Special Feature
After the maelstrom The crisis and the lasting impacts for non-bank lenders Marc Bajer Chief Executive Officer Hadrian's Wall Capital
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hen the torrent came upon us, I had already just weathered, what now seems by comparison, a dripping tap. I have always fancied myself rather hardened by my experiences over the last 42 years. But it has taken quite a number of crises before I realised just how resilient I was. Indeed, how resilient we all are. My father used to tell me, ‘Don’t panic just yet kiddo. I’ll tell you when.’ Well, he never did. In this article I will share some observations and provide some remarks on the challenges facing non-bank lenders (NBLs). I will also suggest possible approaches which may prove helpful in our joint effort to persevere and then thrive in the post COVID-19 world.
A sustainable model? We’ve been lending to NBLs for quite a while now and we’ve always thought of our clients, and others we consider financeable, as an elemental feature of the vibrant and robust SME lending industry in the UK. But that conclusion has always relied upon the presence of three pillars: a sustainable and survivable financing structure, a disciplined credit-underwriting and operational lending infrastructure and, most importantly, some true believers running the joint. The second and third of these are aspects which we, as decision makers, can more or less, directly influence. The first is more of a conundrum. Pay less and live for today or pay more and live to fight another day. I know that my long-suffering clients have had to put up with my endless harping on this particular point – so you guys can look away now. It is at this very moment, however, when the NBLs are in it, quite 30 | NACFB
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It is at this very moment, however, when the NBLs are in it, quite frankly up-to-theirnecks, that they must all decide what they are going to do next with their still evolving, yet very well built, machines
frankly up-to-their-necks, that they must all decide what they are going to do next with their still evolving, yet very well built, machines. I know that we are all doing what needs doing every single day; and it is a real slog. However, I think we may also, all of us, agree that the real challenges still lie ahead of us, after the storm has passed. There are a number of the current conditions at play, and there is much to divine from them. NBL equity, already scarce, is becoming more so, as value has been eroded due to this period of acute systemic distress. Simultaneously, wholesale senior debt funding has also become constricted. Add to this that many NBLs have struggled to obtain broad recognition and reinforcement from the government (although slow progress is being made) for their key role in restarting the UK economy. How to respond to these arduous structural conditions will be no easy task. New sources of senior debt funding with survivability features will be required and these will cost more. More equity,
