impacted by the pandemic, and lenders have not been an exception. Many were forced to take a risk-adverse approach by wholesale funders, halting new business and tightening underwriting. Yet, following recent Bank of England announcements, more lenders are growing in confidence. The forecasted ‘V-shaped’ recovery paired with government-driven economic initiatives has meant that many are actively looking for opportunities to deploy capital once again.

Merchant Money, as a Patron of the NACFB, is single-minded in doing what is best for introducers and their clients. This commitment saw us launch CBILS term loans to both our existing book and new business, whilst remaining flexible in our approach to traditional funding.

Communication is king In the post-pandemic landscape, communication is king. The demand for flexible and tailored finance will inevitably increase, as businesses find their feet and their path back to growth.

As such, the provision of ongoing support is essential. Building strong relationships with both client and lender is key. In the past, lenders may have been guilty of relying too heavily on portals and collateral to provide information to introducers. Email is an essential but often over-used tool that lacks the immediacy required to 34 | NACFB

best support customers. Now is the time for change. With market adjustments occurring sometimes daily and more clients falling into the ‘non-vanilla’ bracket, conversations are required.

Although video conferencing is likely to continue to largely replace traditional face-to-face meetings in the short term, this can be embraced as a benefit to increase efficiency. Two-way conversations build relationships and discussing applications over phone or video call will speed up processes and aid in bringing about transparency.

Streamlining processes Conversations will be vital but will be of limited use if not streamlined. They should be viewed like any automated or set application process, with both lender and introducer outlining response times and remaining consistent with them.

Once the pandemic subsides, client confidence will be hugely important and working together to limit any detrimental impact to

“

Once the pandemic subsides, client confidence will be hugely important and working together to limit any detrimental impact to relationships is essential

relationships is essential. Now is the time to lean on lenders for their expertise and dig deeper than just the application. Getting involved in conversations with lenders earlier in the process, by discussing funding suitability prior to application, will increase efficiency and better maintain those important relationships.

As Merchant Money prides itself on its level of flexibility we have been urging our introducers to pick up the phone to discuss business before applications are submitted. This way we can work together proactively to find a funding solution.

To ensure introducers can continue to best support their clients, a clear understanding of each lender’s application process and requirements are needed to successfully streamline processes.

Understanding timescales and requirements for final information requests for example will enable lenders to make decisions promptly.

“

There is no room for blind decisions in the post-pandemic ‘new normal’ and lenders should be prepared and willing to talk through decisions with introducers

Nurturing collaboration Introducers need to be comfortable sending applications to lenders.

A level of understanding and trust is required to give confidence that such business will not be turned away. Lenders too, need to be consistent in their approach to ensure opportunities are not missed.

Strengthening relationships

Introducers should look to lenders for their expertise to gain a deeper understanding of each lender’s processes and the rationale behind further information request or final decisions.

Conversations, accountability in responses and a deeper understanding of each other’s business will only help to strengthen introducer-lender relationships. Whilst transparency and consistency throughout the application process will reassure introducer and client confidence.

There is no room for blind decisions in the post-pandemic ‘new normal’ and lenders should be prepared and willing to talk through decisions with introducers. Fully understanding the rationale for a decline will enable introducers to give their clients the insight they require and deserve. In doing so, they will be better able to maintain client relationships and be one step ahead in preparing for future ones.

Challenging times often fuel innovation and strong relationships between both lender and introducer will help drive the right solutions in a changing SME landscape. The path and pace of the ‘new normal’ will be dependent on the UK’s success in bolstering confidence and containing the virus, allowing funding to be driven once again, for growth as opposed to survival.

A declined application for example, should be viewed as a learning opportunity to increase consistency, confidence, and efficiency.

A measured approach combined with transparency and strong introducer-lender relationships is required to rise to the challenge.

NACFB | 35

Special Feature

Extending your reach How to market your firm in the ‘new normal’

“

Tiba Raja Executive Director Market Financial Solutions

Taking the time to split your audience will allow you to tailor your messaging depending on their circumstances

T

he 'new normal’ is one of those sayings that everyone is going to get tired of quickly (if not already). However, it’s important to acknowledge that things are new. Just as we transitioned into lockdown, we may now be transitioning out. And already, this is having a profound effect on the country and the economy. The challenge will be learning how to adapt to the ‘new normal’.

Personalised customer experience Making sure your clients are well catered for is something most of us were on top of before the pandemic. But now, market expectations and priorities have been altered. This means the way we structure our customer experience needs to change as well. A top focus is building and maintaining a positive rapport.

How you treat those that come to you for support will determine whether they will return once things have become more settled.

To this end, taking a step back and reviewing your personal marketing strategy will be vital in the coming months.

Audience segmentation One way to review and tailor your personal marketing strategy could be segmenting your audience in new ways. There are two potential groups which you could split your clients into: •

Those whose circumstances are more challenging through COVID. For this first group, a softer, more personal, and educational marketing approach may be beneficial. This group may need an extra level of confidence before transacting.

If your business is mostly email based, perhaps look to add a phone call to your customer journey, or a Zoom meeting to

36 | NACFB

make the client more comfortable. Learn which lenders are still fully operative and flexible to suit your client’s needs.

•

Those that have been able to take advantage of new opportunities. A show of strength may be a good strategy for the second group, however. For those who are attacking the market, ready to take advantage of the current climate, you can show that your business is still very much alive and kicking.

Talk about your positive experiences of lockdown, and promote reliability and stability, particularly with the lenders you are using to bolster confidence.

Taking the time to split your audience will allow you to tailor your messaging depending on their circumstances. If automated marketing is something that you are already doing, this can be implemented simply through dedicated lists, and if your marketing is more one-to-one, you will know before you ring which tone of voice will make your client feel more at ease.

Managing expectations With products changing so rapidly, educating clients in how the market has changed is something that should also be a priority.

This is not just for the client’s benefit, but also for yours. The better your client understands what is happening in the market, the easier it will be for you to explain how their changing circumstances could affect their applications to match a suited lender.

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Special Feature

An allied recovery What now for unsecured lending?

Shyam Raval Broker Manager Esme Loans

C

OVID-19 and the associated lockdown has impacted us all, radically altering the business landscape. Firms have had to juggle mothballing premises, home working and caring for dependants with pivoting to survive and remain productive when demand for most products and services dropped off a cliff overnight.

The true scale of the shock continues to be played out. GDP has fallen 20% in Q2, 730,000 fewer people are on payrolls since the lockdown began and regional restrictions are impacting consumer and business confidence making it complicated to forecast the recovery.

Initially, lenders were inundated with forbearance requests on existing debt. Esme provided all customers in need with the option of a repayment holiday, successfully standing up the process and platform capability within days of lockdown’s announcement.

Working closely with our parent NatWest, we also deployed teams to enable lending under the government schemes totalling over £11 billion.

Naturally, features of BBLS and CBILS saw demand outside these schemes subdue. We saw increases in early repayments as borrowers refinance existing (typically more expensive) debt to benefit from 12-month repayment holidays, subsidised interest rates and removal of personal guarantees.

By leveraging our technology, Esme can enable delivery of a dynamic risk appetite that rapidly adapts to market opportunities and shocks. As such, despite decreased demand, we continued to lend under a revised credit appetite throughout the crisis. We’re now starting to see pockets of demand forming across several sectors and are developing this capability further to best respond to this need as the economy opens up.

38 | NACFB

What next?

Government subsidised lending will eventually cease. It remains to be seen how much liquidity for new money will be available without guarantees at a time where BBLS and CBILS loans could begin to default without further forbearance. For some the unit economics will not work, potentially depressing competition and the variety of finance options available.

As the recovery will not be uniform, lenders are unlikely to switch back to the products and appetite parameters offered pre-COVID. Businesses demonstrating that they have traded out, withstanding the shock will be most attractive, whilst credit teams will favour applicants who can afford to service new money in addition to any COVID debt they may have taken.

Underwriting models will evolve, using non-traditional data sources alongside credit bureau data. Amongst several experimental projects, Esme are using alternative data sources including localised behavioural, demographic & footfall data to support the analysis of an applicant’s recovery potential. Adoption of open banking and accounts package linked to applications will gather pace. Customers will benefit from faster application processing, removing the need to gather and upload documents, offering one click provision of data in a secure manner. Lender side, digital access enables the ability to accurately and instantly process the financial data to automate affordability assessments, whilst reducing fraud risk and staff costs.

The sheer number of businesses that borrowed under the government schemes will likely prompt a revaluation of loan product features.

Lenders may launch multiple risk appetites per product with features (such as no PG and varying capital repayment options) dependent on the location, sector and recovery demonstrated by the applicant.

Brokers are key allies for lenders re-entering the market. Targeted distribution of regional dynamic appetites will likely drive far higher returns than localised direct marketing that risks quickly becoming outdated. Brokers allow technologically equipped lenders to be nimble and avoid the wholesale sector exclusions of the past.

The market may be distorted for some time to come and challenges of a no deal Brexit could complicate things further, but SMEs are resilient and innovative. Esme stands ready to fund the recovery.

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Industry Insight

Candles in the dark?

Accelerating technology adoption Andrew McKee Chief Information Officer Ultimate Finance

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hifting to remote working overnight, completely rethinking business strategy, new business levels slowing and cashflow disruption – there’s no doubt that the COVID-19 pandemic has been challenging. Whether you’re a lender, a business looking for funding or a broker working hard to arrange it, using technology has become more essential than ever to keep business moving.

At Ultimate, we accelerated the pace of our digital technology roll out during the pandemic, investing in the right areas to ensure our people can maintain our funding support and strong relationships between business owner, advisor, and funder.

So far this year, our digital transformation projects have implemented a range of vital tools that include the use of Open Banking capabilities, biometric ID verification, accounting software integration and online application portals which are all designed to speed up the process of providing funding for new clients and servicing existing funding facilities – let me share a little more about what these capabilities can do.

Biometric ID verification and eSign documents We use biometric facial recognition technology to speed up the funding application process for clients. The technology verifies identity by cross-matching a photograph taken with a smartphone against a scanned passport, ID card or driving license. By leveraging secure instant messaging and AI to facilitate the process; it’s a faster, better experience for our customers and offers protection against human error that may arise from reviewing physical documents. Combined with electronic signatures, paper-based processes can be entirely eradicated. Essential tools during the pandemic, when people have been working from home and unable to travel – and speed up the process to provide much needed funding to businesses.

40 | NACFB

Open accounting systems Removing the need to manually share accounting data, often in printed form, our technology is helping our clients get quick and seamless access to funding. Using an integration platform which can access 80% of accounting software systems provides us with live and accurate financial information without the hassle of downloading financial reports. By using real-time statistics and insights direct from a business’s accounting software, our team have access to the information they need to make fast lending decisions, which complies with the additional data security needed to provide secure remote lending.

Open Banking Through our partnership with secure instant messaging app Nivo and TrueLayer, our clients never have to share an electronic or paper copy of their bank statements again as we can access the required data direct from their bank account, in real-time. Data is shared safely through the app, removing the risk of information getting lost or ending in anyone else’s hands, and because it’s live information, it helps us to make informed decisions quickly whilst removes the hassle for our clients.

“

By leveraging secure instant messaging and AI to facilitate the process; it’s a faster, better experience for our customers and offers protection against human error that may arise from reviewing physical documents

Online application portals for brokers

portal for our bridging product this year too.

We’ve made it even easier for our introducers to apply for asset finance on behalf of their clients via our Asset Broker Portal – designed to make working with us as streamlined as possible. There, they can upload new asset finance applications, instantly access the status of any existing applications, with previous deals archived for easy reference. The feedback from brokers has been excellent and having this capability has been invaluable when they’ve been working remotely. We are working on the introduction of a similar application

It is our continued investment in technology that has helped us to adapt, quickly and securely, so we could continue providing our clients and introducers with the seamless, lending processes crucial for supporting the business community throughout the pandemic.

We firmly believe that this technology won’t replace the role our people play in building relationships, understanding clients’ needs and solving problems – but it’s making everyone’s lives a lot easier in the process.

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NACFB | 41

Industry Insight

Sky’s the limit?

The urgent need for PII review Robert Sinclair Chief Executive Officer Association of Mortgage Intermediaries

A

vailability of Professional Indemnity Insurance (PII) has reduced across all professions, including construction, engineering, law and financial services.

This is because in 2018 Lloyds initiated a review of profitability, as part of its regular re-certification of syndicates, which became known as the ‘Decile 10’ review. It required all syndicates to submit plans for the worst-performing 10% of their business. Failure to produce acceptable plans would result in the syndicate or business line being placed into run-off. With 62% of Lloyd's syndicates that wrote non-US PII making a loss over the previous six years, this line of business become one of the main targets of the review.

Client impact According to the FCA’s RMAR (Retail Mediation Activities Return) figures, PII insurance for advice firms increased by 37% between 2017 and 2019 – from £17,540 per firm to £24,072 per firm. It should be noted that the latest figures, while published in 2020, only relate to 2019, so may only reflect the very early impact of the Lloyd's 'Decile 10’ review.

42 | NACFB

Even this is only part of the story. Many PII contracts have also become ‘hollowed out’ in recent years, with greater excesses and other conditions reducing the amount of cover for greater premiums. For example, some PII contracts put a cap on the number of complex cases that are more likely to result in consumer detriment, such as DB pension transfer cases. This in turn, reduces the advisor’s ability to offer genuine choice to all their clients, in a way that is not always clear and intuitive to the consumer.

Whilst firms can secure cover (in line with comments made by the FCA in its April 2020 statement on the availability of PII) we found that firms have experienced significant premium and excess increases and the options available at renewal are limited, due to shrinking insurer capacity in the market.

“

The concern is that increasing PII costs, combined with overall regulatory costs, could result in firms exiting the market

We appreciate that it is a commercial decision for insurers to decide their risk appetite and pricing of risks, however this compulsory insurance is a significant cost to firms. Whilst basic details of a firm’s PII policy is submitted through their RMAR, what cannot be gathered from this data is insight into the scale and impact of these costs, the difficulties and pressures faced by firms to secure cover and the wider consumer implications. It is evident that increasing claims management activity on historic mortgage sales is increasing perceived risk and insurers are concerned about business that is not prime lower LTV residential first mortgage advice, as FCA has expressed concerns on markets such as second charge, later life and debt consolidation.

Fit for purpose?

With a trend towards hollowing out of policies, consumers are also not always receiving the protection from PII that was intended when the rules were written. These issues are not going away. The ‘Decile 10’ review shows that the PII market was not commercially sustainable in the years prior to 2018, and the realignment that has come out of it is not a temporary adjustment. Similarly, the changes in limits to compensation for the FOS scheme that have produced upward pressure on premiums in the financial services sector are a permanent change in the market.

Regulated financial advice remains valuable and in demand; however, it needs to be available and accessible to all consumers, not only now but as we emerge fully from the current pandemic. Coronavirus has for many consumers increased personal debt, missed mortgage and loan payments and financial circumstances have become more complex.

A financial advisor or an intermediary’s knowledge of the market and ability to match a customer’s needs to a suitable product is important for the consumer to obtain an appropriate mortgage, to discuss protection needs and to secure long-term financial resilience.

Government lockdown has also impacted the self-employed and these

“ Many PII contracts have also become ‘hollowed out’ in recent years, with greater excesses and other conditions reducing the amount of cover for greater premiums

borrowers will need financial advice and access to specialist lenders, with many of these products only available through intermediary distribution channels. The concern is that increasing PII costs, combined with overall regulatory costs, could result in firms exiting the market, or limiting the areas of product and advice they are prepared to consider. Any reduction in the number of firms available to provide financial advice could cause unintentional consumer detriment.

Given the issues that exist within the market, a better system of pooling consumer compensation is needed, which produces less volatility, both in terms of premiums and ‘hollowing out’ of cover.

This is necessary not only for the commercial health of the advice sector but also for consumers.

NACFB | 43

Special Industry Feature Insight

The elephant in the room Advising your clients ahead of Brexit Chris Findlow Head of Partnerships MarketFinance

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he impact of coronavirus has been the focus of most businesses since we went into lockdown in March.

Government support in the form of loans, grants and the furlough scheme have been a lifeline to many, but with funding coming to an end, business owners and their advisors need to be thinking ahead to the next challenge: Brexit.

At MarketFinance we’ve seen agility from SMEs across industries, and many businesses now have the opportunity to grow and expand. With the added complications of Brexit returning to the foreground and a trade deal less tangible than ever, it’s an important time to make sure your clients’ finances have the adequate support and facilities to weather all potential outcomes.

What Brexit means for your clients Brexit could have longer lasting consequences on businesses than COVID-19. These will be unique to the UK, and the suggestion that the effects of leaving without a deal could be hidden behind a global pandemic seems short-sighted to me.

One of the biggest areas of uncertainty surrounding a no-deal Brexit are what tariffs and customs checks businesses will be subjected to. Defaulting to the World Trade Organisation rules will mean hold ups and financial uncertainty for many, as trading with the EU becomes more expensive and time consuming. Supply chains may also be impacted.

Assess their risks Helping your clients understand which areas of their business are most at risk to the effects of a no-deal will be critical to their survival. Their financial planning needs to map out different scenarios and identify 44 | NACFB

sources of funding they can rely on to make sure their futures are secure.

Adequate financing with flexible options will be of particular importance over the coming months and years. Lender risk appetite is weak at the moment, and with the end of government-backed, low interest CBILS facilities, SMEs are at risk of being left unsupported.

Finding providers with a willingness to lend and a genuine interest in helping the UK’s largest group of businesses could mean the difference between success and failure.

Prove your expertise In January, a YouGov survey found that four in ten SMEs didn’t feel ready for Brexit – coronavirus can only have exacerbated that.

Uncertainty is the key word in discussions about Brexit. The most important thing to offer an SME client now is making sure they can be financially resilient against the impact of increased export duties and lengthy customs checks.

The ability to adapt to potentially chaotic change has been paramount for every industry. This is an opportunity to play a key role linking your clients to lenders who can help them with anything from loans and invoice finance to restructuring.

“

In January, a YouGov survey found that four in ten SMEs didn’t feel ready for Brexit – coronavirus can only have exacerbated that

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Barclays Bank UK PLC. Authorised by the Prudential Regulation Authority, and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No 759676). Registered in England. Registered no 9740322. Registered Office 1 Churchill Place, London E14 5HP. Barclays Bank UK PLC adheres to Standards of Lending Practice monitored and enforced by The Lending Standards Board. Further details are available at www.lendingstandardsboard.org.uk Item Ref. 9917163_UK. July 2020.

Broker Voice

Striking the right match Launching a brokerage in a pandemic

Ishbir Singh Rakhra Director Commercial & Bridging Matchbox Finance

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pening any business in 2020 would have caused a cocktail of emotions from anxious anticipation, to elation, to disbelief and yelling profanities at the stars, to a now silent, solemn fire of determination. And I am not an exception to this roller coaster. Without divine knowledge, or a degree in epidemiology, no one saw this to be the outcome of 2020. For better or worse, we pressed on with opening Matchbox Finance knowing that if we can make it through this firestorm of global proportions, we will withstand anything.

Square one Our humble origin story began with over a decade of running our East London estate agency. Tired of blocked sink tenants and over eager vendors who believe their home is worth 50% above market value (sigh), we re-routed our path to land a development agency which in turn brought us to launching Matchbox Finance.

Notwithstanding the current madness, opening any business is a daunting task when considering the breakneck evolution which all industries are generally experiencing. From website creation to marketing and CRMs, the breadth of knowledge needed has grown considerably. It is possible to outsource to relevant service providers, but they all come with a price tag which a fledgling business can ill-afford. So, we immersed ourselves in website design, analytics, campaign management, tech advancements and anything that could give us a leg-up. We turned to any affordable resource including industry associations, YouTube, Skillshare and any other repository of knowledge we could find.

Beginning at an NACFB roundtable, I was able to discuss, unreservedly, about our personal and business ambitions, and with their excellent guidance, we navigated the early days of compliance and setting up.

Although technically ready, we faced the dilemma of either becoming directly authorised or joining a network. And for us, joining a network outweighed the costs at this early stage. Although compliant, our inexperience meant early difficulties around learning lenders’ criteria and inefficiencies chasing rates. By leveraging our networks’ criteria knowledge, we became more confident, effectual, and allowed more time to focus on quality client interactions and business growth.

Enter COVID-19 I didn’t want to mention it, as I am similarly bored with the incessant commentary, but I would be amiss had I failed to mention the permanence of its impact. We have all experienced difficulties in contacting BDMs, extended call wait times and a volatile marketplace, so I won’t bore you with a diatribe about

it. However, the announcements from Schroders and PwC to allow staff to continue working from home indefinitely, has created an alternate reality of the workplace architecture. The question is, how do we mere mortals respond to this growing, irrevocable change to the fabric of working life?

Maintaining a business purely on telephony alone is ill-advised.

We experienced a glaring difference in the quality of initial and ongoing interactions with BDMs and clients alike, between those with whom we have ‘Zoomed’ and those with whom we have only maintained telephone conversations. Effort was employed to develop active visual engagements to build stronger and longer lasting relationships. We have chosen to embrace the Zoom culture by hosting virtual meetings throughout the case lifecycle.

To this end, it is important to invest in the technology. Zooming from laptops tend to give unflattering viewing angles, so an eye-level set-up has helped us to stand out.

This new communication format has a great by-product. It has raised the accessibility of professional advice traditionally reserved for the wealthier clientele. To physically host a meeting with the client’s broker, solicitor, and tax advisor would have been prohibitively expensive for most. However, with the wide adoption of virtual meetings, that collaborative advice is not only effortless to arrange but affordable too. We have actively sought to team up with fellow professionals to cooperate and create new touchpoints and added value for our clients.

True business innovation is progressively difficult and expensive to establish, regardless of the industry and this exceptional year we have all endured. Could I have changed any of it? No. The only meaningful action we can exhibit is how we choose to flow within our own realities. I hate to regale you with clichés of adaptation and the power of change, but it has never been more pertinent when considering the effects of the recent act of God. By our singular human nature, we are inherently adaptive; however, embracing technology is merely to embrace a tool, it is how we use it which will define our greatness.

And us brokers are pretty great.

“

By our singular human nature, we are inherently adaptive; however, embracing technology is merely to embrace a tool, it is how we use it which will define our greatness

NACFB | 47

Broker Voice

From the frontline Are we doing enough?

Terry Dean Director Commercial Sense Limited

I

suspect like many of my NACFB colleagues across the commercial finance broker community, my day starts with a read through of the NACFB’s Morning Briefing on my mobile phone.

Why do I do this? Perhaps there is a bit of insecurity there, in that I like the fact that I'm still connected to a much bigger world of information, despite the fact that our brokerage is small, albeit perfectly formed. However, much more important is the ability to quickly switch on and connect to what’s important in the fast-paced and ever evolving world of SME finance and the challenging economic backdrop in which it exists.

One such article caught my attention recently, which detailed the results of a survey, commissioned by Hitachi, where it stated: “61% of SMEs are looking to cut costs, up from 39% at the start of the year. The number of smaller firms targeting cashflow improvements as a priority rose from 22% to 32%, while those reviewing their borrowing commitments nearly doubled to 21%.”

Rather than nodding sagely in agreement and moving onto the next article, on this occasion it made me pause and challenge myself to ask, am I doing enough with my clients to support this important change of focus?

Inward reflection Such self-reflection, is something I try to do regularly, as I have done through my career in financial services, always trying to remember that it’s the client that pays my bills. This was much easier when I was salaried, but now much more sharply in focus, given I’m responsible for generating and collecting the income 48 | NACFB

myself. Actually little has changed, in that I still try to give the best advice possible and adopt the role of trusted advisor the only difference being I now access a much wider range of products and services to support clients in their cost saving ambitions.

Again, a timely reminder that during the current crisis, am I holding myself true to the principle of being a trusted advisor by following my own five golden rules: 1. Pursue a relationship, not a transaction; 2. Be both interested and interesting and don’t be afraid to offer up opinions and suggestions, especially those that add value to the client and not yourself; 3. Question whether the want is really the need, if you can satisfy both then job done; 4. Deliver on your promises, whilst communicating professionally along the way; 5. Be consistent in your behaviours, especially in an inconsistent market; 6. Be credible, honest and reliable; 7. And finally, learn to count!

Stronger together So, what can we do as a broker community? Firstly, we can assist our clients in the search for new debt, to make sure they get a choice of appropriate funding solutions, explaining clearly and simply the pros and cons of each finance offer – this is the minimum we should all do – and dare I say the principle reason we exist.

However, we are finding more and more that the debt a client already has may no longer be fit for purpose and the Ts and Cs,

which whilst relevant in the past, may not be appropriate now.

How many of us sit down with clients and review facility letters in detail and advise on potential risks, future breaches, and potential pricing impacts?

Indeed, the pricing of past debt may have been appropriate at the point it was drawn, perhaps when serviceability was not as strong or proven with LTVs much higher, but is it still appropriate today?

Possibly the best service we can provide is to identify debt that has

been taken and benchmark it against today’s marketplace. If it is expensive, work with the client to refinance it. Where we find that the funds in place are cheap, the advice should then be to ‘hang onto it for dear life’ – perhaps over time CBILS and BBLS will fall into this latter category.

Reflecting again as I write this, I’m sure we still haven’t done enough and should strive to do more, so if you have any good ideas or want to know more about what we have done, I’m always happy to hear from my fellow professionals.

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NACFB | 49

Opinion

Maintaining property momentum Backing UK real estate Tony Geary National Head of Business Development Barclays UK

S

ince the start of UK lockdown in March, the real estate sector has faced unprecedented challenges, from house sales delays to site closures to difficulty accessing building materials – and, more recently, getting the sector back to business after being given the green light from the government.

Through our network of BDMs, we work closely with brokers to develop tailored financial solutions for their residential, commercial and industrial real estate clients – and we’ve been there during the pandemic with a package of support including capital repayment holidays and restructuring of facilities. We’ve backed clients facing reduced income from myriad factors, including commercial tenants being unable to meet payments while trading is paused and residential tenants seeking rent reductions due to unemployment or furlough.

Ready to reopen As the real estate market gathers momentum in a safe, socially distanced manner and we see resumption of property valuations and other related activities, an array of new challenges have presented themselves.

Clients’ cash flow during this period of uncertainty has diminished.

While contracted sales have continued and many developers have started selling online, new sales have been impacted due to office 50 | NACFB

closures – and there have been disparities in rent collection levels for property investors ranging from 25% to 95%. Some sectors which service hospitality, leisure and retail businesses have faced the largest challenges.

Building business resilience Government-backed schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS), as well as our existing bank loans, were just some of the ways Barclays had been there to support clients during such an immensely challenging time – and we continue to do so. As well as capital repayment holidays, we

“

New sales have been impacted due to office closures – and there have been disparities in rent collection levels for property investors ranging from 25% to 95%

also provided covenant waivers and amendments, a series of virtual events and an updated buy-to-let proposition for limited companies.

Lending for buy-to-let properties amounts to around £40 billion per year, but there has been a reduction in individual landlords buying properties due to the phased removal of tax for landlords on mortgage interest payments but I still believe there is plenty of opportunity within this segment. Last year, Barclays launched a new proposition to help landlords purchase up to three properties up to a value of £1 million through a limited company. Whilst this has been successful, we wanted to help more of your clients to invest and that is why we have now reduced the income level to £25,000 from £75,000 for this proposition.

By making this important change, we’re strengthening our real estate offering, opening it up to clients looking for investment opportunities and a stepping-stone into the real estate sector.

Future outlook Whilst we remain positive about the outlook for UK real estate, we won’t be able to fully quantify the impact of the coronavirus until we get through the crisis. The length and scale of the pandemic will determine the long-term changes to the sector – some of which will hopefully be for the better.

Whatever the future holds, our experience of banking through historically challenging periods gives us the tools and knowledge to continue to support brokers, helping you and your clients to navigate this uncertain period. So far, our teams have supported 450 clients with capital repayment holidays with an approximate value of £300 million. But our BDMs offer much more than financial support. They’re always looking to support you with the latest insights, coupled with longstanding market knowledge across multiple sectors.

Look to the future with bridging finance With property investment opportunities currently wide open to investors and movers, bridging finance is ideal for being that one step ahead. Our fast, personalised approach to short-term bridging, can help to unlock finance with absolute speed.

We promise to approach each and every case purely on its merits, giving your situation the attention it deserves. Get in touch today to find out more.

Visit us westoneloans.co.uk

Give us a call 0333 123 4556

West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 510024. Certain types of loans are not regulated, for example loans for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information Commissioners Office. Registration Number: Z2651210. West One Loan Ltd is registered in England and Wales. Company Number: 05385677. Registered Office Address: 3rd Floor, Premiere House, Elstree Way, Borehamwood, Hertfordshire, WD6 1JH.

NACFB | 51

Listicle

5 reasons to attend the NACFB’s Virtual Expo

I

n June, the NACFB held its first Virtual Expo, which saw nearly 1,800 delegates participate on the day. Off the back of this success, the Association is returning with an even bigger and better online event this autumn – featuring more insight, a live expert panel session, and a wider range of content exclusive to attendees.

Finance professionals will be able to access the event from 11.00am on Wednesday 28th October. Once live, you will be able to view – and engage with – a live panel session featuring industry titans who will assess just how pivotal the commercial finance community will be in Moving Britain Forward.

The autumn Virtual Expo will be free to view, but you will need to pre-register as the event requires a password to enter.

The password will be sent on the morning of the event. You can register online at commercialfinanceexpo.co.uk And in case you needed any more persuading, we’ve compiled just five reasons why you should put Wednesday 28th October 2020 in your diary.

1. Join the debate Featuring industry leaders from across the finance landscape, the event’s virtual panel session will explore the challenges the market is currently facing as well as a look to the future. To help spark debate further, this panel session will be hosted live to allow viewers to ask questions and share their views.

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2. In the round Attendees will be offered the opportunity to take part in virtual roundtables with the Association’s support sponsors.

Participants will be able to join a table virtually and partake in a ‘commercial clinic’ with representatives from across the lending spectrum. The sessions will be live and provide a platform for deal discussion, product updates, and networking.

3. Build your business network As well as the live content for you to explore throughout the day there will also be a whole host of exclusive content from all the exhibitors already signed up to be at March’s physical NACFB Expo.

Treat the virtual day as you would the physical NACFB Expo and be sure to engage with the exhibiting lenders.

4. The big reveal The Association will also be unveiling the shortlist for the first ever virtual NACFB Patron Awards. The awards will seek to formally recognise those lenders that have supported the trade body’s Members throughout the pandemic, and you can be among the first to find out who features on this year’s shortlist.

5. Launch of 2021 events With the events landscape not looking quite like we had planned for 2020, we have been working hard to ensure that we can kickstart 2021 with a jam-packed events calendar.

The NACFB’s 2021 events calendar will be launched at our Virtual Expo. Be sure to sign-up early to secure your place.

So, yes, whilst it may not be Birmingham’s NEC, this October you can sit back with a cuppa, don a set of headphones, and be sure to share your insights, responses and views via the event hashtag #NACFBVirtualExpo. And whilst you’re there, why not sign-up to next year’s physical NACFB Expo at the NEC on Wednesday 24th March.

Five Minutes With

​ ive F Minutes with: Tony Smedley Tony Smedley Head of SME Business Development Channel Capital Describe your role in ten words or less?

A combination of challenge, coaching and building for the future.

What advice do you have for the modern commercial finance broker?

When market competition is great, differentiation is key. Taking the time to understand client’s needs and wants can often deliver a far higher level of value for that client.

What are the key elements to maintaining a strong lender/broker dynamic?

A broker needs a partner not just a lender. This means that there is a clearly articulated and consistent credit appetite, certainty of delivery and regular effective communication.

What is your favourite piece of management/leadership advice?

It is not what we say that matters, but what is actually heard by others.

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What has been your lockdown essential?

My bike. Without my daily circuit around the village, I might not have gone outside at all.

What changes do you hope to see in the new normal?

I saw Feeder at the Birmingham O2 last November. It was special because it was the first time that I had been to a gig with my daughter.

If you could have dinner with anyone from history, who would it be and why?

I’ve missed the personal interaction with clients and team members, I want to get that back whilst incorporating the strengths that technology brings. I am disappointed that we did not have the ability to all come together for the NACFB Expo, I hope to have the opportunity to meet you all face-to-face soon!

I know that I am probably supposed to pick some great statesman who has changed the world or a scientist that has achieved great strides forward in the way we live. However, when I go out for dinner, I want to have a bit of a laugh too, so why not pick Ian Botham.

He likes to eat, drink and has a lot of good stories to tell.

What is the best live music experience you’ve ever had?

Where is your favourite place in the world?

Live music is a great thing to experience and I have seen a lot of bands. However, the one that means the most is when

Florence, a couple of years ago we stayed in a stunning spot overlooking the city and it was really special.

Celebrating 10 years of specialist lending solutions

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HMOs Available up to 6 beds

Limited Company Landlord No limit on number of shareholders under the age of 21, subject to them being a director’s dependant

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Portfolio landlords A dedicated team to do the heavy lifting for you

FOR INTERMEDIARY USE ONLY.

Contact your local BDM 0800 116 4385 precisemortgages.co.uk

Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549).

Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

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Owen Bentley | Business Development Manager T: 07799 066 943 E: obentley@utbank.co.uk

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