Commercial Broker (NACFB Magazine) April 2020

Issue 79 APRIL 2020

Broker COMMERCIAL

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

18 FINDING YOUR RHYTHM Helping to reshape small business finance for good

34 NEW WORLD ORDER A duty to guide businesses through to the other side

Apart, together On the frontline of critical business support

38 TOWNS AND GOWNS Why HMOs will always have a place in university towns

50 EMERGING STRONGER SME resilience is dependent on the right support

Contents

In this April issue NACFB News

Special Features

4 6 8 10-11 12-14

24-25

Note from Graham Toy Updates from the Association Note from headline sponsor Industry news round-up Patron news

Alternative Bridging Corporation: Seize the moment 27-29 NACFB: Flattening the curve 30-31 Pivot: The times are a changing 32 Alternative Commercial Finance: Investing in society 34-35 Arbuthnot: Operating in

a new world 36 Rivers Leasing: A new

lease of life 38-39 OneSavings Bank: Uni days

Industry Insight 40-41

42-43 44

18 Case Study 16

Salboy: A foot in the door

Patron Profile 18-19

Liberis: Find your funding rhythm

Compliance Update 20

British Business Bank: Guaranteeing future enterprise Finsec: Building confidence Hope Capital: In safe hands

Opinion & Commentary 46-47

SME Funding UK: Ethical broking 48 ThinCats: Taking care

of business 50-51 Dame Teresa Graham DBE:

Be the change you want to see 52-53 Oblix Capital: A prefab future?

54 Paragon: Taxing times 56 Listicle: Self-isolation essentials 58 Five minutes with:

Emily Driscoll, Relationship

Director, Shawbrook Bank

Philip Ross Solicitors: Alicia Pattihis – Greater fraud awareness

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

NACFB: Your window to the world

Magazine@nacfb.org.uk MACKMAN Design & Production T 01787 388038

Ask the Expert 22

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mackman.co.uk

NACFB | 3

Welcome

Graham’s Note

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must caveat this edition of Commercial Broker by outlining that in our current climate, both our lives and the news are moving at an incredible pace. Nonetheless, we have endeavoured to ensure all content is as up to date as possible ahead of the print deadline.

With that in mind, last month – and just four weeks into the job – Rishi Sunak delivered his first Budget against the backdrop of a worsening coronavirus outbreak. The measures he announced then, and his subsequent support packages for UK businesses, are quite unprecedented and unlike anything I have seen in my lifetime.

I believe amidst the widespread suffering, the NACFB community of brokers and lenders have a unique opportunity to stand tall and support SMEs, in what for many, will be their darkest hour.

Graham Toy CEO | NACFB

I also seek to remind you that your trade body is here for you too.

Over the last few weeks, we have championed the role of the finance intermediary before the Treasury, the Bank of England and the British Business Bank – and we continue to do so on your behalf.

I implore all our stakeholders to lean on us for clarity and guidance during these difficult and worrying times, for there will doubtless be thousands of SMEs seeking to lean on you and your services too.

Only by pulling together as a community can we lighten this load.

To be honest, I have never been prouder of the work our Members and Patrons are undertaking, and I very much look forward to seeing all of you on the other side where I hope to toast to our collective efforts, our community’s resilience and, above all, our health.

Whilst we may currently feel distinctly apart from one another, we remain very much together, bound by principles of professionalism and a common duty to help fund UK business.

Stay safe and well.

4 | NACFB

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NACFB News

Association updates for April 2020

NACFB leads industry response to COVID-19 outbreak Association drives proactive initiatives and postpones flagship events

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month after the COVID-19 outbreak reached pandemic status, the NACFB continues to lead – and form a central part of – a range of industry measures and initiatives designed to offer complete support to our broker community.

In March, we announced a guarantee of free membership for all existing brokers for the next four months. The Association will not be running direct debits for membership fees, nor will we seek to latterly accrue payment. We want our loyal Members to be able to lean on us during this difficult time and feel supported, not just in terms of our service, but financially too.

The NACFB maintains regular advisory dialogues with the Treasury, the Bank of England and the British Business Bank (BBB). We form part of a small cohort of accredited partners within the Government’s new Coronavirus Business Interruption Loan Scheme (CBILS) launched last month. We have also established an online COVID-19 hub, with daily updates alongside relevant news and information.

The hub can be found via nacfb.org/COVID-19

Raising SME broker awareness

NACFB event postponements Owing to social distancing measures, the Association has postponed all upcoming events until later in 2020. This includes both our annual NACFB Commercial Finance Expo, set to be held on 17th June 2020 at Birmingham’s NEC, and the inaugural Commercial Broker Awards, set to be held on 23rd April at Edgbaston Cricket Ground, also in Birmingham.

The NACFB Expo will now be held on the new date of Tuesday 22nd September at the NEC. All bookings have been transferred to this new date and all existing registrations will remain valid.

The Commercial Broker Awards will now be held on Tuesday 6th October at Edgbaston Cricket Ground. Award submissions have now been reviewed by both Patrons and the independent judging panel. The full broker shortlist will be announced soon.

Our Funding Future Growth Healthcare and Professional Services finance forums, set to be held in Coventry on Wednesday 13th May, have also been postponed.

The NACFB has tripled all online advertising spend for its findsmefinance platform, part of a proactive campaign that seeks to enhance national awareness of the Association’s brokers, positioning them as a lifeline for coronavirus-stricken SMEs. The findsmefinance platform has also undergone a brand refresh in a further attempt to increase visibility.

Keeping you in the loop

The free broker directory enables UK businesses seeking finance to simply filter their funding requirements by loan size, type and location and are then presented with a range of the Association’s commercial brokers to approach. All full NACFB Members that hold FCA authorisation are eligible to sign-up and can do so in minutes via findsmefinance.co.uk/broker

Since the COVID-19 outbreak, our daily NACFB Morning Briefing has received record levels of engagement, positioning itself as the go-to source for reliable information. All the latest industry developments and news, as well as updates from the NACFB, break through here first. Anyone can sign-up via nacfb.org/morningbriefing

6 | NACFB

The Association’s London head office remains closed, meaning there will be no physical presence at 33 Eastcheap until further notice.

By implementing a remote working plan for all NACFB staff, full operational functionality continues unimpeded.

Giving cash flow a boost with asset finance We understand that without cash the vision of growing a business can quickly become a blur.

Our straightforward capital release options can help businesses unlock cash held in existing assets and gain a clear perspective on their finance.

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Note from our Sponsor

Remaining by your side We’re growing our product range and team to support your clients

Andy Bishop UK Director Commercial Broker Development, SME & Mid Corporate Banking Lloyds Banking Group

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n the current global environment, businesses will need to continue to balance investing in growth with weathering turbulent financial conditions. Increasing pressures on cash flow in these challenging times means businesses are having to think differently about how they finance their future activity in order to compete.

offer specialist teams for the provision of Invoice Finance. Brokers who refer their clients to us can receive a 40 per cent share of the Invoice Finance service fee for the lifetime of the bank’s relationship with the client. These contracts are zero month, have no minimum service fee and have a notice period of only one month for the first six months.

Likewise, we offer specialist teams for brokers offering Asset Finance provision. Whether clients are looking to invest in plant and machinery or commercial transport, our hire purchase and leasing solutions can help support their growth plans.

Supporting wider opportunities for your clients Our BDMs can also assist with connecting clients to our Private Banking teams for those who have bespoke personal lending requirements, and with Lloyds Bank Corporate Markets for clients who require commercial off-shore borrowing requirements through Jersey, Guernsey, Isle of Man, Cayman and British Virgin Islands.

Working with brokers, gives businesses the opportunity to consider what those financing options might be. The brokers we work with have access to a dedicated and locally-based business development manager (BDM) for every deal, who ensures that they fully assess and understand the clients’ needs in order to shape and personally deliver committed lending solutions.

Commitment to service

With the increasing concern of COVID-19 we have announced up to £2 billion of arrangement fee-free finance specifically to ensure that Britain’s SMEs have access to additional finance to overcome any impact this causes to their cash flow.

Our commitment to creating long-term, sustainable relationships that benefit both broker and client has been recognised through the NACFB Awards for the last eight years and we are proud to continue our sponsorship in 2020 for the third year running.

To support brokers, we have extended our turnover ceiling from £25 million to £100 million and at the other end of the scale, we have an additional 40 local business development managers to support lending requirements of less than £250,000.

We also have accredited specialists in sectors ranging from manufacturing and real estate to healthcare and legal, who can provide the expertise to source the appropriate solutions for your clients.

In addition to our dedicated business development managers, we 8 | NACFB

If you would like to find out more about what Lloyds Bank can offer or to join our Broker panel, please visit Lloydsbank.com/ businessintermediaries

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Industry News

Industry News 1. Government urged to extend FCA powers MPs have called on ministers to give the Financial Conduct Authority (FCA) enhanced regulatory powers to ensure unregulated firms do not capitalise on the coronavirus crisis. In a letter to Chancellor Rishi Sunak, Seema Malhotra and Kevin Hollinrake said that they “fully recognise and support” the efforts of the government – and banking and insurance sectors – as they look to “get ahead of these very fastmoving events.”

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closures in the wake of such an outbreak are rare. In a letter to MPs on the Business, Energy and Industrial Strategy Select Committee, the ABI said standard policies excluded cover for such losses and that few businesses paid the extra to include such cover.

4. Coronavirus will cause ‘a global recession this year’ Ratings agency S&P Global warns that measures to contain coronavirus will cause a global recession this year and see a surge in US corporate default rates in the next 12 months. They shared in a March report that cash flow slumps, stricter financing conditions and an oil price shock will damage creditworthiness. They predicted a surge in defaults, with a default rate on nonfinancial corporates in the US that may rise above 10% and into the high single digits in Europe.

2. Tech investment stalls amid virus restrictions Investments into the UK’s tech start-ups could drop due to travel restrictions from coronavirus and instability in the financial markets, venture capital businesses have warned. Investors are being forced to cancel meetings with start-ups and turn to video conferencing instead. Reece Chowdhry, a partner at RLC Ventures, said: “The ecosystem relies on a lot of events.

Theyʼve all been cancelled, basically.”

3. Most firms not protected by insurance The Association of British Insurers (ABI) has warned that many of the firms set to lose sales or shut down because of the coronavirus pandemic are not protected by their insurance, saying policies covering 10 | NACFB

mortgage applications, has meant nearly three in five (59%) say it is much harder being a landlord now than five years ago.

5 5. Half of UK landlords consider divesting from the rental sector Aldermore’s latest buy-to-let research, surveying 1,000 UK-based landlords, reveals that nearly half (48%) of landlords are considering divesting due to an increase in regulation and rules. The rule and regulation changes seen recently, including the introduction of a 3% stamp duty on rental and second properties, changes to taxation and more complex

6 6. Virus sees carmakers suspend production Coronavirus has caused the suspension of production at all of Volkswagen’s European plants while Nissan has suspended production at its Sunderland factory, Britain’s biggest car plant. Mercedes-Benz owner Daimler will stop most European production for at least a fortnight, while Ford is halting production at its European plants – though its British engine-making operations will continue to operate for the time being.

7. New regulatory forum will help financial services plan ahead The Treasury has announced that a new forum of regulators will be set up in order to better implement policy initiatives.

The Financial Conduct Authority, Bank of England, Prudential Regulation Authority, Payment Systems Regulator and the Competition and Markets Authority will team up to form the Financial Services Regulatory Initiatives Forum which will also be attended by the Information Commissioner’s Office, the Pensions Regulator and the Financial Reporting Council when required.

9. Small tweaks could give start-ups better access to cash

8 8. Nearly a quarter of SMEs declined property finance Research conducted for NACFB Patron Together indicates that nearly a quarter of UK SMEs have struggled to find the funds to move or expand over the past five years; while the 24% that did manage to secure funds found the process difficult.

Finding a suitable property was the biggest problem with 30% saying it was an issue – but the next four biggest challenges were all driven by issues with lenders and raising finance.

Richard Halpin, founder of The Enterprise Trust, has shared his proposals to improve access to finance for small firms.

He calls for simplification of the process of qualifying for the Enterprise Investment Scheme and more advice to be provided

by Startup Loans to businesses when they finish paying their loans back.

He added that data sharing between incubators and accelerators should be compulsory so the best schemes can more easily be identified.

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10 10. Bailey urged to clarify powers over unregulated lenders MPs have called for Financial Conduct Authority CEO, Andrew Bailey, to clarify the regulatory differences which are allowing unregulated lenders and funds to treat mortgage prisoners differently to regulated borrowers. The call comes after a meeting between the regulator, MPs on the All-Party Parliamentary Group (APPG) on Mortgage Prisoners and the UK Mortgage Prisoners campaign group.

Helping you fund UK business Welcome to the NACFB’s targeted lead generation platform findsmefinance.co.uk/broker

findSMEfinance is a trading style of NACFB Member Services Ltd which is authorised and regulated by the Financial Conduct Authority 734857. We are a broker, not a lender.

NACFB | 11

Patron News

Patron News Patrons rally to support coronavirus-stricken businesses

Assetz Capital celebrates £1bn lending milestone

As the UK adjusts to the realities of coronavirus, NACFB Patrons are stepping-up to support businesses impacted by the outbreak.

Peer to peer lender and NACFB Patron, Assetz Capital, has surpassed the £1 billion mark for lending to SMEs and housebuilders across the UK, just seven years after being set up in 2013.

Lloyds Bank have implemented a range of measures as part of a £2 billion support package, including no arrangement fees for new overdrafts or overdraft limit increases, no arrangement fees for new or increased invoice discount facilities and, in some circumstances, the provision of repayment holidays.

NatWest have issued a coronavirus guide sharing how they can support through loan repayment holidays, interest rate reductions, temporary emergency loans with no fees or immediate access to deposit balances with no penalty. They’ve also announced £5 billion of Working Capital Support for those businesses that will see disruption as a result of COVID-19.

Elsewhere, Haydock Finance have launched a support fund through the broker channel that will offer refinance to new and existing customers on their unencumbered (free of finance) assets, thus releasing essential cash back into the business.

John Wilde, Head of Investec Capital Solutions, spoke of how Investec has been speaking to all their clients. John said: “The value of real long-term relationships with clients will be tested during these challenging times… [We’re] already reducing base rates on deals below contractually agreed minimums.”

12 | NACFB

Assetz Capital funds property secured loans through a growing network of more than 38,000 retail and institutional investors, who they outline have earned more than £109 million of total gross interest on their investments to date.

Around half of the £1 billion of lending to date has already been repaid on time by borrowers, thus allowing further lending on new loans to support further economic growth.

Having reached its last milestone of £500 million of lending in June 2018, Assetz has doubled its lending again in the last 20 months through demand from businesses and housebuilders alike who are being let down by the banking system.

In January, the NACFB Patron announced that £100 million had been invested through its tax-free Innovative Finance ISA (IFISA) accounts, of which there are currently 5,000. According to the latest findings from HMRC’s Individual Savings Account Statistics (April 2019), Assetz Capital held 23% of the total £366 million held in all UK IFISAs at that time.

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Patron News

Patron News OneSavings Bank shakes-up HMO proposition

JP Morgan backs bridging Patron Glenhawk

OneSavings Bank has announced changes to their HMO proposition by maximising the underwriting expertise and leveraging the combined strengths within the group.

Investment banking giant, JP Morgan, has agreed a £200 million facility with NACFB Patron Glenhawk to grow its property loan size and enter the UK homeowner mortgage market.

OneSavings Bank recently introduced a new approach to Buy-to-let and HMO valuations which included new valuation fee scales and lending based on investment value.

The new funding line will support Glenhawk’s ability to grow its maximum property bridging loan size from £3 million to £5 million to fund a mixture of residential and commercial borrowers.

Taking these measures one step further, the NACFB Patron has rationalised the HMO submission process as follows: Precise Mortgages will cover HMO applications up to six bedrooms, Kent Reliance for Intermediaries will provide for HMO applications up to eight bedrooms as standard or more by exception, and InterBay Commercial will oversee any size HMO application with no limit on bedrooms.

The new capital will allow Glenhawk to enter the UK homeowner mortgage market with its first regulated bridging product planned for the first half of this year.

Alan Cleary, group managing director for mortgages at OneSavings Bank, said: “Ultimately for brokers, these changes ensure that their HMO cases will be directed to the specialist teams that are best placed to handle them, regardless of size or complexity. Whether the cases involve investment valuations, large loan sizes or even complex company structures, we have the expertise to consider every case.

“Intermediaries are absolutely fundamental to the success of the group and pivotal in providing borrowers with successful outcomes.

Our message to them is ‘watch this space’ as there will be many more exciting developments ahead.”

14 | NACFB

Glenhawk, which is backed by Rightmove founder Harry Hill, was launched by Guy Harrington in January 2018.

Harrington said: “This is a significant milestone for us, a little over two years since we started out. J.P. Morgan is one of the world’s most prestigious financial institutions, and we are extremely excited by this opportunity, whilst also a little humbled.

“The new funds allow us to enhance our existing product range, whilst providing us with the platform to expand into markets where there is an opportunity for us to replicate our success to date, as we look to continue pushing the boundaries with what is possible in the non-bank lending space.”

Finding solutions for financial needs You’ll find Accredo refreshingly flexible when it comes to providing secured finance for your clients, often lending when others won’t. We’ll look at bridging, interest-only and fully amortising options while keeping all the facts of each case in mind. And we offer commercial loans and leases from £25,000 to £1,000,000, terms from 3 months to 10 years. Seasonal and deferred payments can also be considered.

Financial flexibility – Accredo Send your proposals to props@accredoltd.co.uk or call us on 01444 255915 for more details.

Case Study

Getting a foot in the door Providing a helping hand to aspiring property developers

Nick Russell Business Development Manager Salboy

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team of two first-time developers approached Salboy with a request to help make their first step onto the property development ladder a reality. They had interested investors pull out at the last minute, and with no property development track record and a shortage of personal funds, many lenders wouldn’t even consider them. The pair requested 100% funding from Salboy for their first development.

They aimed to develop a ground up build of two semi-detached, three-bedroom, family-style houses to the rear of a disused pub in the village of Silverton, Devon.

One of the borrowers was in the finance industry and could manage the finances of the development, create appraisals, and manage the sales process. The other was a ‘jack of all trades’ builder who had completed numerous extensions, conversions and ground up builds for other developers. However, he felt he couldn’t take the financial risk while maintaining his contracting business.

Upon meeting the pair, Salboy decided to lend these driven borrowers 100% of the funding over a 15-month term. The project was built in seven months and was sold with the sales completed within 12 months. Despite Salboy typically working with experienced developers, this project was one of the smoothest schemes they have been involved in. The new developers are now working on two larger scale developments. One is through Salboy Equity and the other they are using external funding and putting equity in themselves. With their foot now firmly in the property development sector, they are planning more schemes moving forward.

16 | NACFB

Through Salboy’s ‘build partner’ development finance facility, the company offers 100% development funding. There is no personal guarantee required from the borrower, which alleviates much of the risk for potential borrowers that are looking to complete their first development. Day one money is paid out in advance, inclusive of land, stamp duty, section 106 and other associated costs. The borrower then pays for sub-contractors and materials in advance before drawing down and invoicing in arrears on a fortnightly or monthly basis. Salboy is flexible with these payments and acts quickly to ensure all on-site activities run smoothly.

Simon Ismail, director of Salboy, said: “This was our first ‘build partner’ facility. We typically work with experienced developers, but we also want to back aspiring developers with vision for growth. We can see the benefits of helping new property developers get a foot in the door, so they can bring forward more high-quality housing.”

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There is no personal guarantee required from the borrower, which alleviates much of the risk for potential borrowers that are looking to complete their first development

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Patron Profile

Rhythmic funding Reshaping small business finance for good Stephen Yearwood Head of Broker Liberis

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he financial crisis of 2007-2008 had many knock-on effects but particularly hard hit were small businesses and their access to funding. This crisis was also the turbulent and uncertain birthplace of Liberis; a company born out of necessity.

The UK is currently home to 5.9 million small businesses and some 3.3 million of these accept card payments ­– something that will only increase as we move towards a cashless society. Yet access to finance remains a headache for so many small businesses; it is too slow, too inflexible and excludes too many good companies.

The last twelve months have seen a sharp increase in the number of banks and traditional lenders tightening their criteria. We have also seen a rise in alternative funders and although they are more favourable towards small businesses, many are becoming stricter in their policies which impacts the speed and cost of finance. All of this means that high-potential small businesses are being left in financially difficult situations and the global economy is suffering as a result.

Liberis is here to change that by helping small businesses access fast, fair and flexible finance that works with the rhythm of their business.

18 | NACFB

How we work Liberisʼ finance solutions combine technology and smart data to create products designed specifically for small businesses; they are easy to access, have one fixed cost with no hidden fees, and best of all are paid for automatically via a fixed percentage of the small business’ card transactions. In other words, small businesses only ever pay us when their customers pay them. This perfectly mirrors cashflow, which we know is one of the main reasons so many small businesses struggle to stay afloat.

We currently partner with four of the world’s largest payments acquirers including Worldpay in the UK and US. In a typical funding deal, Liberis would review a small business’ request for finance and then work with their acquirer to review the business’ card volumes.

By combining our partners’ data with open banking, we can provide our partners’ small business customers with bespoke and affordable

“

In other words, small businesses only ever pay us when their customers pay them

finance offers that can be drawn down in as little as 24-hours once contracts have been signed. In some cases, we can even pre-approve small businesses for funding which makes it easier than ever for them to access the finance they need to thrive.

Doing business ethically and responsibly We use a number of data sources to make sure we provide finance responsibly. Like many funders, Liberis reviews customers’ credit card profiles and that of the business. However, we also review more than a year’s worth of card receipts, or less if the business is younger, to understand the business’ revenue profile, bank statements using open banking technology and, where appropriate, further information such as VAT statements. This wealth of information enables us to conduct a rigorous assessment of the customer and the health of their business to ensure that we fund responsibly.

The amount we fund a customer is determined by their credit profile and evidenced revenue so we never offer more finance than the small business can afford. This, coupled with our business model whereby we only do well when our customers do well, ensures that we never throw a small business into an unmanageable debt spiral.

The future Looking ahead, the dynamic between brokers and finance providers will only evolve particularly as more alternative finance providers and lenders emerge on the scene. Brokers’ established relationships with finance providers and small businesses puts them in a powerful position but the focus must now be on deepening those connections, building trust and educating small businesses on the different options available to them outside of the normal term loans or asset finance they have come to rely on.

Brokers are also perfectly placed to support with financial inclusion, which sits at the heart of Liberis’ mission. With many brokers working with clients that often do not fit the banking or alternative funding models, other non-traditional funding options play a critical role in helping to level the playing field for small businesses, particularly those that have a shorter or a less favourable trading history.

The future of the broker market looks bright and I look forward to seeing how the relationship with alternative finance providers grows over the coming years. For Liberis, the priority for 2020 is to refine our broker channel and form the strategic partnerships that will ultimately make life easier for small businesses and help them to thrive.

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Brokers’ established relationships with finance providers and small businesses puts them in a powerful position but the focus must now be on deepening those connections

NACFB | 19

Compliance

Maintaining your shop window Your customer-facing website must be clear, fair and not misleading Dean Williams Compliance Officer NACFB

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website should act as a window into your firm, providing an insight as to the level of professionalism and standards present within. It is therefore of vital importance that the information provided on your website is accurate and meets the needs of not only prospective customers, but also the needs of your existing customers.

Whilst websites are predominantly designed to attract customers and inform them of the benefits of your products and services, they are also used by other key market participants, such as regulators and lenders. Regulators and lenders can undertake activities which include reviews of firms’ websites during their initial supervision or due diligence activities.

All firms should maintain a financial promotions log, confirming the details of all financial promotions, their approval date and the individual who approved the content of the promotion. This includes all content on your customer facing website. Financial promotions should be regularly reviewed to ensure they meet the FCA’s overarching principle that financial promotions must be clear, fair and not misleading.

What should my website contain?

When reviewing your existing customer facing website, you should seek to establish that your website: • Includes your firm’s full legal name (in addition to any trading names), company registration number, registered office address, place of registration (such as ‘England & Wales’) and 20 | NACFB

• •

•

•

•

you should also ensure your VAT registration number is clearly stated, as detailed on Companies House; Confirms your FCA registration number; Where such regulatory authorisation and/or approval has been obtained, appropriate and prominent status disclosure must be provided (more on prominence and appropriate status disclosures detailed below); Contains prominent confirmation that your firm is a broker and not a lender; Details how to contact your firm via a geographic and email address. A ‘contact us’ section is not sufficient on its own without these details; Includes information relating to any trade bodies or professional associations you are party to.

Where you provide information on products and services: • And should your website include any facts, claims, opinions or comparisons, these should be qualified or substantiated where possible; • The information should be presented in a way that is likely to be understood by the average member of the group to whom they are directed or to whom the information is likely to be received by; • You must not use your FCA authorisation status in a promotional way and must not use the FCA logo; • Information should be balanced, giving a clear, fair and not misleading summary of products and services being promoted.

Assessments of Member firms’ websites are included as part of the NACFB Minimum Standards Review. Through these reviews, we continue to support Members in enhancing the content of these important sources of information for customers, lenders and regulators, in line with our mission to embrace the highest industry and regulatory standards, to help Member firms prosper.

Did You Know?

African elephant ears are, helpfully, the shape of Africa. (and we provide development loans simply & swiftly, that’s what makes us Alternative)

0208 349 5190 alternativebridging.co.uk

Ask the Expert

The need to be more fraud aware

Q Alicia Pattihis Partner Philip Ross Solicitors

Why is fraud so prevalent in commercial finance?

Crime and fraud have always been rife in the property industry and inevitably always will be. Now more than ever, the onus is put on the professionals on the front lines to more effectively police matters.

Who should be spotting the early signs of fraud?

As the types of fraud and crime become more sophisticated it is imperative that all professionals involved in a deal work together to spot the tell-tale signs as early on as possible. The property agent is usually the first professional with whom a fraudster will have contact and their legal and compliance requirements have certainly tightened up.

Before progressing to the lawyers, the broker is next in line to scrutinise.

What can a broker do to limit or prevent fraudsters from getting away with it?

Brokers should ask about the asset being offered as security. Is it high value? Vacant? Unencumbered? Under refurbishment? Fraudsters like to keep it 22 | NACFB

&

simple and will target an asset that has as few obstacles as possible. You should also investigate the source of wealth. It’s not enough to know that they have the funds in their account. You need to know how they generated it. Trace the source, obtain documents in support and satisfy yourself of the legitimacy of the money and the client.

A

Paying attention to the story provided by the client, backing it up with documents, and ensuring that everything stacks up will help to avoid situations where a broker has inadvertently participated in the would-be borrower’s fraud.

What parts of the deal process are most susceptible to fraud?

Do stringent ID checks. Don’t just rely on the solicitor to deal with this. By that point the fraudster has probably charmed you and matters will have significantly progressed. Don’t just accept a driving licence as proof of address, get a current bank statement, utility bill or council tax bill too. Back the information received with an online search and a credit check to ensure the veracity of what has been supplied.

What’s your top legal tip?

an extra set of eyes to spot discrepancies is something that should be encouraged.

Promote separate representation. Whilst frequently viewed as a hindrance, having

What role does the lawyer play in the process?

Your solicitor should also conduct their own independent checks of a purchase, but there’s no harm in a broker doing that too. Remember, money laundering isn’t just about dealing with the money of underground people traffickers and drug dealers. It could also be money parked in tax havens which has not be declared to the authorities or proceeds of sale from a property with an ignored planning enforcement notice.

What other types of fraud should brokers be mindful of?

Not all frauds are carried out by people committing identity fraud. Though seemingly ‘innocent’ compared to identity fraud, misrepresenting personal circumstances also amounts to mortgage fraud as it still enables someone to benefit from something more advantageous on the basis of having provided (wholly or slightly) inaccurate or exaggerated information, leaving the lender exposed to higher risk.

This could be inflating income to demonstrate a better financial position or applying for a BTL mortgage against a main residence with no intention of renting it out.

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Special Feature

Advertising Feature

Seize the moment Alternative is in our name and being different is in our DNA Jonathan Rubins Director Alternative Bridging Corporation

W

e are now officially post-Brexit; a new majority Government is in power and spring has sprung.

It’s time to take full advantage of life’s opportunities whenever and wherever they present themselves, and the opportunities for well-managed short-term lenders and their introducers have never been greater.

This is a time for innovation and new products, as well as simpler systems to help you navigate a shorter route from enquiry to completion. At Alternative Bridging this is the time for us to consolidate our long-term relationships and create new friends by providing a service-led offering for both our established bridging and development finance loans and our new, unique products.

One such product is the Alternative Overdraft (AO) which has been an undoubted success and offers our introducers a cost-effective facility, not available elsewhere, that can be secured against a wide range of properties, both commercial and residential.

It is available for up to two years, and after we agree a limit, the borrower can draw all or part of the loan and then repay and draw down again and again, whenever they wish, only paying interest on the balance outstanding and a small non-utilisation fee on any undrawn balance. This avoids financing and refinancing each time an opportunity occurs and saves repetitive set-up costs.

The AO is great for the property industry and business community and can be secured against under-utilised assets. For example, it can 24 | NACFB

be secured as a second charge on the borrower’s home, or a first or second charge on investment properties and business premises.

It is not available for regulated loans.

By being available on demand, the AO can be used to finance purchases and be reduced or repaid when permanent financing is introduced. As a source of funds for auction purchases, it avoids the delay in arranging a loan each time a purchase is made and enables bids to be made safe in the knowledge that funds are immediately available. Usefully, it can also be utilised to top up the equity alongside other financing when a little more is needed.

In addition to the Alternative Overdraft, we have also introduced the Alternative Term Loan, a three to five-year interest only loan, that is underwritten by people, not algorithms and this often enables us to say yes, when others have found the circumstances do not tick their boxes.

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While many lenders have entered the market, few have introduced innovation, and their claim to fame appears to be to climb the risk profile and slide down the pricing ladder

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Where it is not straightforward, we meet our brokers and their clients and get to the bottom of the story, fully understand the transaction and create a loan which satisfies the problems

Term loans are made against a variety of residential and commercial assets for both owner-occupiers and investors, for the property industry and the business community. Recent transactions have included manufacturing, distribution and retail premises as well as residential investments, offices, buy-to-lets, holiday and student accommodation.

The ability for our borrowers to transfer from a bridging loan to an Alternative Term Loan enables our introducers to offer their clients a one-stop shop, reducing both the time and the costs of putting the loan on a more permanent basis elsewhere.

Alternative is in our name and being different is in our DNA. We are committed to breaking boundaries and being more accommodating, keeping things simple and more flexible and knowing that when we say yes, we mean it and have the funds on call and available to complete each loan. We will, and do, go the extra mile and that is why we often can say yes, when others can’t. We gather information, review it promptly and where there are questions, use our phones and get the answers. Where it is not straightforward, we meet our brokers and their clients and get to the bottom of the story, fully understand the transaction and create a loan which satisfies the problems.

It is not always possible for borrowers to easily demonstrate that they can sustainably service a term loan. So, rather than say no, we meet the borrower with the broker, and get a clear understanding of their cashflow and satisfy ourselves that interest can be serviced.

Where it is necessary for income to be established or stabilised, we will include an interest deposit to meet the debt service for the first six to twelve months.

Short-term lending has never been more competitive and while pricing is still a headline, it is not the only and certainly not the key issue. While many lenders have entered the market, few have introduced innovation, and their claim to fame appears to be to climb the risk profile and slide down the pricing ladder. This does not work! Soon enough they exhaust their funding and need to repair the wreckage they have heaped on themselves.

Our philosophy is to keep it simple, have fresh ideas, find solutions and win business by being service driven, and seizing the opportunities that our brokers provide.

If you are interested in working with Alternative Bridging, call us now on 020 8349 5190 or visit alternativebridging.co.uk for more information.

NACFB | 25

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Special Feature

Flattening the curve Intermediaries on the frontline of critical business support Norman Chambers Managing Director NACFB

R

emember Brexit? Those were the days. The speed with which we’ve jumped from a national form of isolation to more wholly individualistic measures has been somewhat breathless. For the time being at least, there is no such thing as ‘business as usual’, and those trying to maintain any sense of it risk putting vulnerable people and vital services in danger.

From here on in we can be in no doubt just how much the health of our citizens is inextricably linked to the health of the business community. Such co-dependence should come as a surprise to no one. One thing is certain; the strategies, measures and efforts deployed to remedy both now, will play a crucial role in ensuring society as we know it recovers.

Enter, Mr Sunak As the adage goes, there are decades where nothing happens and weeks where decades happen. And last month, we saw just one of those weeks. It was a week that hosted no ordinary, and certainly no ‘business as usual’, Spring Budget. Just four weeks into his new role, Rishi Sunak stepped up to the despatch box and moved

swiftly to counter the economic threat posed by the pandemic.

Here the Chancellor unleashed a £330 billion package of bailout loans alongside an extraordinary set of wage subsidies. The sheer speed of his actions has in turn created its own problems, with lenders, regulators and Treasury officials scrambling to find ways of getting money out to the companies that need it most.

How can Sunak’s aid package help ailing SMEs? What schemes should enterprises be aware of? And what role can the intermediary-led lending community play in providing the right tonic? Here we explore how, during a time of national crisis, the broker community is already well-placed to lead on the frontline of critical business support.

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Within 48-hours, the first facility had been drawn down and more than 5,000 applications were in the pipeline by the close of the week

NACFB | 27

Special Feature

Unprecedented relief For many businesses, the coronavirus crisis has triggered a race against collapse. Most have wage bills to pay and, at the same time, have seen their income flatline after the implementation of a UK-wide lockdown.

The biggest weapon in the Government’s arsenal has been the Coronavirus Business Interruption Loan Scheme (CBILS), provided through the British Business Bank (BBB), within which the NACFB forms part of a small cohort of accredited partners. CBILS (more on p. 40) evolved from the Enterprise Finance Guarantee (EFG) initiative, and its sole purpose is to facilitate the immediate injection of liquidity into small businesses with loan guarantees of up to £5 million.

On the morning of its launch, banks were still frantically racing to sign-off the terms of the loan scheme, that was due to go live just hours later. Within 48-hours, the first facility had been drawn down and more than 5,000 applications were in the pipeline by the close of the week. In early April, the official figures were released revealing that just 983 companies have had loans approved, from over 130,000 finance inquiries. Most eligible companies with revenues of less than £45 million can apply through more than 40 lenders, including some NACFB Patrons. The debt can be provided to borrowers as a normal term loan, an overdraft or invoice and asset finance facilities.

The Government will then make a Business Interruption Payment to cover the first 12 months of interest payments as well as any lender-levied charges. The BBB were quick to reiterate that the CBILS guarantee is designed to encourage more lending, rather than bail out the borrower, who will remain fully liable for the debt.

First responders The scheme was initially met with some criticism as it allowed banks to ask borrowers to provide personal guarantees. This potentially put company directors at further risk of losing their savings and property (although not, under the terms, their primary residence) if their business should fail. All accredited lenders have now waived personal guarantees as security for lending of less than £250,000, but any borrowing of more than that still needs security from the applicant at a time when SMEs are already traversing a knife-edge.

The scheme’s initial implementation has been far from flawless.

Borrowers complained from the outset that they received no reply from banks for several days and that they have been forced to wait for hours to talk to someone familiar with the initiative. To a large extent, this is to be expected, nothing on this scale has been implemented as quickly as this before – and there are a fair number of logistical hurdles too. Lenders are having to meet the increased demand with a predominantly remote workforce, all dependent on an infrastructure that is largely untested on such scales.

There are also two very important considerations included within the CBILS eligibility criteria that quickly became apparent. Firstly, an SME’s application for funding must be one that the lender would have already considered viable under normal circumstances.

Borrowers and lenders must ask themselves: if there was no coronavirus and the CBILS didn’t exist, would the application for funding be accepted based on standard eligibility criteria? Secondly, an accredited lender must believe that the requested funding will enable the SME to trade their way out of any short to medium-term difficulty. Whilst there is no expansion on this in the guidelines, it can be interpreted as meaning that the funding should be enough to keep the business running and, in doing so, allow the borrower to work their way back into a financial position capable of repaying the debt.

Additionally, the hold-up of valuers and valuations is likely to cause a bottleneck of applications waiting to be authorised. Valuations form a core component of any commercial finance deal, and social distancing measures have meant few non-desktop valuations are currently being undertaken.

The Government has, however, been responsive and is moving quickly to adapt. By the time you read this, the terms and criteria of CBILS will likely have changed again, owing in part to the direct dialogue the NACFB has maintained with both the BBB and the Treasury.

This too shall pass It is because we are human that we are susceptible to the coronavirus, and it is this shared humanity that means we will work together to defeat it. We believe this is where our broker community can stand tall, as part of a sector renowned for its adaptability and resilience. The NACFB continues to call upon lenders and industry bodies to utilise the full potential of the Association’s 2000-strong membership of commercial finance experts – all of whom remain ready and able for virtual deployment in support of SMEs stricken by the impact of COVID-19.

Whilst under-resourced lenders are being inundated with business finance applications, the intermediary community is best placed to help triage these applications by ensuring that an applying SME is met with professional guidance and financial advice. Brokers can deploy their unrivalled knowledge and experience of the required documentation and information before an enquiry is even made.

It is here that the intermediary-led route to market can answer the call in helping to alleviate pressure points within the scheme, whilst being able to fast track quality applications.

The Association will continue to make representations on behalf of commercial brokers with the British Business Bank, UK Finance and HM Treasury. These form part of coordinated efforts to strengthen ties and link arms across the industry, standing shoulder to shoulder with key stakeholders for a common cause. We are seeking to unite organisations both within and outside of the CBILS initiative, reminding them of the vital role that we can play in ensuring British businesses receive the right finance, in the right areas, at the right time.

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It is because we are human that we are susceptible to the coronavirus, and it is this shared humanity that means we will pull together to defeat it

NACFB | 29

Special Feature

The times, they are a-changin’ Will more bridging technologies result in quicker completions?

Claudia Cataldo Senior Underwriter Pivot

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t’s an inevitable question: “What is causing delays in completion times?” It would have undoubtedly resurfaced as stakeholders took to their now-postponed circuit of industry events, yet there doesn’t seem to be a coherent and collective view of the root cause and technology is all too often seen as the silver bullet.

Only a year and a half ago, at Pivot, our average enquiry to completion time was ten days. This metric is now anywhere from three weeks to three months, with market commentary and data suggesting that this issue is industry wide.

In an increasingly competitive market, most lenders pride themselves on service and the ability to turn a deal around quickly but one of the biggest challenges remains the fact that a transaction is reliant on so many external parties.

Whilst it’s easy for us to point to the number of stakeholders involved in the value chain – including brokers (often more than one), valuers and solicitors – this hasn’t really changed and we’ve always had to work together with all parties to meet the goal of speed in completing a loan.

We have seen delays recently in valuation appraisals, as well as how long the conveyancing process is taking, and on top of this demand doesn’t seem to be waning – there has been a reported eight-fold increase in bridging loan completions reported in the last decade – so this is putting increased pressure on the parties involved.

30 | NACFB

Lenders have looked to technology and innovative ideas to speed the lending process up. Many lenders are creating online broker portals and/or calculators, and face recognition has also now started to be used and document production technology is vastly improved.

But is technology really fixing the underlying issue?

It is our belief that whilst uncertainty remains in the wider economy and our future trading relationship with Europe is uncertain, transactions will continue to take longer to complete and technology will only partly help in speeding things along.

Borrowers looking at more complex transactions to extract value The use of bridging has changed to mirror what developers and investors are having to do to make a return and we are seeing

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Complex cases can take longer for an underwriter and or broker to assess, and solicitors may also be more vigil in their own due diligence, which in turn can increase completion times

less and less of the ‘vanilla’ type deals. Historically, the ideal situation would have been to purchase a property at auction, retain the property and the profit will come from the uplift in value.

Nowadays, it is much more common to see complex land assembly schemes and development transactions, with specialist lending the popular choice for refurbishment and development loans even with novice borrowers.

Complex cases can take longer for an underwriter and or broker to assess, and solicitors may also be more vigil in their own due diligence, which in turn can increase completion times.

valuations often take longer as there is just a lack of comparable evidence. There is often a nervousness in putting a number to a value and down valuations are now commonplace. This in turn means that lenders can’t provide the leverage required and the deal falls down or has to be re-worked.

Determining a risk appetite without knowing what’s ahead

Lack of data causing difficulties in the valuation process

Whilst uncertainty remains over interest rates, economic growth and property prices, lenders are making risk decisions semi-blind and there is a nervousness to take on risks. We’re already seeing increased default rates in the industry and longer debate within credit teams is inevitable.

While bridging volumes are on the up, the number of property transactions has reduced significantly since the Brexit vote and

While technology might not be the silver bullet, we should still pursue with it and be prepared for a more certain future.

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NACFB | 31

Special Feature

Ahead of a public investment boom Brokers should not be overlooking public sector opportunities Adrian Trenchard Introducer Programmes Specialist Alternative Commercial Finance

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s the economy struggles to find its feet in the new post-Brexit climate, the enhanced opportunity for leasing in the public sector is being largely overlooked by many finance brokers.

We are now entering a period of significant government investment in the public sector – as part of possibly the greatest overall investment strategy for 25-years. This will determine that projects for infrastructure, health, education, energy and communications which have been deferred or on-hold could now receive the government funding and support to proceed. There may be a somewhat reticent outlook currently in the commercial sector as the shape of our new economy emerges and we move to complete withdrawal from the EU on 31st December, however the public sector presents immediate and growing opportunities for leasing.

Add to this the pressure on greener energy alternatives, conserving valuable resources and ambitious government-led targets for the move to electric vehicles for example, and opportunities for leasing in the public sector have never been greater.

At Alternative Commercial Finance (ACF) we specialise in fully compliant operating lease solutions for education and the wider public sector, such as higher education establishments and the NHS, across a broad range of assets. We can also offer residual-based finance leases. This strategy has enabled us to offer very competitive leasing options whilst allowing our customers to move ahead now with projects such as the installation of LED lighting, efficient heating 32 | NACFB

installations, solar energy generation, battery storage units and electric vehicle charging points, modular buildings etc.

This is in addition of course, to ACF’s established market in providing leases for IT infrastructure, audio visual products and classroom technology such as interactive flat panels, tablets, laptops and telephony.

Our current client base also includes NHS hospitals, clinical commissioning groups, local authorities, and key utility providers.

Furthermore, we are approved as a preferred provider of leasing finance under the Crescent Purchasing Consortium (CPC) and the Everything IT framework agreements. Our operating lease options for schools are endorsed as compliant by both the Department for Education and the National Association of School and College Leaders.

As a leasing broker if you are not currently taking advantage of leasing alternatives to support the growth in the public sector you may be overlooking an important business opportunity and may not be providing the full leasing service to those important supplier alliances.

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The public sector presents immediate and growing opportunities for leasing

Special Feature

Operating in a new world It is vital we follow the right guidance to get through this quickly Stephen Fletcher Deputy Chief Executive Arbuthnot Latham & Co., Ltd

S

ix weeks ago, the prospect of a full coronavirus outbreak was a spectre that most of us eyed anxiously on the horizon. For many, its rapid emergence into the foreground has been all-consuming. These are uncertain times, but there are steps businesses can take to mitigate their current challenges and expedite their recovery.

Protect This is a time of national crisis. A quick glance on social media teaches us that businesses who are not following guidelines face a serious reputational risk. Putting the safety and interests of colleagues, clients and suppliers first is paramount. It means listening to the experts and doing our bit to ‘flatten the curve’ by helping reduce the exponential growth of reported infections. The quicker we abide by the current restrictions; the quicker business can start to return to normal.

At Arbuthnot Latham, we have followed government guidance closely and before the situation escalated, pre-empted the current restrictions by asking colleagues to work from home. This was a huge undertaking behind the scenes, but much can be achieved with the right energy committed to it. There are, of course, challenges posed by changing how you work, but these can be mitigated.

34 | NACFB

Communicate Everyone is adjusting and few will expect things to carry on as before.

Communication, therefore, is key. There are two strands to this: Colleagues want to know that you value them. Few can have escaped the reports of imminent economic decline and many will be worried about their future. No one knows exactly what is to come, but letting staff know they are valued does not just engender a common sense of purpose, it can also drive productivity by keeping the workforce motivated and informed.

Equally as important is communicating with customers and clients.

Many businesses will not have finalised their contingency and procedures, but transparency and honesty are vital. Be up front about service disruptions as you are working to fix them. Clients are good dealing with what they know; frustration comes when there are unknowns, so manage expectations where you can.

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Everyone is adjusting and few will expect things to carry on as before. Communication, therefore, is key

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Clients are good dealing with what they know; frustration comes when there are unknowns, so manage expectations where you can

Retain The government has announced an unprecedented package of support for businesses. Perhaps most important is the Coronavirus Job Retention Scheme, which offers an element of job security for employees. If you can keep your staff on, do so. It will give them a sense of security at a time of crisis and save you recruitment costs and precious lost time when things return to normal. Other schemes such as COVID-19 Commercial Financing Facility (CCFF), VAT deferral and Coronavirus Business Interruption Loan Scheme (CBILS) could be right for you, so find out about what support is there for you. This information is always subject to change, so it is best to get the latest information from the dedicated government website.

Plan It is worth considering contingency plans for disruption to working practices and services, logistics and distribution. Have you recently made enquiries about the rigour of your suppliers’ contingency

plans? It is definitely worth reviewing your supply chain to identify if an over-reliance on any one supplier could slow you down in the event that their services become disrupted.

Also, make sure you develop a plan for the worst-case scenario.

Decide on your priorities and carefully think through your course of action. Executing a plan is much more effective than improvising in a panic, which undoubtedly leads to mistakes and oversights.

Test Take time to review your current expenditure. It is definitely worth stress testing cash flow in the event of services being disrupted, such as reaching out to HMRC for flexibility. Only by having clear and defined oversight of business-critical expenditure and non-business critical costs, can you start to develop a plan to maintain liquidity.

Part of this testing means identifying the most profitable lines of business, having a clear idea of your financial cushioning and reviewing your borrowing options.

NACFB | 35

Special Feature

A new lease of life Industries that can flourish through lease and asset financing Tim Shand New Business Development Director Rivers Leasing

T

he adage goes, that you have to ‘speculate to accumulate’. While there’s a myriad of ifs, buts and maybes that should caveat that pronouncement, in short there is much to be said for spending (sensibly) as a business, in order to grow, and it seems that British SMEs are in agreement, exhibiting a determined attitude to continue pushing towards a profitable future.

While it’s all well and good saying we need to spend in order to grow, sometimes cashflow makes it tricky. This is where asset finance has been able to provide significant opportunity for businesses on the cusp of taking their next steps, and where brokers make it possible for businesses and individuals to find the right solutions for them.

Enabling growth and optimism After months of pessimism last year, the Confederation of British Industry’s (CBI) quarterly gauge of manufacturing optimism in the UK rose to +23 in the first quarter of 2020, its highest level since the second quarter of 2014.

Appropriately, this optimism and the proactive, well-planned drive to action it, have been reflected in the direction of the asset finance industry. FLA figures showed that asset finance hit record levels last year, with members providing a record £137 billion of new finance to UK businesses and consumers, up from £128 billion in 2017. Within that, new business hit a new high of £32.5 billion to mark an eighth consecutive year of growth.

In the first quarter of last year, asset finance grew by 11%, with particularly high growth in IT equipment finance. By June, it had continued to grow with new business in the plant and machinery finance and business equipment finance sectors up by 8% and 9% 36 | NACFB

respectively. In the final quarter of 2019, total asset finance new business grew by 2% in the UK. The IT equipment finance sector reported 43% year-on-year growth.

A large beneficiary and user of asset finance is of course vehicles.

It was reported that finance taken out on trucks and vans was up 18% in December, and according to the Society of Motor Manufacturers and Traders (SMMT), nearly 360,000 new vans up to 3.5 tons were registered last year. This contributed to an 8% increase in UK commercial vehicle manufacturing and an 18% increase in commercials built for the home market.

Finding the right fit When it comes to the right type of asset finance, leasing, loans and hire purchase, for any particular business or industry, the number of finance instruments available is almost infinite. There are some general trends. For example, leases tend to be at the smaller end of the market where equipment is in the form of soft assets, as well as at the very large end of the market on items such as aircraft. Hire purchase is prevalent across the market, and sub-sections of leasing are also available, such as contract hire on cars.

However, deciding who needs what is actually quite personal, and this is where the role of the broker is invaluable. It is their experience that looks at the kind of asset, the legislation around it and what the customer needs and wants, to determine which product is needed.

Then they are able look at the different service levels to decide which provider is best for that particular scenario. However, key to its service are short communication lines and fast decision making processes.

At the end of the day, one size does not fit all when it comes to asset finance, and the experience that brokers have is invaluable. That experience is used with the customer, in order to make sure they are getting the product that they need. As well as to providers, in order to make sure they are being introduced to clients who are right for them. Together, we can help businesses speculate to accumulate, sensibly and securely.

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Special Feature

Advertising Feature

Gowns and towns HMOs will always have a place in university towns Adrian Moloney Group Sales Director OneSavings Bank

I

n the 2017/18 academic year, there were 2.34 million students studying at higher education institutions across the UK. Meanwhile, the JLL Student Housing Report forecasts that by 2030 this number will be bolstered by a further 500,000 full-time students. With university attendance showing no signs of falling and with growing pressure on current housing supplies, there continues to be significant opportunity for landlords with properties in popular university towns and cities.

Research by Ideal Flatmate in August 2019 found that Edinburgh, Nottingham, Leicester and Dundee were the best areas for landlords seeking strong rental yields on student properties. In addition to strong rental yield properties in university towns, research by the ONS and Land Registry shows that house prices rose by 2.2% in 2019, with Yorkshire and The Humber having the strongest growth of any region, up by 3.9%.

With a constant stream of students looking for quality housing and landlords needing their properties to stand out in an already crowded market, completing small renovations is a simple way to ensure that landlords can continue to attract tenants. InterBay Commercial’s own research has identified that many landlords take a ‘little and often’ approach to refurbishments, seeking to ensure they maintain rental income. As an example, InterBay Commercial found that some 28% of landlords spent less than £5,000 on their last refurbishment. Furthermore, the research found that 74% of landlords who undertook a refurbishment said that the work they did enhanced the value of their property and in turn improved the quality of the property for their tenants.

38 | NACFB

Refurbishments can be a great way for landlords to increase both the attractiveness and value of their properties, but it’s concerning that so many landlords are unaware of their finance options when undertaking such a project. Education is vital in order to ensure that landlords are no longer relying too heavily on their own personal funds to improve their properties. With better understanding of the options at their disposal, landlords can choose from a variety of options from remortgaging to a bridging loan – making a refurbishment much more feasible and likely. Indeed, plugging the knowledge gap will not only benefit the landlord, but also the end tenant too.

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With a constant stream of students looking for quality housing and landlords needing their properties to stand out in an already crowded market, completing small renovations is a simple way to ensure that landlords can continue to attract tenants

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For brokers who have landlord clients looking to capitalise on opportunities in the student accommodation market, it is important to make clients aware of the intricacies of owning an HMO property

Our research also highlighted that landlords value flexibility highly when it comes to choosing finance products for a renovation. This means finding the right product to fit the landlords’ circumstances, for example tight turnarounds to ensure properties are fit for purpose at the start of a new academic year. Brokers can play a valuable role in ensuring that landlords have access to the right finance options so it’s important that they understand the range of support and flexible products that specialist lenders such as InterBay Commercial can provide to help meet their client’s needs.

It’s important for landlords to have a balanced approach towards the student market as the turnover of students can mean that less care is taken of a property during the tenancy, which in turn could lead to increased maintenance and refurbishment costs so these all need to be taken into account.

For landlords who are competing to attract students, it can be hard to stand out. However, with the current housing supply/demand issues and a growing number of students requiring accommodation each year, there is still a significant market for those who have the capital to purchase or convert a property.

Landlords in university towns and cities can hope for strong returns in the short-term with rising rental yields and, in the long-term, amid increasing property prices.

For brokers who have landlord clients looking to capitalise on opportunities in the student accommodation market, it is important to make clients aware of the intricacies of owning an HMO property and the different types of finance available to them. When entering a new market, it’s comforting for brokers to have an established relationship with a trusted partner with proper expertise, like InterBay Commercial, who can help make the process of adding an HMO property to a landlord’s portfolio as straightforward as possible.

InterBay Commercial’s tailor made approach to lending, service commitment and strong partnerships with brokers means that we give our clients the information they need and can match them to our most suitable finance option based on their specific situation, no matter how complex.

Our national sales team are happy to talk through the complexities of your case, visit interbay.co.uk/contact-us to find your local BDM and get your conversation started today.

InterBay Commercial is a trading brand within the OneSavings Bank plc group NACFB | 39

Industry Insight

Extending vital support to UK businesses How the CBILS initiative can help your clients over the line

Bernie Skivington Director Guarantee & Wholesale Solutions British Business Bank

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elivered by the British Business Bank, through 40+ accredited lenders and partners, the Coronavirus Business Interruption Loan Scheme (CBILS) seeks to support the continued provision of finance to UK SMEs during the COVID-19 outbreak.

As advisors to smaller businesses, you know that external finance can be the key to unlocking growth for your clients. However, too often a ‘no’ from a finance provider can stop a small business in its tracks.

Now, more than ever, the Bank is committed to changing this by enabling alternative access to finance through CBILS, which can provide facilities of up to £5 million for UK smaller businesses (SMEs) across the UK who are experiencing lost or deferred revenues, leading to severe disruptions to their cashflow.

CBILS is designed to help turn a ‘no’ credit decision into a ‘yes’, by providing accredited lenders with a government-backed guarantee for 80% of the facility value. Brokers should note that the guarantee is to the lender and not to the borrower and the borrower remains 100% liable for the repayment of the facility.

CBILS supports a wide range of business finance products, including term loans, overdrafts, asset finance, and invoice finance. The Government will make a Business Interruption Payment to cover the 40 | NACFB

first 12-months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.

Finance terms are up to six years for term loans and asset finance.

For overdrafts and invoice finance facilities, terms will be up to three years. At the discretion of the lender the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack of, or absence of security prior to the businesses using the CBIL Scheme, whilst Principal Primary Residences (PPR) cannot be taken as security under the scheme.

“

CBILS supports a wide range of business finance products, including term loans, overdrafts, asset finance, and invoice finance

Helping your clients apply for a CBILS-supported facility

1. A UK-based smaller business that is experiencing lost or deferred revenues, leading to disruptions to their cashflow, needs funding.

2. The business must have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

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80% facility guarantee to the lender not the borrower.

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3. The government, operating through the British Business Bank, guarantees 80% of the facility balance to the lender, which may enable a ‘no’ credit decision to become a ‘yes’.

No guarantee fee for the SME The Government will make a business interruption payment to cover the first 12 months of interest payments and any lender-levied fees.

4. Using CBILS, the lender can

now offer the finance facility requested, providing all other lending criteria can be met. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.

5. The business now has the

finance it needs to sustain its operations during this period of uncertainty. The business remains liable for paying 100% of the outstanding facility.

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Always liable for 100% of the outstanding facility.

NACFB | 41

Industry Insight

Enabling more confident funding There remains a gap for SMEs seeking smaller loan amounts over longer terms Kevin Cooke Managing Director Finsec Limited

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esearch has suggested that access to traditional finance is worsening for smaller firms, but it also revealed that alternative finance is making up a growing portion of the market. However, only a small percentage of small business owners rejected by a bank or mainstream lender are aware of the alternative finance options available to them. Further, evidence suggests SMEs are increasingly more amenable to exploring different forms of finance, and it is here where a broker becomes invaluable.

Whereas traditional bank loans of upwards of £25,000 are available over a period of one to ten years, with commercial mortgages for longer still, most alternative business lending is limited to just one or two years and many of these lenders set minimum advance requirements of £100,000 or £250,000. There is an obvious lack of solutions for business owners looking for upwards of £25,000 but repayable over a longer period and the position becomes acute when the business is new or only recently established or facing some sort of financial difficulty.

Typical examples are purchase of leasehold businesses such as cafés and restaurants where the price being paid is for goodwill and a short lease or more established businesses which have unpaid tax demands or urgent restocking or repair needs following an unforeseen occurrence. The amount of funds required will likely 42 | NACFB

be quite sizeable but often below £150,000 and possibly urgent too, but at the same time the business may not be able to repay in a short-term, preferring a period of years to pay back.

For many business owners one option to consider is using the equity in their home or from buy-to-let properties to raise funds to establish and grow their business. However, the availability of residential remortgages and second mortgages for business purposes is nowadays also quite limited and the affordability and mortgage stress tests based on after-tax personal income can make it difficult.

A remortgage of a buy-to-let property, if available, may prove easier and a business purpose bridge loan may also be possible, but the short-term nature means it will not be suitable for many.

A solution which we find brokers aren’t too aware of is a secured business loan where a homeowner acts as a guarantor to the business. The business demonstrates its turnover and profitability

“

There is an obvious lack of solutions for business owners looking for upwards of £25,000 but repayable over a longer period

or business plan and projections to support the monthly repayments and the business owning homeowner provides a guarantee secured on property they own. As a result, specialist lenders offering this type of secured business loan may offer longer-term loans and can work with new and recently established businesses to reach a far quicker decision to lend.

A further advantage is that because the loan is in the name of

the business and the interest charge is pre-tax and paid by the business, the loan is more efficient and results in less accounting headaches. A specialist finance broker can submit the application and often assist with the case requirements and because residential property valuations are both cheaper and quicker to obtain than those of commercial property and other assets the case can be progressed quickly. This ensures rapid funding and increases confidence all round.

A bank of knowledge not simply a bank of money Our support for your broker business goes beyond finance. We can connect you with the right people, with the right knowledge, to boost your clients’ businesses and help them grow.

Search: NatWest Brokers

NACFB | 43

Industry Insight

The future is in safe hands The NACFB broker survey highlights the strength and depth of our industry Jonathan Sealey Chief Executive Officer Hope Capital

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approached the latest NACFB broker survey with a mix of hope, expectation and interest. To be honest, I’m not always a fan of surveys but this one is a bit different because it is both robust and relevant, coming as it does from those who are placing business and driving the market forward. If you’re a fan of football analogies, this is the equivalent of an award voted for by the players. It means more because it comes from those who know what they’re talking about.

Firstly, it was great to see a 20% growth in NACFB membership. This is very encouraging as a strong, well supported trade body gives the whole industry added credibility and having strong advocates to represent the interest of the sector as well as their members can only be a good thing. Bridging has come a long way in the past few years and most lenders are highly reputable and ethical.

I was also pleased to see that 35% of brokers are under 44 years old.

That is a wonderful statistic as it shows that the sector is both vibrant and attracting new talent. It is also in stark contrast to the rest of the mortgage industry where the average age is reputed to be well over 50. We all benefit when there is a blend of experience and youth. As a passionate equal opportunities employer, a signatory to the Women in Finance Charter and employer of 66% women in our business, I also think that it is terrific that, of brokers in the 18 to 24 category 40% are women. Would I like this to be 50%? Absolutely, but it shows me that there are not the barriers to entry for women joining our sector that seem to exist in others.

44 | NACFB

Last year NACFB brokers introduced over 200,000 deals to the value of almost £15 billion, that’s nearly 800 deals every working day.

60% of deals were from brokers placing fewer than 100 cases per year. What does this mean? Well, it means that we have a market of tremendous scope and depth rather than being dominated by a few bigger players. This bodes very well for the future of the sector as it will drive competition, innovation and the use of technology.

The survey gives me tremendous hope that our market has taken some significant and positive steps over the past 12 months in terms of growth and sustainability. We are seeing a genuinely competitive landscape which creates an environment that drives product innovation and results in a push for higher standards across the board from both lenders and brokers. This survey genuinely encourages me to believe that it is onwards and upwards for the sector, in 2020 and beyond.

“

I’m not always a fan of surveys but this one is a bit different because it is both robust and relevant, coming as it does from those who are placing business and driving the market forward

Broker Voice

The ethical broker Helping the grassroots take hold

Henry Audley-Charles Founder SME Funding UK Ltd

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launched SME Funding UK Ltd with a single aim; to provide ethical, relevant, financial solutions to the SME market. With over 30 years of experience in the finance industry, I knew there was a need for a brokerage firm that could not only offer the right funding but the right business advice too. Combining these two factors has helped me to develop long-term relationships based on integrity and ethics and has helped earn me a reputation as a trusted business advisor.

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Over the years, my moral compass has served me well.

While I am not righteous in my opinions, I am acutely aware that I am responsible for people's livelihoods, their homes, and futures

Investment and innovation According to the Federation of Small Businesses, SMEs account for over 99% of the business population, with a collective turnover estimated at £2.2 trillion (52%). It’s little surprise then that through this astonishing figure they are recognised as the backbone of our economy. As such rapid growth shows no signs of slowing down, I feel it’s our responsibility as brokers to help guide SMEs towards more ethically sound financial decisions.

There is no question about the impact that SMEs have on our economy. As brokers, I feel it should be, in part, our responsibility to enable these businesses to continue growing through regular investment in people, training and innovation, and access to the right finance will allow them to do this. Itʼs my job not only to help them find the finance to achieve their goals but also to help them plan for their vision of the future.

Gaining clarity Iʼve worked for some high street banks and cut my teeth on funding SMEs and the associated challenges. I loved working with SMEs, but I realised I wanted more and felt that I could make a real difference to SMEs with a broader market offering. I wanted to help the grassroots guys get the right finance they so badly needed.

One of my first experiences working for a bank has stayed with me.

Itʼs become my 'intuitive barometerʼ for deciding whether I can help a client. I was dealing with a case where the client needed funding quite badly, and on paper, it wasnʼt looking good. I needed to speak with the underwriting team for a final decision, so I went and talked to the head of risk. He told me the bank couldnʼt lend him any money. Knowing I had a problematic encounter ahead, I asked why?

He just looked at me and asked: "If the customer asked to borrow your personal money Henry, would you lend it to him?"

My answer came swiftly: “No chance.”

His retort was equally swift: “Then why do you want him to borrow ours?”

Your trusted advisor Over the years, my moral compass has served me well. While I am not righteous in my opinions, I am acutely aware that I am responsible for peopleʼs livelihoods, their homes, and futures. I firmly believe that integrity and ethics go hand in hand, and I drive my business based on these values, wrapping the core tenet that money shouldnʼt get in the way of ethics.

My brokerage is the result of wanting to deliver something positive and productive to the SME market. Finance, lending and borrowing are at the heart of all business, without which nothing much would happen. However, in recent years it has become a bit of a shark pool for business owners. Many arenʼt aware of their options, and they can feel their choices narrowing due to lack of collateral, adverse credit or even knowing who to talk to.

As a perpetual student Iʼd done my research, I knew the market was a large one filled with entrepreneurs who have big ideas, innovations and potential but they couldnʼt get off the ground without the right funding.

Unique solutions for unique circumstances As we know, funding comes in all shapes and sizes; there is not a ‘one size fits all’ solution when it comes to borrowing, especially for smaller businesses. Each business has its own unique set of circumstances, and I remain determined to find the right solution for each client. I know that while the bank may not approve an SME request for finance, there are still many alternatives and ethical options in the market that could help a start-up grow or give a struggling business a hand.

NACFB | 47

Opinion

Taking care of care home finance As traditional funding options for care home operators dry up, alternative finance providers are filling the gap Richard Henshaw National Development Director, Healthcare ThinCats

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here is a fundamental change occurring in the way that healthcare businesses are being financed; one that is impacting proven owner-operators who play such a key role in overall care provision, but are being impacted the most.

While some banks have completely withdrawn from the sector, others have refined their offerings to focus on corporate operators and high-end purpose built homes dominated by private fee paying residents. This has left good, independent, local and regional operators exposed, as the number of finance options available has reduced. It used to be the case that you could ring a few banks and get funding: not anymore.

Reasons to be cheerful The retrenching of the more typical high street funders is nothing to do with care homes being a risky proposition for lenders, quite the reverse. As property specialist Knight Frank states, the UK’s ageing population “will be one of the key structural shifts of the next 30 years, driving demand for elderly care services,” and notes that fundamentals such as occupancy rates and care home fees are already at record highs. Its 2019 market overview concluded “…the market is looking healthy at a broad level and especially so when viewed in the wider context of commercial real estate.”

It’s simply that regulations deter banks from lending to perceived ‘risky’ areas, such as small and medium sized enterprises. And, as they cut back on staff – HSBC’s recent announcement of further redundancies is just one example – they increasingly lack the 48 | NACFB

in-house expertise to make lending decisions on businesses that require anything other than a tick-the-box approach.

Large care home operators can go to capital markets or to specialist REITs, such as Target or Picton. That’s not viable for smaller operators; for instance, those running two to five homes.

Whatever the demonstrable quality of your business, neither banks nor REITs are interested.

While one door closes…

That’s left many quality operators high and dry as, for many, the extent of their financial network was their traditional funder. Those doors are closing. Many are now turning to a growing number of brokers for assistance. The other positive is that the skills the banks are abandoning are not evaporating.

With more than 20 years’ experience across financial services and healthcare, including 13 years with RBS and AIB, and eight years with healthcare specialist broker Chandler & Co, I have picked up a certain amount of expertise in this area. What’s more, I also have six years as a care home owner so I can fully relate to the challenges faced by operators.

This specialist knowledge is vital in a world where business lending from traditional banks is moving towards vanilla opportunities.

ThinCats is bucking the trend so it can offer funding solutions that are bespoke and not ‘off-the-peg’.

Perhaps the most encouraging aspect for me, is that ThinCats aims to fit the financial structure to the borrower, not the other way around. We lend from £1 million upwards with a particular focus on the £5-10 million space. In conjunction with experienced brokers, we are well placed to support care home operators with solutions that are designed specifically for their needs.

TUNE OUT THE NOISE. TUNE IN THE AMBITION. We’re helping record numbers of medium-sized businesses pursue their ambitions.

Our nationwide teams of business development and credit experts are on hand to work directly with you to find smart and bespoke funding solutions.

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Bespoke business loans from £1m up to £15m

Visit thincats.com ThinCats is a trading name of Business Loan Network Limited (BLN). Registered in England & Wales No. 07248014. BLN is authorised and regulated by the Financial Conduct Authority (No. 724062).

Opinion

We will emerge from this stronger But SME resilience will be dependent upon us having the right tools to hand Dame Teresa Graham DBE Chair UK Finance’s SME Advisory Group & HMRCʼs Administrative Burdens Advisory Board

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he financing of the UK’s small and medium-sized business sector (SMEs) is an important issue for policy makers given the sector’s great significance to the UK economy. The Government’s rapid response to ensure viable businesses survive through the COVID-19 crisis is proof of this.

Why? Because there are around 5.9 million SMEs that make up 99 per cent of all businesses in the UK, located all over the country. They provide vital products and services to all of us and come in various shapes and sizes; companies with zero employees who sell their expertise and time, small shops, restaurants, builders, small tech firms – the list is long and diverse.

COVID-19 is impacting on SMEs in three significant but different ways: supply chain disruption making it difficult for businesses to source the parts and products they need, business continuity disruption with fewer employees available due to sickness or childcare demands and a collapse in demand for some products and services. The recent announcement to close pubs, restaurants and gyms will have significant ramifications. But some businesses are benefiting from the crisis. Tech platforms that enable home working and supermarkets are likely to see increased profits.

50 | NACFB

Given the dependency of the UK economy on SMEs, it is critical that viable businesses have access to the financial products and services they need to see them through the crisis.

UK Finance’s commercial finance members, which include invoice finance and asset based lenders, have spent the last few weeks proactively reaching out to those business sectors most likely to be impacted by COVID-19. They are encouraging all other customers

“

I recently took the difficult decision to close the Lexi Cinema, which I co-founded, so have first-hand experience of the damage this virus is wreaking on the leisure sector

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Agility and innovation are often critical to SME resilience. With the right finance tools in place, we hope many viable businesses will survive this latest crisis and that the fortunate few may thrive

to get in touch to discuss finance needs at the earliest opportunity but to use digital channels first. Telephony for banks is currently at capacity with significantly more calls while adjusting to remote working.

The Government has also announced a package of financial support for businesses. This includes the Coronavirus Business Interruption Loan Scheme (CBILS) provided by the British Business Bank through participating firms. CBILS provides the lender or finance provider with a government-backed guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. It supports the provision of a number of different types of finance facility, including loans, overdraft, invoice finance and asset finance.

Small business grant schemes will also be available from the beginning of April provided by local authorities in England. Details about these schemes and a range of other support for business is available on the gov.uk website. You can also find out more about these initiatives on UK Finance’s Let’s Talk Business Covid-19 site, which specifically focusses on access to finance for SMEs. As Chair of UK Finance’s SME Advisory Board, we are constantly in discussion with business representatives about the impact of COVID-19 and what support is needed from the financial services sector. I recently took the difficult decision to close the Lexi Cinema, which I co-founded, so have first-hand experience of the damage this virus is wreaking on the leisure sector.

UK Finance’s SME Advisory Group (SME AG) was established in 2017 to act as a critical friend to and voice within UK Finance, the financial sector trade body, which represents over 250 firms from the mainstream banking community, to alternative finance providers. As Chair, I help ensure that the collective views of the SME AG are heard within UK Finance and that the perspectives of small businesses are considered across all activities in the organisation.

As well as economic uncertainty and the general risk averse nature of many small businesses when it comes to external finance, we know business leaders are concerned about the ease of the application process and speed of decision making in getting finance. They also generally have low levels of awareness of alternative providers and products and limited resources to consider a range of different options for raising the funds they need. Commercial finance brokers need to ensure they are up to speed with a constantly changing landscape of SME financing, while encouraging businesses to feel confident about accessing the finance they need.

We know that entrepreneurs are often highly resilient through challenging times. Many businesses have recently had to deal with the impact of the uncertainty caused by Brexit, an increase in consumer concern about climate change and flooding, in quick succession. Agility and innovation are often critical to SME resilience. With the right finance tools in place, we hope many viable businesses will survive this latest crisis and that the fortunate few may thrive.

NACFB | 51

Opinion

A modular future Could prefabricated construction be the key to achieving house-building targets?

Richard Payne Director of Development Oblix Capital

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he government has pledged in its manifesto to build one million homes during the course of the current Parliament. This may sound like an ambitious target, but one million houses by the end of a five-year Parliament would constitute a reduction, on average, on the 241,130 built in 2018/19. Nevertheless, a concerted effort will need to be made by planners, developers, construction firms and lenders to help achieve this ambition – particularly when the impact of the current COVID-19 situation is factored in.

Modular construction has been around for decades. Long-gone are the days of traditional ‘pre-fabs’, with today’s modern modular construction methods providing a credible and, in many ways, preferable alternative to traditional construction. Off-site construction is generally faster, modules can be constructed whilst groundworks are still ongoing, construction isn’t impacted by on-site environmental conditions, build quality is improved due to the factory-based construction methods, and the number of deliveries to construction sites, and waste, is reduced.

Modular construction does have its disadvantages though. The benefits that are brought about by standardising unit and module build also limit the design options that are available, meaning that customisation is normally restricted to internal fixtures and fittings.

The build is often more suited to projects where standardised layouts are suited, such as student accommodation or social build-to-rent housing. Nevertheless, build costs have also been shown to be up to 40% cheaper using modular construction when compared to traditional methods.

52 | NACFB

The potential for modular construction is already accepted The government appears to be supportive of modular housing as a way of helping to achieve its house building targets, as demonstrated by a £30 million investment in Ilke Homes’ modular housing factory in Yorkshire, funded from the £3 billion Home Building Fund. The Housing Minister at the time, Esther McVey, said: “The North of England has the potential to lead the world in the modern methods of construction that are transforming homebuilding, an industry that when matured would be worth £40 billion a year and provide up to 80,000 jobs. We need to fully embrace this.”

Compared with other parts of the world, the UK has been remarkably slow in adopting the construction method – in Japan 15% of houses are built using prefabricated elements, in Germany the figure is 20% and in Sweden the figure is a remarkable 84%. In 2017, it was estimated that c15,000 modular homes are constructed in the UK each year (which is less than 10% of all dwellings completed during 2017).

Some notable examples of current modular construction projects include 546 flats over two 38 and 44 story housing towers in Croydon, and Creekside Wharf in Greenwich, with 249 flats again being spread over two towers. A joint venture between furnishing giant IKEA and construction firm Skanska is building 162 affordable homes in West Sussex. Crescent Point in Plymouth, and The Maltings in Colchester are examples of modular construction in the student housing industry.

There have been some significant investments in modular construction facilities in the UK in recent years; these should help unlock restrictions caused by capacity in the UK and are a sign of how much potential the UK market is seen to have. Laing O’Rourke announced plans in 2015 to invest £104 million in a facility in

Worksop, Derbyshire, which will be capable of delivering 10,000 homes a year when fully operational. In 2016, Legal & General announced plans for a £55 million factory in Leeds. Modular unit builders TopHat secured £75 million in backing from Goldman Sachs in April 2019.

What’s stopping modular construction from becoming mainstream?

Despite all the positive mood music, lenders are often reluctant to lend to fund such projects or, if they are willing to lend, additional requirements are put in place. The prime consideration for lenders who are considering funding student housing projects relates to ownership of the modules whilst they are being built offsite; whilst developers will need to make staged payments in advance to the modular housing contractors as the units are being built, ownership does not transfer to the developer until the units are complete and a certificate of vesting has been issued, or the units are delivered to the site. Should anything happen that prevents the delivery of those modules, the lender will have no collateral against which

to reclaim the loan they have made to the developer. By contrast, when construction is happening onsite, the charge the lenders have on that site includes all materials held there.

As well as the issues of ownership of the asset whilst it is being built, housing projects carry additional risks. Lenders need to make sure that the units are mortgageable, understand the strength of the re-sale market for modular-built properties, and how maintenance, repair and insurance costs will stack up.

The Buildoffsite Property Assurance Scheme (BOPAS) has been set up to provide additional confidence in the technology, and to each party that needs to be involved in the various stages of the process.

This scheme will not in isolation, however, provide lenders with the confidence they need but efforts to formalise and certify the construction method should provide them with greater certainty.

Lenders, their industry bodies, constructors, developers and the government will need to work closely together to help unlock the potential that modular construction could bring in helping meet the UK’s housing requirements.

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NACFB | 53

Opinion

New tax year, new challenges Changes to landlords’ tax treatment could impact borrowing appetite Richard Rowntree Managing Director of Mortgages Paragon

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ach new tax year typically heralds some form of tax changes for landlords to be aware of and this year is no different. There are two key pieces of tax legislation that have implications for landlords this year – tax relief for finance costs and Capital Gains Tax.

Tax relief for finance costs Landlords have had to contend with a layering of changes in fiscal and regulatory policy targeting the buy-to-let market since 2015.

Landlords used to deduct all finance costs from their rental income and profits were taxed at their marginal rate. However, starting from April 2017 and phased in over a four-year period, tax relief for finance costs have been restricted to a basic rate tax credit.

The phased reduction began with claimable tax relief reduced to 75% and continued through 2019-20. In 2020-21, landlords won’t be able to claim any tax relief on mortgage interest payments.

Instead, from April 2020, they will receive a 20% tax credit on interest payments.

In response, landlords are adopting a range of different strategies to mitigate the impact of these changes, ranging from rent increases to portfolio resizing. However, as these tax changes have been phased in over a period of four years, we believe most landlords will be well prepared for this latest change.

54 | NACFB

Capital Gains Tax: Private Residence Relief Private Residence Relief (PRR) provides a useful exemption from Capital Gains Tax (CGT). Previously, landlords could claim PPR for all the time they lived in their property before letting it to tenants, plus an extra 18 months after moving out. From April 2020, this was reduced to the time they lived in their property, plus nine months, meaning landlords will lose nine months’ worth of CGT relief when they come to sell.

In addition, CGT relief of up to £40,000 (£80,000 for a couple) was available for those who let out a property that is, or has been, their home. However, from April 2020, this relief only applies to landlords who are in shared occupancy with their tenant, as the government aims to “better focus PRR to owner-occupiers”.

The deadline for payment of your CGT bill also changed in April 2020, from 31st January in the year after the tax year the sale is made, to within 30 days of the completion of the sale.

As always, we would advise landlords to seek independent tax advice when it relates to the management of their property portfolios.

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Landlords have had to contend with a layering of changes in fiscal and regulatory policy targeting the buy-to-let market since 2015

Funding 365 Limited is registered in England & Wales. Company Registration Number: 08488034. Company Registered Address: 20 - 22 Wenlock Road, London N1 7GU.

Listicle

5

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s the whole world adjusts to the medical, social and economic realities of coronavirus, the majority of us have endeavoured to maintain a sense of business as usual. In reality though, these times are anything but.

Concurrently, there remains a prevalent, but largely outdated, belief that a ‘real’ business has a physical premises that all staff work from. This can be a very difficult mindset for some to change, largely because remote working can feel like a step backwards. Working from home is something that start-ups do, not companies with onsite shower facilities and a well-stocked kitchen.

Attitudes are changing, and if one positive could stem from this tragic pandemic it could be a sea change in the way we view remote working and working from home.

So, before we find out which meetings could actually have been emails, allow us to share our top five ways to remain productive whilst in self-isolation.

1 56 | NACFB

self-isolation essentials 1. Make your own commute

4. Picking up the slack

The biggest benefit of not travelling to and from an office is the time you save, but have you ever considered the benefits a commute brings? Your commute provides neat bookends around your day, helping you to both power-up and decompress.

Whilst we’re not saying hop in the car or on the train for a needless journey, a brisk walk round the block or drive to get a paper might help you mentally prepare for a day’s work.

Just because you’re sat in your living room in Stoke doesn’t mean you’re on your own. Online team platforms such as Slack, Microsoft Teams and Google Hangouts can bring the ambience of an office to you. If used correctly, it can feel close to a face-to-face meeting. If used incorrectly it can result in a relentless pinging of banal notifications and a webchat of thirty people talking over one another.

2 2. Dress the part As tempting as it may be to stay in your pyjamas all day, getting showered and putting on functional clothing will go a long way towards mentally preparing yourself for a day’s work. Even if it’s just the top halve, so you’re ‘Skype suitable’, the illusion will help set the right tone. One common tip is to wear gym or sportswear, this helps send signals to your brain that you’re ready for action.

5

3. Separate work and play

5. Give yourself a break

It’s all too easy for the lines to blur between where work stops and living starts. If you can, dedicate a consistent area that is used exclusively for working. This could be a home office, half of the kitchen table, a cosy shed or even the family car. Arrive at this station at the same time you would start work and be sure to leave at the same time you would leave for the day.

This compartmentalisation creates a physical and mental space from which to be productive.

As a homeworker, you might find it easy to work long hours without taking a break.

Stopping to put another load of washing on doesn’t count as rest, nor does grabbing food from the fridge. Marathon sessions may feel like a productive experience, but they’re anything but – you’ll earn breaks, and your time can be better spent resting and recharging. Try setting an alarm to go off every two hours in the room farthest from your desk. Use these alarms as opportunities to get up and take a break.

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020 7060 1234

Direct contact with our skilled underwriters

bridging@mfsuk.com

Free valuations on residential properties up to £1.5 million

www.mfsuk.com

Rates from 0.59%, with up to 75% LTV

Five Minutes With

​ ive F Minutes with: Emily Driscoll Emily Driscoll Relationship Director Shawbrook Bank

Describe your role in ten words or less?

To make the Shawbrook journey and experience smooth and simple.

In your view what are the key elements to a successful deal?

Three things; partnerships, information and certainty.

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

Think about the panel of funders you need to deliver your own unique proposition.

Unless you’re a supermarket, you probably don’t need every funder on your panel.

Pick a select few based on their values, product range, appetite, culture and develop a partnership with each one. Invest the time and effort to understand their business and work to create a mutually 58 | NACFB

beneficial partnership. That’s what we’re now focussed on doing at Shawbrook.

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

What is your favourite piece of management/leadership advice?

I saw Robbie Williams at Knebworth. He was incredible, and the weather was great also. A great day out.

Focus on your own personal development, irrelevant of the role you are doing. In today’s world, things can get a little hectic at times. So, it makes sense to take a step back every once in a while and look after yourself and your own personal goals. If nothing else, it keeps the mind open and fresh to your surroundings.

What was the last great book you read?

Deborah James’ ‘F*** You Cancer: How to Face the Big C, Live Your Life and Still be Yourself’.

What law would you pass if you became Prime Minister for the day?

Greater equality on healthcare. I am a huge fan of the NHS but I can’t help but think people with more money (and private health) have greater access to new medical care.

Who do you admire most and why?

My parents who have been my rock recently. If I can bring my children up half as well as they did, I will be very happy!

If there was an Olympics for everyday activities, what activity would you have a good chance at winning a medal in?

Definitely eating – I absolutely love my food!

What’s happening now, that in 20 years people will look back on and laugh about?

Driving cars. I believe driverless cars will transform how we travel – it’s inevitable.

Our children will never believe that we actually had to drive them ourselves.

SPECIALIST LENDING SOLUTIONS BUY TO LET MORTGAGES

A new way for landlords to increase yield and capital growth Our Refurbishment Buy to Let product lets your customer take advantage of the flexibility of Bridging Finance with the surety of an exit onto a Buy to Let Mortgage once the property has been refurbished (providing there are no changes and the property meets the expected valuation following refurbishment). Take a look at our unique approach: One application, which we key for you One expert underwriter providing support for the entire case One valuer for both the bridge and Buy to Let Mortgage One conveyancer and discounted legal fees

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

FOR INTERMEDIARY USE ONLY.

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

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

01966-TO (1)

Get in touch

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Downsize l Capital Raise l Developer Exit l Refurbishment

YO U R T R U S T E D PA R T N E R Bridging Finance you can depend on Nick understands that you are looking for a partner you can depend on to provide funding tailored to individual needs.

Approachable | Adaptable | Knowledgeable

Nick Warren | Business Development Manager T: 020 3862 1002 E: nwarren@utbank.co.uk

we understand bridging finance