FEATURE
Interview with
Neil Logan Partner, Wilson Nesbitt
Wilson Nesbitt advises the largest banks and financial institutions operating in the Northern Irish market and beyond. Their banking experts advise on volume residential lending, SME, corporate lending and real estate finance. Neil Logan, Partner for Banking & Financial Services, reflects on the past 18 months.
their funds back in which meant the funds could come back out to borrowers. However, this came with challenges: it was a new area of banking which meant we had to educate ourselves on what was initially a moving target. Ultimately it was an incentive for lenders to lend: it was good for the market. Most CBILS loans have since been paid back.
Has the pandemic impacted Northern Ireland as a business hub? The effects of the pandemic will resonate down the years, but it gave Belfast a rare opportunity to shine: the brain drain was stalled for two years; NI is now the only jurisdiction, post-Brexit, to be both in the EU and the UK; and there’s a huge draw to move businesses here due to education standards, low cost of living, improved quality of life, strong work ethic and high levels of employer loyalty.
What are the main lender types? We now see three types of lenders in NI: pillar banks, alternative lenders, and very high interest private equity. Alternative lenders have been more optimistic and commercial: they have come into the market with a fresh set of eyes and no burn marks from the 2007/2008 crash, they are challenging the pillar banks. Borrowers are going to alternative lenders happy to pay one to two percent more interest because they have smaller credit committees and tighter turnaround times. It’s creating a really healthy market in Northern Ireland. When it comes to development finance, there’s a huge gap for them in the market – it appears some of the pillar banks have given up on development finance. If you’re going to develop a scheme for high demand housing, for example, you can complete within 18 months where the lend is about 60% of the loan to value: it’s a safe lend by any account. Why not do the deal if everything stacks up?
Has this affected lenders and borrowers in NI? At the end of March 2020, there was almost a moratorium on lending with many investors withdrawing investment funds. At one point we were two days’ away from a two million pound refinance and the investors got anxious and that was it, the funds were withdrawn. This was compounded by the land registry literally closing, almost overnight, which virtually froze everything for two to three weeks. Since then, there has been an air of positivity about lending and borrowing here, thanks to the likes of a strong existing lender base, new lenders coming to town and the Government CBILS scheme helping businesses to get back on their feet. I have never seen as much money knocking about the Northern Ireland market – access to finance is very good. Did CBILS lead to greater liquidity in the market? The CBILS scheme was a godsend for clients. It gave peer-to-peer lender clients confidence to go to their investors and get additional funding. As it had an 80% government-backed guarantee the investors were happy to put
What opportunities lie ahead for those coming to NI? I saw a term sheet from an alternative lender offering an interest rate of 7.5%; this would’ve been unheard of two or three years ago. There’s real competition in the market and it’s going to heat up over the next two years. Clients that have come from overseas to do business aren’t leaving, they like it here. These businesses have low default rates on their loans, generating high yields. They benefit greatly from the smaller, tight knit community. Having a reputation for delivering on lending promises, quick turnaround times, being easy to deal with and having commercial views is the key recipe for becoming a busy lender in Northern Ireland.
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Businesses will work with the same legal professionals, so you’re dealing with the same people all the time. Have you witnessed growth? One of our clients who entered the market four years ago has seen exponential growth. They have just taken additional office space in their central London office and are constantly recruiting graduates and experienced lending professionals. They have grown to a size where economies of scale come into play: they are more efficient, they know the market and they are confident and comfortable, taking on more loans – and better loans – as a result. They have reduced their interest rates and their package is very attractive. What is your advice to borrowers in NI? Be an advocate. There is property on the market that investors from the UK and the rest of the world would benefit greatly from and they might not even be aware of the opportunities. We’ve got the right conditions for success. Some recent high profile deals highlight the demand for some of the bigger ticket transactions in NI. For businesses buying here, their entry level is going to be lower than any other top city, but their yields are going to be higher. The opportunities for investing in Northern Ireland are huge.
“The opportunities for investing in Northern Ireland are huge. We’ve got the right conditions for Success.”
