Commercial Broker (NACFB Magazine) July/August 2021

Issue 92 JULY/AUGUST 2021

Broker COMMERCIAL

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

16 THE GROWING APPEAL OF ISLAMIC FINANCE

18 BIG THINGS COME IN SMALL PACKAGES

Unlocking Sharia-compliant financing

The responsibilities and risks of deal packaging

The path to decarbonised finance Leading the way in sustainable SME funding

30 GREEN IS THE NEW BLACK Green mortgages encourage landlords to go eco

38 THE DIRECTION OF TRAVEL A pivotal twelve months for the transport sector

FREE YOUR CLIENT FROM THE RESTRICTIONS OF ASTs We like to make superheroes out of our brokers. That’s why our approach to short-term lets isn’t just for the holiday let. We look at the overall picture, so if your client uses their property through booking sites for people on staycations, for contractors working at a nearby site, or for families needing a short-term base for a couple of months through a property licence - we can take that into consideration to meet the ICR. With LENDING UP TO £15M AT UP TO 75%, it’s all about powering up affordability and improving returns.

Specialist BTL

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FOR INTERMEDIARY USE ONLY | © 2021 Hampshire Trust Bank Plc is authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and the Financial Conduct Authority. Our FRN number is 204601. We are a company registered in England and Wales, registration number 01311315.

Registered office: 55 Bishopsgate, London EC2N 3AS. Hampshire Trust Bank, HTB and

are registered trademarks of Hampshire Trust Bank Plc.

Contents

In this July/August issue NACFB News

Special Features

4 6 8

10-11 12-14

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

22-23

InterBay Commercial: Are we there yet?

24-26 NACFB: The path to

decarbonised finance 28 HTB Specialist Mortgages:

Diversifying portfolios 30-31 Landbay: Green is the

new black 32 NACFB: Young Lives

vs Cancer 34-35 Phelan Independent:

Demystifying personal guarantees

Industry Insight 36 38-39 40

42

18 Patron Profile 16-17

Qardus: The growing appeal of Islamic finance

Opinion & Commentary 44-45

46

48-49

50

Compliance Update 18-19 NACFB: Understanding

deal packaging

iwoca: On the up BVRLA: The direction of travel Ortus Secured Finance: Motherhood vs career NACFB: Why online review sites matter

52

54

Mortgages for Business: A word of warning Nucleus Commercial Finance: Taking service to the next level Hodge: Developing greater resilience Magnet Capital: Building momentum Listicle: Five mistakes to avoid when using a review site Five minutes with: Rebecca Howitt, Head of Underwriting, 365 Business Finance

Ask the Expert 20

LDS Sales Guarantees: A solid exit strategy

30

38 Further Information KIERAN JONES Editor & Feature Writer

33 Eastcheap | London | EC3M 1DT Kieran.Jones@nacfb.org.uk JENNY BARRETT Communications Consultant

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

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

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

mackman.co.uk

NACFB | 3

Welcome

Norman’s Note

I

have sat down at the end of quite a few lockdowns now to write my opening note. On each occasion I proclaimed with an uneasy confidence that ‘this one’ would be the last. I shall be making no such assertions now. Whether you think the latest lifting of restrictions is wild and reckless or simply ‘about time’, we can at least all agree that the experience has not been a picnic for any of us.

Norman Chambers Managing Director | NACFB

Except for a precious few, the pandemic has been something of a great leveller. We have all suffered in some way. But we must draw from the well within us once more and seek an optimistic path forward. The NACFB is once again leading the way here. We have held our collective nerve and we continue to plan for our flagship events.

Both the NACFB Commercial Finance Expo at Birmingham’s NEC and the Commercial Broker Awards – the day before at Edgbaston Cricket Ground – are going ahead. By the time you read this the NACFB Patron Awards will also have opened for submissions ahead of November’s ceremony (see p. 6). I hope the Association’s steadfast confidence and boldness will in turn inspire you to attend. I know it’s been a while, and mass networking may feel strange at first, but it’s what our community does best.

On a final note, it was with tremendous pride that I watched the England team fall at the final Euros hurdle last month. Whilst the ending may have been familiar, the journey felt distinctly different.

Those young lads gave us all a glimmer of what our country can be.

You can’t bring home what’s already here.

4 | NACFB

The whole team Auction Bridge-to-Let Development Development Exit Land Bridge Residential Bridge Commercial Bridge With every type of product for every type of deal, start your next project with the right team.

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NACFB News

Association updates for July/August 2021

November return for NACFB Patron Awards and Gala Dinner The pandemic forced the shutters down on Westminster’s Park Plaza last year as the NACFB hosted its first ever virtual awards ceremony.

Whilst the online celebration was a success, this year we are pulling the shutters up and are ready once more for an in-person night out to recognise lending excellence.

Buy tickets

will be announced at the end of the ceremony.

• Asset Finance Provider of the Year • BDM Team of the Year • Business Bank of the Year • Buy-to-Let Lender of the Year • Commercial Mortgage Lender of the Year • COVID Response Award

The NACFB Patron Awards and Gala Dinner will return to Westminster’s Park Plaza on Thursday 25th November 2021 and tickets to the event are available to purchase now.

• Development Lender of the Year • Factor & Invoice Discounter of the Year • Industry Supplier of the Year • Most Innovative Lender of the Year

Early bird ticket prices start at £310 per person for NACFB Patrons.

This price will be held until 10th September and thereafter they will rise to £325 per person. Non-NACFB Patrons can still attend, and tickets are priced at £400 per person. Tables of ten are available and demand is expected to be extremely high for the return of this ever-popular flagship event.

Call for awards submissions Patrons wishing to participate in the awards can enter up to 15 categories. There is no cost to enter. For ease and recordkeeping, submission documents can be downloaded from nacfbgaladinner.co.uk, although Patrons will be required to upload their entries using the online form. The deadline for all entries is 5pm on Friday 27th August 2021.

In addition, all submissions will be entered into the highly coveted ‘Patron of the Year’ award. The winner of this prestigious accolade 6 | NACFB

• Rising Star of the Year • Short-Term Lender of the Year • Socially Responsible Lender of the Year • Specialist Lender of the Year • Unsecured Funder of the Year

Shortlist and voting The shortlist will be determined against a list of specific criteria and announced on 20th September whereupon all NACFB Members will be asked to vote for their preferred Patron in each of the 15 categories.

More information To find out more, download submission forms, submit an entry, and to purchase tickets for the live ceremony, visit www.nacfbgaladinner.co.uk

Reduced rates for energy efficient properties With our new green buy to let product range Applies to properties with an EPC rating of C or above

Call our team on 020 7096 2700 Landbay.co.uk

Note from our Sponsor

Exiting the void Renewed expectancy and returning appetites

Alan Harber South East Area Director, Real Estate Lloyds Bank

D

emand in the commercial property market remains strong as we enter the second half of 2021. However, there have been some noticeable shifts in terms of what clients are looking for and prioritising.

Adapting to the ‘new normal’ Perhaps unsurprisingly, the retail and office markets are undergoing the biggest changes. Investors are increasingly focused on mixed-use developments which combine living, working, and retail spaces.

In terms of retail, there’s been a shift towards out-of-town parks, which thrived during lockdown. Over the next year or two we’d expect to see greater clarity over what the high streets of the future will look like.

The geographical locations investors and developers are looking at have also altered considerably. The switch to hybrid or homeworking models means traditional commuter towns aren’t experiencing previous levels of growth. Instead, with people able to work from anywhere and putting a greater emphasis on work-life balance, we’re seeing hotspots developing in rural and coastal areas.

Focus on sustainability One of the most positive changes driven by the pandemic is the increased focus on sustainability. There’s a growing appetite among clients to invest in greener properties and ‘build back better’ and we’re taking steps to support our customers on their sustainability journeys.

All members of our real estate team are undergoing training on climate change and sustainability-related risks and opportunities with the Cambridge University Institute for Sustainability 8 | NACFB

Leadership, while our Clean Growth Financing Initiative (CGFI) means development clients can benefit from zero arrangement fees depending on the SAP score and energy rating of the property they’re building.

Investment clients have exclusive access to our green buildings tool, which enables them to identify, evaluate, and understand the estimated outcomes of potential investments to make their property more sustainable and energy efficient.

Changing appetites The shifts taking place within the commercial property market in recent months are undoubtedly influencing lenders’ appetites.

We’ve seen a number of household names step back, making way for less well-known lenders, some with higher fees. Other lenders are tightening their lending criteria and altering their credit policies, which has led to clients looking elsewhere for funding.

Looking to the future Despite the uncertainty of recent months, both development and investment clients are demonstrating an appetite to increase their portfolios.

If they have a sound business model and a future-focused outlook, what happens in the short and medium term won’t necessarily affect their longer-term goals, and we’re well positioned to help support them through this recovery period.

Our real estate team has a diverse range of property market experience and all clients get a dedicated relationship manager, who really understands their ambitions and challenges and can provide valuable insights. We always take a flexible approach to ensure we can find the best ways of supporting our clients.

Find out more at lloydsbank.com/realestate Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 119278.

Helping small businesses get the finance they need We’ve helped over 100,000 businesses borrow £11 billion over the past 10 years, and now we’re also offering the Government’s Recovery Loan Scheme. Find out more about our market-leading commission for introducers, and how we can help your SME clients today.

Contact us at broker@fundingcircle.com or on 020 3667 2208 fundingcircle.com/introducers The Recovery Loan Scheme is managed by the British Business Bank on behalf of, and with the financial backing of, the Secretary of State for Business, Energy & Industrial Strategy. British Business Bank plc is a development bank wholly owned by HM Government. It is not authorised or regulated by the PRA or the FCA. Visit https://www.british-business-bank.co.uk/recovery-loan-scheme

Industry News

Industry News 1. British Business Bank: Demand for SME finance outweighing supply

6. FCA commits to being ‘tough, assertive’ in latest business plan

Demand for finance among small businesses is exceeding the level of supply across the UK, a new survey from the British Business Bank suggests. The findings come from a survey of 511 SME intermediaries conducted earlier this year, including many NACFB Members, that explores access to finance in both the UK regions and nations. Six in ten respondents (59%) said demand for finance exceeded supply, and eight in ten (79%) agreed there were gaps in the supply of finance in their region or nation (only 12% disagreed).

The Financial Conduct Authority released its latest business plan in July, the first under new chief executive Nikhil Rathi.

The plan includes £120 million of spending over the next three years to improve the regulator’s data strategy, as well as a commitment to increase headcount in its Edinburgh office and open new sites in Leeds, Belfast, and Cardiff. The FCA says it will seek to strengthen rules on financial promotions to protect investors, improve standards on pension advice and take a more proactive approach on scams.

3 3. Jump in number of lenders offering development finance The number of lenders offering development finance has increased by more than 50% in five years, according to analysis by Mortgages for Business. The NACFB Member says there were around 70-75 lenders active in this market in 2016, but that there are now 110-115 offering finance to developers for refurbishing properties or building from scratch.

4. Business confidence at highest level since 2005

2 2. Mortgage choice grows There are now more than 4,500 mortgage deals on offer – just 700 fewer mortgage options than there were before the pandemic, according to data from Moneyfacts, with 269 launched in the last month alone. For the first time in three years, the data service has recorded an increase in mortgage options for all deposit sizes. This time last year there were just 14 mortgages available for borrowers with 5% deposits, but today that number is 18 times higher at 253.

10 | NACFB

The latest business trends report from BDO shows business confidence in the UK has surged to its highest level since 2005 as companies prepared for the final lifting of lockdown restrictions last month. The rise was driven primarily by the manufacturing optimism index, reflecting growing global economic confidence as the easing of lockdown measures and rollout of vaccines begins to pay off.

5. Inflation hits 2.5% Office for National Statistics (ONS) figures show that inflation continued to rise in June, with the Consumer Price Index (CPI) rising to 2.5% last month. The figure exceeds May’s 2.1% and analyst forecasts of a 2.2% climb. It also marks the highest level since August 2018. On a monthly basis, the CPI rose by 0.5% in June, up from a 0.1% increase recorded in June 2020. The increase recorded in June was driven by higher food and fuel costs, the ONS said.

7. FCA threatens action over banks’ poor financial crime controls The Financial Conduct Authority (FCA) has issued a warning to retail banks about their failings regarding financial crime controls. In a letter from David Geale, the FCA’s director of retail banking and payments supervision, banking industry chiefs were given an outline of the key issues and weaknesses, with governance and oversight, risk assessments and due diligence among the control vulnerabilities identified. The regulator has requested that banks complete a gap analysis of each of the identified weaknesses and take prompt and reasonable steps to resolve them by 17th September.

8. One in three brokers see rising demand for unsecured loans Demand for unsecured finance from SMEs is on the rise, according to iwoca’s quarterly SME Expert Index of UK brokers. The NACFB Patron’s index, which covers a four-week period in May, found that over a third (38%) of brokers had submitted more lending applications for unsecured finance compared to the four weeks prior to that, suggesting that SMEs are increasingly using credit to support their growth and recovery.

9. Retail sector sees fastest quarterly growth on record

11. SMEs losing up to 54% of online revenue through poor websites

Analysis of consumer spending by the British Retail Consortium (BRC) and KPMG shows that the retail sector has seen the fastest quarterly growth on record for shopping in stores and online. While retail sales were 13.1% higher in June than in the same month two years ago, the total for Q2 2021 was 10.4% up on the same three-month period of 2019. The analysis compares this year to 2019 as 2020’s figures were distorted by a downturn caused by the early stages of the pandemic.

Yell has released a study detailing how small businesses are managing their online presence in light of the pandemic.

The research identified an effective online presence as a key driver for sales and enquiries for SMEs. 80% of businesses stated that their website and social media presence were the most important aspects for generating leads and sales, closely followed by digital marketing and branding (both 79%).

9

10 10. SMEs need to adapt for the future of sales A study by HubSpot suggests small businesses will need to adjust to hybrid working and embrace innovative technology to stay competitive. HubSpot found that only 46% of businesses have made changes to enable successful remote working, despite many firms saying they are eager to take advantage of the remote or distant talent market and diversify their workforce.

11

Membership News

Membership News Final COVID scheme data reveals £79.3bn of loans

£160m expands Ultimate Finance funding syndicate

In early July, the government published statistics that show businesses across the UK have benefitted from 1,670,939 government-guaranteed loans worth £79.3 billion.

Ultimate Finance has significantly increased its lending capacity through a new £160 million wholesale funding facility. The NACFB Patron welcomed HSBC to its working capital syndicate along with the extension of existing long-term relationships with both Lloyds and NatWest.

These loans helped support cashflow during the crisis through schemes delivered by the British Business Bank. This includes 1,560,309 Bounce Back Loans worth £47.36 billion, 109,877 loans worth £26.39 billion through CBILS and 753 loans worth £5.56 billion through CLBILS. New figures for the Bounce Back Loan Scheme Top-Ups reveal 106,660 loans have been approved worth £0.95 billion.

Commenting on the announcement, NACFB Associate Patron Purbeck Personal Guarantee Insurance issued a statement which said that the figures failed to provide clarity on the total value of loans which required the business owner or director to sign a personal guarantee (PG), putting their personal assets at risk if the business fails.

Purbeck estimates that 8% of the value of all the CBILS loans advanced required a PG which equates to £2.1 billion in loans taken over the past year.

Saying that the scheme had provided “a lifeline to businesses”, Ed Rimmer, CEO of NACFB Patron Time Finance cautioned: “But the tide is turning and if we don’t shift our focus away from the short-term, we risk losing momentum in our economic recovery.”

12 | NACFB

The new facility significantly increases Ultimate Finance’s growth capacity and has been secured on the back of its established track record of success and service quality in the invoice finance market.

Neil McMyn, CFO said: “Combined with the backing of our shareholder Tavistock Group, this additional funding gives us a substantial balance sheet to continue providing working capital solutions to UK SMEs as the economy recovers. We’ve enjoyed a strong relationship with Lloyds and NatWest for many years and adding HSBC to our syndicate puts us in an enviable position in our market, to drive growth in our loan book.”

Simon Earnshaw, associate director of syndications at Lloyds, added: “Lloyds are extremely proud to act as agent and lead on this facility and to be continuing our long-standing relationship with Ultimate Finance.”

Ultimate Finance will now be able to provide more funding to an increasing number of businesses, having lent more than £30 million of new finance in May.

Standing Shoulder to Shoulder with Mike “ We loved the Black Arrow approach.

It wasn’t long winded. It was speedy and pragmatic. We met, discussed, signed and received our funding in less than a week from first contact.”

Mike Parr Founder and Managing Director PML (Perishable Movements Ltd)

BLACKARROWFINANCE.COM Let’s talk: 020 8572 7474

Membership News

Membership News Hope Capital breaking company records

BTL landlords trust brokers to find best deals

Hope Capital has achieved numerous company records, owing to a successful second quarter. In Q2 2021, the NACFB Patron grew its loan book by 169%, increased its loan size by more than 120%, and recorded a 260% increase in AIPs, with volumes escalating monthly.

The majority of buy-to-let landlords put their trust in brokers to find the best loan, according to recent research from Hodge. Nearly three-quarters, 73%, said they preferred to use a broker to access finance, compared to just 27% who said they would rather go directly to lenders.

The short-term lender also saw a 400% rise in the number of refurbishment, commercial, and land deals, a doubling of mixed-use cases alongside a 50% increase in applications for its Seventies Collection on residential property.

The NACFB Patron’s research, which asked both portfolio buy-to-let landlords and brokers for their views, also found that 71% of larger investors (with portfolios of between £2 million – £50 million) indicated that a broker had saved them money by getting them a good deal.

Gary Bailey, managing director, commented: “We have all worked extremely hard over the last few months to ensure we are delivering the best solutions for brokers and their clients, meeting market demand, whilst continuing to provide an outstanding customer service.”

In light of its achievement Hope Capital has also been expanding its team to ensure that the increase in business is well-serviced. The recruitment programme is expected to continue for some time.

Wrapping up, Gary said: “As we move forward, our focus will be to continue listening to the feedback of our brokers and their clients, on the type of bridging finance products they would like to see available in the market.”

14 | NACFB

Frustration when searching the market for mortgage products was the main reason that 40% of landlords chose to use a broker. Other annoyances included interest rates (35%), lack of clarity over charges (35%), and mortgage/loan underwriting (31%).

Mike Clifford, head of commercial propositions at Hodge, said: “Our research shows borrowers clearly value the support of a broker to find them the best deal and trust them to find a lender that suits their needs. With so many borrowers putting their trust in brokers to find them a loan that suits them, brokers are seen as a key link between lenders and investors – with the added benefit of removing frustrations for landlords.”

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Patron Profile

The growing appeal of Islamic finance Unlocking the potential of Sharia-compliant financing ​Hassan Daher Founder & Chief Executive Officer Qardus

Q

ardus is the first ethical and Sharia-compliant business financing platform for small and medium-sized enterprises in the UK.

Interest-free Sharia-compliant Islamic financing is used to offer banking and financial services to more than 1.8 billion Muslims globally. This is primarily due to prohibitions on the payment and receiving of interest in their faith. Globally, the Islamic finance market is expected to grow 10%-12% over 2021-2022 according to S&P. With lockdown restrictions beginning to ease and government support ending soon, many more businesses are looking for unsecured business financing as the economy recovers. A recent survey suggests 55% of UK SMEs expect to require finance in the next six months. Our team offers eligible businesses up to £200,000 in unsecured Sharia-compliant business financing for terms of up to 36 months.

Islamic finance in the UK In the UK, the 3.8 million strong Muslim community is massively underserved, especially when it comes to business financing options for SMEs. The laws required to ensure a level playing field for Islamic finance products were only passed in the early 2000s, and it was not until the industry received political and regulatory support that momentum started to build.

16 | NACFB

Islamic banks in the UK primarily offer Sharia-compliant property financing and offer business financing on a very selective basis to their clients. Due to their constraints, many SMEs do not meet their eligibility criteria.

Efforts are being put in place, however, by the UK government to change lending appetite. Earlier this year, Chancellor Rishi Sunak outlined ambitious plans to make the UK the most open and dynamic financial centre in the world.

In March, £500 million of Sukuk, the Islamic equivalent of a bond, was sold to investors based both in the UK and in the major hubs for Islamic finance in the Middle East and Asia. This is the UK’s first issuance of sovereign Sukuk since 2014, making us the first country outside the Islamic world to issue sovereign Sukuk and cementing our position as a centre for Islamic finance.

“

Due to the lack of Sharia-compliant financing alternatives, Muslim business owners often resort to raising equity or reinvesting profits into the business to fund growth

“

It is important to note that Sharia-compliant business financing is open to everyone irrespective of faith or background

This second Sukuk offering is more than double the size of the first issuance, increasing the supply of high-quality Sharia-compliant, liquid assets to the market, and supporting the development of Islamic finance products in the UK.

Market access Start-Up Loans, a government funded scheme, offers a Sharia-compliant financing facility to new businesses or businesses that have been trading for up to 24 months, although SMEs that have been trading for more than two years are not eligible.

Due to the lack of Sharia-compliant financing alternatives, Muslim business owners often resort to raising equity or reinvesting profits into the business to fund growth. This has resulted in a higher cost of financing relative to non-dilutive options were they made available. Upward social mobility and a highly entrepreneurial community suggests an upsurge in Islamic business financing in the UK going forwards.

It is important to note that Sharia-compliant business financing is open to everyone irrespective of faith or background. However, due

to the aforementioned prohibitions, Muslim business owners are more likely to be looking for this type of business financing that aligns with their faith. Through day-to-day operations, brokers will likely come across businesses that are Muslim owned, and which have either specifically requested interest-free business financing options or resorted to interest-based financing due to the lack of Sharia-compliant alternatives. Along these lines, we have funded businesses that have obtained interest-based financing in the past, however, once our Sharia-compliant alternative was made available they opted for it immediately. This was either to fund their growing businesses during the pandemic or refinance existing interest-based loans using our Sharia-compliant alternative.

Some businesses might request this type of financing upfront.

However other business owners might not be aware that such a facility exists in the UK. A quick way to identify whether a business might be seeking this type of financing is to see whether they have any Muslim directors. It is also important to note that like ethical screening criteria used by lenders across the UK, the business activities of the SMEs are also screened for activities considered harmful to society and the environment. Sector exclusions include those involved in alcohol, pork, gambling, and pornography, among others.

NACFB | 17

Compliance

Big things come in small packages The responsibilities and risks of deal packaging Erica Meredith Senior Compliance Officer NACFB

O

ver the last twelve months, we have witnessed a growing demand for the NACFB’s compliance support services as Members look for guidance to help them through complicated transactions. One such situation on which brokers seek clarity concerns deals where there is an introducing broker who keeps the client at arm’s length from the packager or master broker. Brokers want to know how they can protect themselves in these cases and ensure that they are sourcing the most suitable lenders, whilst providing good service to both the introducer and the client.

A typical scenario would see a residential mortgage broker – the introducer – working with a long-standing client who requires a commercial finance product. Often the introducer will want to retain any relationship and therefore will not allow a commercial finance broker to communicate directly with the client. The key risks in this situation are as follows: • The quality of the fact find, specifically the omission of follow-up questions by the introducer; • The quality of supporting documents; • And the question of who takes ultimate ownership of the information provided to the client?

How can these risks be adequately mitigated, whilst ensuring all parties are protected and a good service is provided to both the introducer and the client?

18 | NACFB

The first thing to consider is the standing of the introducer. Brokers should complete due diligence on the introducer including Red Flag Alert checks – or a Companies House search as a minimum – with adverse media screening, and ensure the introducer is appropriately registered with both the Information Commissioner’s Office (ICO) and the Financial Conduct Authority (FCA), where appropriate.

When the checks have been completed, and the introducer’s standing has been satisfied, the next step is to review both their Terms of Business and Privacy Notice. Their Terms of Business must include some key points, as per the template on the NACFB website. An introducer will need to provide their Privacy Notice and their Terms of Business to each client.

Once the introducer’s standing and documents have passed muster, the broker must then put in place an introducer agreement. This agreement clearly outlines the expectations a broker has of the introducer, including details of the commission paid, how it will be paid, and most importantly, formalises that the introducer maintains ownership of the information provided to the client.

It’s also worth noting that if a member of a mortgage or IFA network introduces consumer credit regulated business where that introduction is utilising the network’s credit broking permission, the commercial broker cannot legally pay the introducer directly without specific permission from the network, without which the introducer fee has to go to the network itself.

“

The fact finding process is also an area of potential risk

The fact finding process is also an area of potential risk. Brokers should provide the introducer with a full fact find to certify the appropriate information is gathered and ensure this is completed in full, where appropriate. Brokers should also complete standard Know Your Customer (KYC) and due diligence on the client, just as they would ordinarily when meeting or liaising directly with a client, as well as requesting supporting documents to verify the information gathered.

When indicative terms from appropriate and interested lenders are gained, brokers should confirm that all the options are presented to the client via the introducer, including the product particulars and accompanying risks, as well as the consequences of failing to maintain repayments. When the client has selected the most suitable lender, a broker must request from the introducer the reasons why the client selected that product. This information will form part of the subsequent suitability letter which is provided to the introducer.

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This suitability letter should state wording to the effect of: “based on the fact find completed by the introducer”.

There are various scenarios which involve both an introducer and either a packager or master broker. How the relationship is created and progresses during the course of a facility being drawn down can by highly nuanced. Hopefully, this article helps to identify the potential risks and demonstrates how they might be mitigated.

When sourcing suitable lenders for the client without meeting or liaising directly with them, a broker must ensure the information is detailed and accurate. As with many aspects of compliance, it is about protection through the ability to provide ample evidence that a client was always treated fairly. These steps will mitigate risks that surround sourcing lenders for transitions when there is limited or no direct client contact.

Our research found over 68%¹ of SMEs supported Government plans to end the sale of new petrol and diesel engine cars and vans by 2030. With 77%¹ of SMEs planning to make the switch to electric vehicles, our Pure Electric Vehicle finance could be perfect for your clients.

Benefits include: Monthly payments deferred for the first 3 months2.

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Visit ccbank.co.uk/pev or call 0344 225 3940 ¹ Research among 100 senior decision makers at UK SMEs conducted by PureProfile between the 7th and 16th December 2020.

2 Interest will continue to be charged throughout the term and a customer will pay more over the term of the agreement by deferring the payments. Payment deferral is unrelated to FCA & PRA COVID 19 arrangements implemented in 2020.

For Intermediary Use Only - Cambridge & Counties Bank Ltd is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under firm registration number 579415. Our authorisation can be checked at the Financial Services Register at www.fca.org.uk.

Cambridge & Counties Bank Ltd Registered Office: Charnwood Court, 5b New Walk, Leicester England, LE1 6TE. Registered in England and Wales No. 07972522. VAT Registration Number GB 208354420.

Ask the Expert

A solid exit strategy

Q Mark Roberts Relationship Director LDS Sales Guarantees

H

aving a successful strategy to exit a loan facility is crucial to borrowers, brokers, and lenders. For SME housebuilders it is key to being able to move on to the next project. Step up LDS Sales Guarantees, one of the NACFB’s newest Associate Patrons. They have introduced a unique offering which ensures house sales in new developments built by SMEs. We talked to LDS relationship director Mark Roberts about how property developers are faring in today’s market and how the new sales guarantee scheme works in practice.

What are the key reasons a development stalls?

Lender and developer uncertainty is a major hurdle, which typically centres around pricing and demand risk. A new development is always going to be sold into an unknown future market so even in a buoyant market there is always a risk it will turn (inevitably, at some point it always does). This stifles lender and developer confidence and therefore output.

20 | NACFB

&

The market is healthy so why do we still have a housing shortage?

A

We are in a rising market because we are not building enough homes, so demand is driving prices up. Planning and land supply are often considered the most significant constraints; however, we recently commissioned some research which completely dispels this myth. There are tens of thousands of plots with planning ready to go yet they are not being brought forward due to difficulty in funding. Finance is the lifeblood of most industries, especially property development; the less leverage available the more equity a developer needs and therefore the fewer new homes they can create. We provide a 10% cash release to developers, alongside our sales guarantee, which transforms their cashflow and available capital allowing them to develop three or four times more stock.

What is a sales guarantee?

housing supply. The guarantee ensures the developer has an exit whilst also allowing them the ability to sell units on the open market and maximise returns. For each unit sold on the open market LDS takes a small fee and for any units that cannot be sold, for whatever reason, the developer or lender can call upon LDS to complete.

It is a legally binding purchase contract that the lender or developer can call upon at any time to dispose of completed units. The sales guarantee removes all speculative risk and uncertainty, opening access to finance on improved terms and completely transforming viability. This in turn allows developers, lenders, and brokers to transact more business bringing forward much needed new

How does LDS ensure a development project is seen through to completion?

We get involved early and work with developers, lenders, and brokers to optimise the entire development ecosystem. The more robust every element of the transaction is, the lower the chances of default. Whilst we have yet to have a default on a site, if we did, our contract ensures our sales guarantee remains in place for the lender which underpins the project through to completion.

What’s in it for the broker?

Lots! We open access to finance which means faster transactions and higher leverage.

This means brokers are doing less work yet producing larger loans and associated fees. LDS is often the difference between a transaction happening or not as we can tip the viability into positive territory. Additionally, we also pay brokers generous introduction fees which are in addition to the usual finance fees from the senior debt providers.

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Advertising Feature

Are we there yet?

The rise in demand for holiday let properties Emily Machin Head of Specialist Finance InterBay Commercial

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reaming about warm sunshine, blue, cloudless skies and long lazy days on the beach can only mean one thing – it’s time for the great British summer.

Okay, so the reality rarely matches up to the expectation, but occasionally everything seems to come together to create the perfect opportunity for a getaway.

Take the late May Bank Holiday, for example. After a miserable few months, it felt like nearly everyone in the country took advantage of the sunny weather to enjoy a well-deserved break.

According to the RAC, nearly 11 million leisure trips were made over the weekend as people packed up, took to their cars, and headed to the coast for the half-term holiday following the easing of COVID restrictions.

It appears as though many of them were headed to the South West of the country, with Visit Cornwall estimating that almost 400,000 trips were made to the county and LastMinute-Cottages. co.uk saying that 99% of its listings for Cornwall, Devon, and Dorset were fully booked.

And, as I write this, it looks as though it will be a similar story over the summer holidays too. With large-scale foreign travel looking increasingly out of reach other than to those willing to pay for the tests or with time to self-isolate when they return home, according 22 | NACFB

to research by holiday parks firm Haven, apparently 21 million of us are considering a UK staycation this year.

That’s a huge number of people who’ll need accommodation in 2021 (and maybe beyond), and as a holiday let property could earn as much rental income in a single week during peak season as a standard buy-to-let would in a month, perhaps it’s not surprising that the demand for short-term rental properties has attracted the attention of investors.

However, many mainstream lenders are reluctant to lend on holiday let properties because of the way they calculate affordability. With most buy-to-let mortgages, affordability is worked out using the annual rental figure for a property being let for twelve months of the year. This can cause problems when it comes to holiday lets, which are rented out for weeks, rather than months, with income often fluctuating depending on the season.

Fortunately, specialist lenders, such as InterBay Commercial, are here to help. These type of lenders have got a vast amount of experience in providing bespoke solutions, and can offer products specifically designed to meet the needs of investors looking to make the move into holiday lets.

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21 million of us are considering a UK staycation this year

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Take our new holiday let proposition, for example. With mortgages aimed at personal ownership and limited company landlords, investors can choose from a range of products, with rent calculated on a letting period based on the average of the low, mid, and high season rates.

With more people looking to take their holidays in the UK this year, it’s good to know there are lenders out there who can help. So if you’re approached by a client looking to purchase a holiday let property, why not look beyond the high street and consider a lender who is best placed to help them realise their dreams?

Bridging and Commercial Press Ad 210x130 MKT000231-054.pdf

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16/06/2021

Why not look beyond the high street and consider a lender who is best placed to help them realise their dreams?

12:54

For an expert partner on your next holiday let case...

With up to 70% LTV available on properties in England and Wales, contact your local specialist finance account manager today or call 01634 836006 for more information.

FOR INTERMEDIARIES ONLY Product and criteria information correct at time of print (16/06/21)

Special Feature

The path to decarbonised finance Britain is poised to lead the way in sustainable SME funding Norman Chambers Managing Director NACFB

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riting about environmentalism is fraught with risk.

Before even putting pen to paper, one must first anticipate both the challenges of hypocrisy and cries of worthiness, before quickly accepting that the very subject of green issues remains incomprehensibly vast and surprisingly contentious.

What follows has briefly taken into consideration the above, and to be frank, tossed such concerns aside. This article will not attempt to construct both sides of a green debate, instead we will take as read some key inalienable facts. Namely, that climate change is already happening and is detrimental to human life, but also that the worst impacts of climate change could be irreversible by 2030. In short, it’s here, it’s not too late to stop it and, crucially, the UK lending community has a vital role to play.

The world at our feet?

Increasingly, the responsibility for solving major societal problems – including climate change – is being shifted from the collective to the individual. There are few other areas in which the individual is held so responsible for what is happening. The very term ‘carbon footprint’ places emissions quite literally at the feet of the individual.

But personal sacrifice alone cannot be the solution to tackling the climate crisis.

Looking for solutions to the climate crisis in individual responsibilities and actions risks obstructing more vaulting ambitions. The very notion suggests that all we must do is pull ourselves together over the next 30 years and save energy, ditch the car, skip holidays abroad, and simply do without. But these demands for individual action paralyse people, thereby preventing the large-scale change we so urgently need.

Making the transition Let us zoom out slightly from the individual then. Consumer expectations on how businesses should operate are changing. For the most part, it is no longer sufficient for businesses to simply offer reliable goods and services, increasingly people are voting with their feet, and opting to back businesses that can evidence a positive social and environmental impact. This growing movement provides a clear incentive to drive low carbon business practices, but if further incentivisation were needed, UK energy prices are increasing at a rate that far exceeds inflation, so a 20% reduction in an SME’s energy costs could well represent the same benefit as a 5% increase in sales.

According to the latest BEIS data, business and industry account for 25% of UK territorial emissions, with just under half of these emissions from SMEs. As the UK’s six million small businesses make up 99% of the UK’s enterprises, employ 60% of the UK workforce, and generate £2.2 trillion of revenue to the economy, it is crucial these enterprises buy into the need for action to reduce carbon emissions.

We know the number of companies pursuing sustainability is growing, and so is the market for sustainability finance – which, in turn, is encouraging more companies to go green.

Across UK banking, green and sustainability-linked financing is among the fastest-growing segments of the credit market. Both lenders and intermediaries can help shape how green initiatives are designed, launched, and embedded into everyday thinking. Once established, green finance will lose the green prefix and just become an integral part of the product, but the transition to that place may yet take time and some initial incentivisation.

involve an environmental, social and governance dimension,” says Scott Barton, managing director for corporate and institutional coverage, commercial banking at NACFB Patron, Lloyds Bank. “We are absolutely focused on the transition, working sector by sector and client by client to establish a roadmap around transition.”

The bigger picture So far, we have pulled back from individual efforts, examined green funding initiatives for SMEs, and the role of the brokers and lenders that empower them, but what about decarbonising on an even greater scale?

Located in a reclaimed china clay pit, three miles outside of the town of St Austell in Cornwall, lies the Eden Project. The familiar domed structure is a monument to the alternative, a mecca for climate science, and carbon consciousness. In June, just a few short miles down the road from the iconic building, G7 leaders met and failed to agree on any meaningful climate accord. Those same leaders will get a second chance this October in Glasgow, at the United Nations Climate Change Conference, also known as COP26. It is hoped that part of their discussions will be a global green finance strategy.

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The very term ‘carbon footprint’ places emissions quite literally at the feet of the individual. But personal sacrifice alone cannot be the solution to tackling the climate crisis

As the UK faces the challenge of achieving carbon neutrality by 2050, attention has turned to the lending community’s role in providing innovative new products to help finance that transition. “We don’t have a conversation today on the financing agenda that doesn’t NACFB | 25

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Greenwashing poses a risk for consumers who invest in green financial products, but it also poses a reputational risk for lenders and the intermediaries that recommend their services who do not label their financial products clearly

Britain has the potential to be a genuine world leader in this field.

Last year, the UK launched a Green Finance Strategy. The document outlines how the finance sector, and better climate disclosure from key corporate actors, can drive progress and help the UK achieve its net-zero emissions target.

This year, and in response to the strategy, the Treasury Committee published its report entitled ‘Net Zero and the Future of Green Finance’ in time for April’s Earth Day. This report reviewed the economic opportunities and costs of reaching net zero, alongside green finance and how it can support decarbonisation, and the role of consumers and how they need to be protected through appropriate and evolving regulation.

financial products, but it also poses a reputational risk for lenders and the intermediaries that recommend their services who do not label their financial products clearly. Here you would think that the FCA retains oversight over the labelling of products, but the regulator’s role is limited to confirming whether the financial product or fund ‘does what it says on the tin’, rather than assessing if a product has genuine sustainable credentials.

A system of eco-labelling has been mooted but is considered difficult to implement because there is not yet enough standardisation in the market to be able to compare like with like. However, until there is more standardisation it is hard to see how institutions like the FCA could police mislabelling fairly and consistently.

It considers much of the progress made to date and the market response. For the most part, this translates to a sense that more needs to be done and that there is a market appetite for faster progress to be made. For instance, the UK has announced that it plans to issue a sovereign green bond this summer in a minimum amount of £15 million, which is expected to lead the way towards unlocking the sterling green bond market.

In the meantime, lenders and other providers of green financial products should see that they focus on ensuring the integrity of green finance. Failure to do so puts the reputations of brokers at stake. Much like building a house where you must build solid foundations before laying the first brick, the UK government must ensure that the structures for market-leading green finance are built on strong policies and strategies.

There remains much optimism towards progress. After all, if the UK gets the strategies, incentives, and regulation right, it would be a big win in terms of meeting climate-change targets and achieving economic recovery in the aftermath of the all-consuming pandemic.

Acting on climate change will help UK businesses grow, it will help them seize new opportunities, create new jobs, encourage investment, and adapt to the challenges of a changing planet.

Further, reducing emissions can lower businesses’ running costs, saving them money, and helping them to attract new customers – ultimately helping them maintain a competitive advantage both locally and globally.

Treading carefully One of the key obstacles the roll-out of green finance initiatives faces, relates to greenwashing, namely the labelling of financial products as ‘green’ or ‘sustainable’ when they are not.

Greenwashing poses a risk for consumers who invest in green 26 | NACFB

With the pandemic and Brexit sending shockwaves through our entrepreneurial community, green financing represents a beacon of hope, and perhaps a tantalising opportunity for not just lenders and brokers, but our country.

For your semi-commercial and commercial cases...

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Special Feature

Diversifying portfolios Short-term lets are here for the long haul Marcus Dussard Sales Director HTB Specialist Mortgages

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s a specialist bank, our objectives and vision are clear. We provide creative solutions aligned with innovative products and criteria. As an intermediary focused lender, we also put brokers at the forefront of everything we do. We believe that this dedication to providing such qualities, aligned with the highest quality service standards helps set us apart from our competitors.

For landlords, it is all about providing tailored solutions which can power-up affordability levels and improve returns where possible.

When located in the right place at an optimal time of year, a short-term let can earn four or five times the amount a standard BTL property or an AST can make in a month. Even typing these words makes me realise just how attractive such an option can be for property professionals, but it is also prudent to point out the performance of such properties can vary wildly depending on the location, time of year and, probably most importantly, the quality of the management. These properties need a significant amount of resource when it comes to the three Ms – marketing, management, and maintenance. These are factors which landlords and investors can sometimes, at best, underestimate or, at worst, ignore completely.

Lingering COVID-related restrictions may not have exactly fuelled the fire of this lending type in 2020, but a recent study by the UK Short Term Accommodation Association highlighted renewed confidence that this sector will swiftly recover to the levels of business experienced in 2019. The data found that there is an 89% average confidence rating around the outlook for short-term lets for the remainder of 2021, up from 69% in February. It also reported an average confidence rating of 83% for 2022.

28 | NACFB

While the term ‘staycation’ will continue to dominate column inches, there are many other scenarios for landlords and intermediaries to consider. For example, contractors working at nearby sites for extended periods, or families needing a short-term base for a couple of months through a property licence.

These are just two instances which we, as a lender, can consider when meeting ICRs and it is these types of common sense criteria tweaks which are leading to more and more landlords appreciating the flexibility and yield of short-term lets. And when you add existing homeowners who are taking advantage of rising house prices by selling without immediately looking to purchase, plus buyers who are waiting for new build properties to be finished into the mix, then it is fair to say that demand for this property type has become stronger and more diverse.

“

It is also prudent to point out the performance of such properties can vary wildly depending on the location, time of year and, probably most importantly, the quality of the management

Let’s keep this simple.

Our bespoke Introducer Portal was rated as good, very good or excellent by 96% of brokers for ease of use.* • • • •

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Find out more at allica.bank/introducers or give us a call on 0330 094 5555 COMMERCIAL MORTGAGE LENDER OF THE YEAR PATRON OF THE YEAR

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*Source: Allica Bank’s Q1 2021 Broker Survey of 131 brokers

Allica Bank Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN: 821851). Registered office: First Floor, Eldon House, 2-3 Eldon Street, London EC2M 7LS. Registered in England and Wales with company number 7706156.

Special Feature

Green is the new black How green mortgages are preparing landlords for an eco-friendly future Paul Brett Managing Director – Intermediaries Landbay

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n 2019, the Government committed to make Britain carbon neutral by 2050. Apart from reducing our dependence on fossil fuels, reducing the country’s carbon emissions by addressing inefficient housing stock has also become an area the Government is seeking to address. According to the Government’s national statistics, residential properties account for 15% of the UK’s total climate emissions.

In 2020, and before the pandemic hit, an IMLA (Intermediary Mortgage Lenders Association) survey showed that 43% of consumers had not heard of green mortgages and at the time 43% of lenders said they had no plans to launch them. Fast forward eighteen months and the momentum is beginning to grow. Green issues are rightly dominating the news agenda and interest among consumers is growing.

The FCA is also aligning its policy with the Government’s commitment to a greener future. Its interpretation of the Government’s wishes will become less a nudge and more a desired expectation. At the same time, the building sector, is going to have to commit not only to building more energy efficient homes, but also work positively to improve both the design and quality control of new builds, to ensure the long-term effectiveness of an eco-led future.

30 | NACFB

However, their enthusiasm and willingness to build increasingly eco-friendly property will depend on seeing a profitable outcome and a continuing campaign of educating property buyers to the environmental benefits and the economic case of lower mortgage rates on green mortgages.

EPC certificates with their current qualification criteria and the value placed upon them will, for the time being, represent a standard that all parties can understand and work with. For lenders offering green mortgages, the EPC qualification will continue to be the gold standard for a property.

At Landbay, we have just launched our first green product range for both purchase and remortgage which will be of benefit to landlord clients whether they are buying or refinancing properties with an EPC rating of C or above.

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Green issues are rightly dominating the news agenda and interest among consumers is growing

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Landlords are recognising the growing value of owning property which not only meets today’s energy standards but also anticipates future requirements

Currently, properties being let by landlords are obliged to have at least an E rated EPC. However, the Government has said it wants as many as possible to be upgraded by 2030 – and our new green product range will go some way to help achieving that goal by incentivising more landlords to consider adding energy efficient properties to their portfolio.

mortgages, landlords are recognising the growing value of owning property which not only meets today’s energy standards but also anticipates future requirements. Last year the Government’s consultation document outlined the case for requiring new rented property to have an energy efficiency rating of band C from 2025 and 2028 for existing privately tenanted buildings.

Whilst the £2 billion Green Homes Grants package of investment for homeowners to implement energy efficient upgrades has been broadly welcomed, it is only being made available to owners of main residences. Currently, landlords are not obliged to improve the energy efficiency of their properties, but pressure will increase as 2030 gets closer – either via local authority licensing or changing the taxation process.

The financial and ecological argument for green mortgages is becoming indisputable and the intermediary channel is in the best position to be pointing out the advantages both for new purchases and for remortgaging existing property, to meet today’s and tomorrow’s energy efficiency ratings.

According to a survey by Mortgages for Business in March, 60% of landlords said they were interested in products that offer a lower rate for making their properties more energy efficient. Twenty years ago, that figure was only 10%. Of course, in that time overall awareness of the issue has moved from the periphery to the mainstream so the uptick in interest is hardly surprising.

Apart from the incentive of lower rates of interest on green

Green mortgages provide landlords with the means to meet tomorrow’s challenges by helping to improve existing property portfolios and being more selective when investing in energy efficient housing for new purchases. Advisers have a major role to play in educating landlords that green mortgages will not only help to improve the quality of tomorrow’s rental housing stock but will also make a positive impact on their future profitability.

For more information or to discuss any of your BTL cases please get in touch using our online BDM finder.

NACFB | 31

Special Feature

Supporting young lives £26,185 raised and counting for NACFB chosen charity Norman Chambers Managing Director NACFB

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ur charity partner CLIC Sargent has changed its name to Young Lives vs Cancer as part of a new strategy responding to the impact of COVID-19 on both the charity and the families it supports. The change will help it to reach more people, raise more funds, and support more families facing the fear a childhood cancer diagnosis brings.

Their name may be changing, but the support they provide to young people with cancer and their families will be as vital as ever.

The NACFB’s partnership with Young Lives vs Cancer started back in October 2019 as the benefiting charity for the NACFB’s annual Gala Dinner. To date we have raised an incredible £26,185 and are aiming to raise this further by the end of the year. This support helps families like Theo’s.

Theo’s story In September 2019, Theo started to cough but though he didn’t feel unwell in himself, and he wasn’t bringing anything up, it just wouldn’t go away. A little while later, he started to get eczema on his feet, which was quite bad. His mum took him to the doctors, they listened to his chest but were not concerned as they couldn’t hear anything and then they saw a dermatologist for his feet.

The GP appointments had been emergency appointments, but his mum had made a scheduled appointment for a month later and by the time that came around his feet were getting better so she wasn’t sure whether to still go but decided may as well. At that appointment, the GP listened to Theo’s chest but also felt round his neck, where he felt a lump. He said it may be nothing to worry about but to get it checked out. This was just before Christmas. Over New 32 | NACFB

Year’s Eve his family were worried about what the results would be, as the GP had taken a lot of time feeling around. On 8th January, they were told Theo had Hodgkin’s Lymphoma.

Theo was transferred to UCLH for treatment. His mum had to stop work to look after Theo. Support from their social worker, Becky, was a real help – Theo was especially pleased with his Nintendo Switch which helped to pass the time in hospital.

“Becky, our Young Lives vs Cancer social worker first came round to see us – on my first day when I was sitting there with Theo while he was having his chemo – she came for a chat to see how I was doing, see how Theo was doing, just chat. It’s quite overwhelming when you’re there on your first day and you don’t really know what this journey is going to bring.”

Thank you Claire Herrick, our partnerships manager at Young Lives vs Cancer told me: “We’re delighted to have the continued support of the NACFB with some amazing activities planned for the year ahead.

This support helps Young Lives vs Cancer be there to help families find the strength to face everything cancer throws at them.”

I would like to take this opportunity to thank each and every one of you who has helped us support the work of this amazing charity.

I am deeply touched by your generosity, and I look forward to seeing many of you this autumn at Commercial Finance Expo, the Commercial Broker Awards, or the Gala Dinner where we plan to continue fundraising.

CELEBRAT1ON We’re immensely proud of how far we’ve come with our broker partners - a decade of achievements worth celebrating.

Here’s to the next 10 years!

Special Feature

Demystifying personal guarantees In cautious anticipation of a post-pandemic boom Joe Phelan Director & Solicitor Phelan Independent

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t’s been a tough 16 months for UK businesses. Understatement of the century aside, the negative impact of COVID-19, which caused GDP to decline by 9.9% in 2020 and hundreds of businesses to cease trading entirely, continues to take its toll. In June, the Office for National Statistics published data confirming that many surviving companies are trading well below their usual capacity, with 31% of businesses reporting lower than normal turnover. A figure that jumps to 60% for businesses in the arts, entertainment, and recreation sectors.

Yet, as restrictions ease, vaccination uptake increases, and we adapt to the ‘new normal’, there’s economic light at the end of the tunnel.

According to research by Reparo Finance, 64% of SMEs are likely to take on external finance in the next three years in response to the pandemic.

Additionally, 100% of businesses and financial intermediaries that responded to a separate survey by Time Finance agreed that ‘investing in business to recover and move forward should be happening now’.

Approach with caution While this is undoubtedly hugely positive news for businesses, commercial finance brokers, and the UK economy at large, lenders are cautious and increased levels of security, including personal guarantees, are likely to be sought. Personal guarantees include legally binding commitments to satisfy the obligations of another party, often even if that other party is not in default. Therefore, parties must approach personal guarantees with caution and fully understand what they are signing up to.

34 | NACFB

Herein lies a key problem. It turns out there is a serious disconnect between what a personal guarantee is and what individuals think it is. In fact, almost half (47%) of SME owners and shareholders don’t understand personal guarantees. Some think that, as they are guaranteeing their related company, there is no additional risk and some think a personal guarantee is an individual’s confirmation that they personally understand the terms and conditions of a loan.

Either way, this lack of understanding can equal significant financial risk for clients.

Mitigating risk Supporting clients to bounce back from the impact of COVID-19 and thrive over the coming months and years places a renewed onus on brokers to challenge the misconceptions surrounding personal guarantees and the need for independent legal advice.

Clients often fail to appreciate that they are a separate legal entity from their company or wrongly assume that personal guarantees are unlikely to be activated so pose little risk.

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Parties must approach personal guarantees with caution and fully understand what they are signing up to

In reality, personal guarantees do pose serious risks to individuals signing up to them. Because of this, and various case law on the topic, lenders will simply not proceed without confirmation that independent legal advice has been given to a guarantor where a transaction involves personal guarantees.

With the requirement for independent legal advice normally arising as transactions near completion, it’s understandable that many view it as a mere formality or box ticking exercise, rather than a value adding process. However, for clients to take full advantage of the investment and growth opportunities on the horizon, this perception must shift.

Independent legal advice, delivered by a qualified solicitor, plays a vital role in mitigating personal financial risk, empowering clients to make informed borrowing decisions, and enabling deals to complete swiftly and successfully. Deals involving personal guarantees simply won’t complete until independent legal advice has been given to the guarantor. Therefore, to help clients benefit from the post-pandemic boom, instead of fall victim to it, and avoid transactions being delayed whilst independent legal advice is sought at the last minute, it is crucial brokers facilitate, as early as possible in the transaction, access to expert, fast, and affordable independent legal advice for their clients.

Offering flexible funding and reliable response times, Wesleyan Bank is a partner you can count on.

X Choose from a variety of finance solutions to suit your clients’ needs X Funding for a wide range of commercial sectors X Easy to understand deal submission and credit policies X Dedicated team of account managers X Direct access to our credit experts To find out more, call us on 0808 123 0111 between Mon-Fri 8:30am-5:30pm, or email bank.broker@wesleyan.co.uk.

Depending on the circumstances and where required by law, loans will be regulated by the Financial Conduct Authority and the Consumer Credit Act. Wesleyan Bank Ltd (Registered in England and Wales No.2839202) is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services register No.165116). Registered office: PO Box 3420, Colmore Circus, Birmingham, B4 6AE. Tel: 0800 358 1122. www.wesleyanbank.co.uk . Calls may be recorded to help us provide, monitor and improve our services to you.

BR-AD-3 06/21

Industry Insight

On the up The rising demand in unsecured finance Colin Goldstein Commercial Growth Director iwoca

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t will come as no surprise to many in the commercial finance industry that demand for unsecured finance from SMEs is on the rise. This was the headline finding of the Q2 2021 edition of our SME Expert Index. The data, which covers a four-week period in May, is based on insight from UK brokers who collectively submitted more than 1,250 applications for unsecured finance on behalf of their SME clients throughout the month.

Our research found that more than a third (38%) of brokers had submitted more applications for unsecured finance compared to the four weeks prior, suggesting that SMEs are increasingly using credit to support their growth and recovery. What’s more, almost one in five brokers (19%) saw demand increase significantly – submitting 50% or more applications compared to the previous four weeks. This has risen from 14% of brokers citing the same in the Q1 index.

Moving from volume to value; over half of brokers (55%) told us that the most commonly requested unsecured loan amount they’d applied for on behalf of their clients was under £50,000. And nearly one in five (17%) were most likely to request loans under £25,000 – this is below the threshold of the Recovery Loan Scheme.

As well as investigating the volume and value of applications, we also asked SMEs about the reasons small business owners were requesting finance. It’s clear that cash flow remains the key driver: 32% of brokers said the most requested reason for loan applications was for managing “day to day cash flows”. Growth came next, with 23% of brokers reporting that the main reason their SME clients requested finance was to “grow their business”. As social distancing restrictions ease, one in five (21%) SMEs are seeking finance to recover from lockdown or closure.

The “approved amount” continued to be the most important factor for brokers when presenting two competing loan offers to clients, 36 | NACFB

with 23% of brokers highlighting this as having the most impact, down from 25% in Q1. “Total cost of borrowing” (19%) and “monthly interest rate” (19%) came next. However, the number of brokers concerned with the level of APR had more than halved since January from 13% to 6%.

Just over two-thirds (68%) of brokers said the “speed of receiving a decision” and that the “amount requested meets lender’s offering” were the factors which most often played a part in deciding which lender to send a submission to. This was a slight variation to the Q1 index, where speed was the key factor and only 56% were concerned with the lender matching the amount requested.

For SME clients who requested finance through the Recovery Loan Scheme, a third of brokers said they waited – or are still waiting – for non-bank lenders to be accredited to the scheme.

As the economy opens up, access to finance is crucial for small businesses who are looking to grow and recover from the pandemic.

It’s encouraging that SMEs are feeling increasingly confident in using credit as a tool to help them get back on track.

“

Moving from volume to value; over half of brokers (55%) told us that the most commonly requested unsecured loan amount they’d applied for on behalf of their clients was under £50,000

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Industry Insight

The direction of travel A pivotal twelve months for the transport sector Thomas McLennan Head of Policy & Public Affairs British Vehicle Rental & Leasing Association (BVRLA)

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ransport remains a key focus of the decarbonisation agenda as the UK, and the world, put ever increasing pressure on the transition to net zero. At the same time, the external forces of Brexit and the pandemic also impact the sector as consumer and commuter behaviour changes embed.

Changes are also happening from within. Vehicles are becoming ever more connected and autonomous and the definition of ‘mobility services’ is rapidly evolving.

Brexit and what it means for the UK is still not clear. COVID-19’s effect on demand and an array of temporary easements have meant that the new EU-UK trading relationship has not yet been truly stress-tested.

For the transport sector a raft of regulations that were previously derived from Brussels – ranging from CO2 targets and type approval to competition law frameworks – are all up for review. It is not clear if the UK will deviate or align with the EU’s direction of travel.

According to a recent BVRLA Business Impact Survey, which provides a view on the issues affecting UK fleet leasing and vehicle rentals, working remotely has changed how we do business. It found that 78% of respondents expect that business travel will never return to pre-COVID-19 levels. Consumption patterns have also changed.

38 | NACFB

More people than ever are buying goods online and this has seen the van market hit unprecedented highs.

There are also indirect COVID impacts. A global semi-conductor shortage for the auto industry has restricted the supply of new vehicles just as the recovery begins pushing up used vehicle values. This ‘long COVID’ impact looks to continue into 2022 and may well set the pace for the sector’s recovery. Over 90% of BVRLA survey respondents see van supply as a barrier to them meeting their customer needs.

Coronavirus has also been hugely expensive. We expect the Chancellor will want to start to reign in some of the government’s spending, and his earliest opportunity to demonstrate this will be with the

“

Sentiment is now overwhelmingly positive with over 90% believing the economy to improve and 71% expecting to grow their fleets over the next six months

Spending Review later this year. Motoring taxes might be in the crosshairs at later fiscal events. The sector needs certainty to recover and currently there is not enough foresight around any of the key motoring taxes: fuel duty, Vehicle Excise Duty or Benefit-in-Kind.

During the height of the pandemic there were concerns from BVRLA members around access to finance. Huge numbers of consumers had requested forbearance on their motor finance products and lenders seemed to be increasing in wariness. In late 2020 more than 20% of BVRLA survey respondents suggested access to finance was an extreme barrier for them. Fortunately, this was more a temporary blip than a trend and by May 2021 the figure had more than halved to 7%. While forbearance remains a concern, general member sentiment is now overwhelmingly positive with over 90% believing the economy to improve and 71% expecting to grow their fleets over the next six months.

Decarbonisation of the transport sector is a key government priority.

This year, it is especially in focus with the UK hosting COP26. The UK is hugely ambitious with its plans and will be following up last year’s 2030 ICE phaseout announcement with a raft of consultations and announcements in the run up to the UN conference.

Fleets are driving the growth in zero emission vehicles, and the current policy framework is working for cars. It is critical that the government continues its support as long as it is needed and provides additional targeted measures where user groups are lagging. Of specific concern are vans which have the same deadlines as cars but have a far less effective framework of incentives.

“

Data will be the new oil and how it is accessed, by who and at what cost, will have a fundamental impact on how the sector develops

We will see the first vehicles classed as autonomous on the roads in the UK by the end of the year. The government is keen to establish the UK as a world leader in this field, but the underlying regulatory framework needed to create a fair and competitive landscape is not yet clear. Data will be the new oil and how it is accessed, by who and at what cost, will have a fundamental impact on how the sector develops. The government needs to work with all parts of the sector to establish a clear and fair regulatory framework that fosters innovation and competition.

Given all that is in flux, the next twelve months have the potential to set decades of direction for the transport sector. With a keen focus on innovation and customer service, I have no doubt that our sector will rise to these challenges, emerging fitter and stronger than ever before.

NACFB | 39

Industry Insight

Motherhood vs career Why can’t women have both? ​Rebecca Chapman Internal Business Development Manager Ortus Secured Finance

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fter two years of being a stay-at-home mum, I was ready to return to work in the finance industry. However, when speaking with recruiters and companies, I faced significant bias. Despite being fully qualified, with years of experience under my belt, I struggled to convince recruiters I was fully capable of performing a job while also being a mother.

Some companies made it clear that I was just not what they were looking for. Some recruiters told me that it would be a “waste of time” to forward on my CV because of my life stage, whilst others very clearly told me to reconsider my application for a BDM role because “you don't really want a role like this with a young family”.

I found it incredible that my professional experience was often overlooked in favour of commenting on my suitability because of my stage of life.

I fear my experience is not uncommon and believe that many women struggle against the assumption that mothers are not able to maintain the same professional footing as their male colleagues. This phenomenon is known by some sociologists as the ‘Motherhood Penalty’ which can greatly affect a woman’s professional reputation, her earning potential, and her chances of finding another job.

Although changes in legislation mean more support for mothers in the workplace, women still face unfair assumptions and unequal opportunities at work. Although shocking, I find it unsurprising that my husband has never had the same recruitment challenges even though they are his children too.

According to the New York Times, on average, women experience a 4% pay cut for each child they have, compared to men who receive a 6% pay increase.

40 | NACFB

Thankfully, there are companies working to change things for the better; from practical provisions such as space to breastfeed, on-site nurseries, and generous maternity packages to counselling support, flexible working arrangements, and equal employee opportunities.

Fortunately, I secured an interview with Ortus Secured Finance where they treated me as an experienced professional who had something to bring to the table. It was so refreshing. They were genuinely focused on how I met the job description whilst also being supportive of flexible working discussions.

Ortus places a strong emphasis on developing their people and as a consequence are beginning to implement forward-thinking initiatives that are supporting mothers like me re-entering the professional landscape.

If businesses want to support mothers returning to the workplace, the best place to start is by listening to their needs. People flourish in environments where they feel supported, positively challenged, and permitted space to grow. Positive attitudes and clear communication between employees and line managers is pivotal to supporting mothers in their return to work.

“

Although changes in legislation mean more support for mothers in the workplace, women still face unfair assumptions and unequal opportunities at work

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Industry Insight

For better or for worse Why online reviews matter to brokers Jenny Barrett Communication Consultant NACFB

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them into your marketing. Putting them onto your website is a great place to start. You can do this manually, or by linking to the review sites. For best results, you will probably have to create an account with the review providers. You may even choose to pay for an enhanced service which will give you more control and, if the provider is Google-affiliated, could boost your profile in the search results.

hese days, online reviews are everywhere. There are dedicated review sites, in-house review systems, and good old-fashioned customer testimonials. So many reviews in fact, that it can be difficult to keep up with what people are saying about your business and where they are saying it.

If the reviews are not what you were hoping for, do not be downhearted; instead, view them as an opportunity to identify where you can make improvements to the service you provide. It could take some time to build a collection of positive reviews but should be worth it in the long run.

From a business perspective, reviews are good because they can generate leads, improve customer trust, and raise your brand’s visibility, especially on the search engines.

Whenever possible, always respond politely to a review, even if it is only to say thank you.

What are people saying about your business?

Try typing your business name followed by “reviews” into Google.

If you have a listing on Google My Business (see my article in the December 2020 issue of Commercial Broker magazine) it is likely that you will appear on the first page of the search results in a standalone box on the righthand side of the screen. Directly underneath your business name you will find your Google star rating – a score out of five based on the average rating given to you by individuals who have left a review. A top score is five out of five. You can click on the links to find out the reviewers’ Google handle (name) and what they have written about you.

In the natural search results, you may also find links to reviews about your business on other sites including Facebook, Trustpilot, Feefo, and Smart Money People. It is worth noting that you can also carry out the same process on other search engines where, of course, the results are likely to differ slightly but will still give you a good spread of feedback.

Put good reviews onto your website If the reviews are generally good, you should think about incorporating 42 | NACFB

Ask clients to write a review Think about where best in the customer journey to ask a client to write a review. Do not be tempted to limit them to one review site as you may find they have a preferred provider, and you could reduce your overall reach.

For more information on the practicalities of making the most of reviews, take a look at p. 52 for the five mistakes to avoid when using a review site for your business.

“

It can be difficult to keep up with what people are saying about your business and where they are saying it

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Broker Voice

A word of warning The caution surrounding Beneficial Interest Company Trusts Jeni Browne Director of Business Development Mortgages for Business

S

ince the Section 24 income tax relief changes began in 2017, an increasing number of landlords have started running rental income via Beneficial Interest Company Trusts. While not a new structure, not every broker has heard of them or knows why they are not popular with buy-to-let lenders.

A Beneficial Interest Company Trust (BICT) allows landlords to move the economic value of their property into a company whilst retaining both the legal title and the mortgage personally. Historically, this was popular when holding property in a limited company was unusual and very few limited company buy-to-let mortgage products were available.

By putting the property through a BICT, landlords can still access personal buy-to-let mortgages, but from a tax perspective, treat the property as if it was part of the company.

Since the Section 24 changes kicked in, landlords have been looking for ways to minimise their tax liability. While many opted to own property in a limited company structure fully, some landlords are using the BICTs to circumvent the restrictions on interest relief.

It sounds excellent in theory but there is a reason not everyone is doing it. I can count on one hand the number of lenders which would consider lending where a BICT is in place. Even then, the consensus from this minority of lenders is that applications stand a better chance of consideration if the borrower has used this arrangement before the interest relief restrictions were revealed.

In their view, landlords who have adopted this structure after the Section 24 announcement did so to work around the tax changes.

44 | NACFB

The reason why lenders do not like lending where this structure is in place is, predominantly, because there are concerns that it could be considered contrived and fall foul of HMRC anti-avoidance legislation. In a nutshell, they are worried it could be a tax avoidance scheme!

If a landlord is pursued by HMRC, they could find themselves presented with a large and unplanned tax bill. Lenders are therefore concerned that if a landlord finds themself in this situation, they may not have the funds to pay. While HMRC has not pursued many cases, buy-to-let mortgage lenders still consider this structure a high risk.

In addition to the potential issues with HMRC, the legal complexities that lenders (and borrowers) can run into with these structures mean that lenders are mostly reluctant to take the risk. We have encountered situations where landlords have set up a BICT during the term of an existing personal buy-to-let mortgage, without telling

“

A Beneficial Interest Company Trust (BICT) allows landlords to move the economic value of their property into a company whilst retaining both the legal title and the mortgage personally

their lender which can be a violation of the mortgage contract.

Whilst the borrower might not be found out immediately, it may be a problem when the time comes for them to remortgage. Lenders do not take kindly to this course of action and may consider the landlord untrustworthy, and consequently reject the application and, potentially, any future ones.

For lenders, BICTs can also make chasing mortgage defaults more difficult; while the person named on the mortgage and property deeds are underwritten (and therefore responsible), if the rent is going into a limited company, the waters are muddied.

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With so many potential issues surrounding the structure, most buy-to-let lenders consider it too much hassle and too high risk to consider supporting.

As a broker, if you come across a client with a BICT already in place, do not panic! Remember, some lenders will consider an application.

However, if you have a client who wants to set one up, recommend that they take professional tax advice as well as talking to a solicitor.

And explain to them how using a BICT could reduce their chances of securing a buy-to-let mortgage. And if you are still not sure, refer them to a broker with BICT experience.

Opinion

Taking service to the next level Don’t let the opportunity pass you by Chirag Shah Chief Executive Officer Nucleus Commercial Finance

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t’s already a competitive world out there for both brokers and lenders alike. So, when Open Banking was introduced a little over three years ago, many brokers and lenders were concerned about what they considered a new threat on the block.

But rather than worrying about how technology can outperform us, we should instead be thinking about the many things we can offer, which Open Banking and technology simply can’t.

Hopes and fears Whilst technology has made considerable advancements in the last decade or two, there remains the one crucial component that cannot be programmed into a piece of software: the human touch. We all understand that the emotional force behind financial decisions will always take precedence.

That being said, failing to adopt Open Banking and AI into what you do will only mean more work, more time, and potentially worse outcomes. Tech is here to stay and ready to help. Implementing AI helps us all to deliver the key customer requirements – speed, consistency, and transparency.

There’s no need to incorporate overcomplicated steps into the lending process, as it’s often difficult enough for businesses to access finance. But adding technology to enhance the experience for everyone involved? It’s a no brainer.

Streamlining processes AI and the use of Open Banking allow everyone in the marketplace to get a better picture of the short-term business performance. For 46 | NACFB

lenders, that means being able to offer quicker, accurate, and more informed decisions. For brokers, it means being able to package more robust loan applications and higher approval rates. And, of course, for customers, it means a greater speed of access to funding via a pain-free and simplified journey.

Technology is here to help everyone, providing everyone is happy to adopt it. Whether it’s implemented to improve underwriting, auto-decisioning, or for heightened risk and fraud prevention, the power of AI cannot be ignored.

Not only is Open Banking safer, but it’s also the more superior option where customer experience is concerned. Customers no longer need to dive into piles of paperwork as the innovative tech behind Open Banking accesses various data points. With read-only access, third parties who are granted access get a comprehensive picture of the customer’s financial history – and with a better risk profile in place, the right lending decisions can be made, and everyone is better off.

The problem?

Customers mustn’t see tech advances as more ways in which they are under scrutiny, as finances are a tricky subject for most. Instead, your clients should welcome change as technology allows lenders to streamline the process so that businesses can get the funds they require as fast as they need to.

Ascertaining the best finance facility that reflects your client’s cash position and ability to repay will always be your top priority – and AI is the industry’s worst kept secret to ensuring that happens. It’s key to providing the best outcome for everyone – the customer, lenders, and you, the expert finding the perfect funding product for your clients.

Brokers need to be AI and Open Banking advocates if consumers are ever going to truly embrace this revolutionary technology. Many still don’t feel comfortable with it and it’s our job to work together to help your clients understand why they’ll never look back once they do.

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Opinion

Developing greater resilience From 2007 to 2021: how has development finance changed?

Gareth Davies Head of Development Finance Hodge

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he last 18 months has seen unprecedented challenge and, while the development finance market has had to react inventively to the changing environment, the need to adapt is nothing new.

The Global Financial Crisis (GFC) The GFC was a turning point for many lenders in the UK. Multinational institutions collapsed, household names disappeared, and many more needed extensive government support. During the late 2000s, development finance was a scarce commodity. Traditional funders, mainly larger clearing banks, were too busy fire-fighting much wider, often existential issues, leaving minimal appetite for new development finance opportunities.

Traditional banks remained exceptionally cautious. Two types of developments existed – good ones and everything else. ‘Good’ developments (and only if they were ‘gold-plated’), may have found funding from their existing bank; anything else would struggle to find a home. Unlike today, shopping around for development finance as a ‘new to bank’ customer was hardly de-rigueur. Availability of capital was key; the price of borrowing it was less of a priority.

Five years on The effect of the GFC was seismic. Huge changes were made to 48 | NACFB

policy, legislation, and regulation, improving capital and the liquidity standards of banks, dramatically reducing the risk of a repeat crisis.

Traditional banks continued to deal with challenging legacy loans, increased regulatory costs, higher capital costs and taxes, all of which resulted in lower profitability. They needed to become smarter but often targeted products that required the least capital, over those that generated the best returns. Unsurprisingly, development finance remained difficult to obtain from traditional lenders.

But, with record low interest rates, an economic recovery gaining momentum – 2013 saw the strongest economic growth (1.9%) since before the crisis – and residential property prices continuing to rise (8.4% in 2013), a flurry of second tier lenders, challenger banks,

“

Traditional funders, mainly larger clearing banks, were too busy fire-fighting much wider, often existential issues, leaving minimal appetite for new development finance opportunities

“

The key for borrowers and brokers alike is to find a lender they trust.

This is where good advice, from a quality broker, adds genuine value

funds, and peer-to-peer lenders flooded in, taking advantage of the broadening gap in the market left by the clearing banks’ absence.

to confidence of delivery; those lenders with a proven track record could often charge a premium.

Materially more capital became available for development finance and, as more varied funders joined, a hunt for differentiation began. Borrowers recognised the extra capacity, demand grew, leverage increased, and prices fell. Cheaper, more readily available development finance had made an entrance.

Where are we now?

Five years on from that…

Ten years on from the GFC, hefty challenges remained across the UK. The impact of SDLT changes had bitten hard, the reverberations of the Brexit referendum continued, and two general elections in quick succession had done little for the UK’s attractiveness to overseas investors.

Despite this, the UK economy continued to grow, unemployment was at its lowest since the 1970s, and the demand/supply dynamics of the housing market ensured continued price increases. More funders continued to enter the development finance market but, with an influx of lenders, came an increase in risk – borrowers needed to become alive to who they were borrowing from.

‘Know Your Lender’ became as regularly touted as ‘Know Your Customer’. Trusting your lender to behave appropriately, treat you fairly, and, crucially, delivering on their promises, became a top priority. Price remained a constant feature, but focus had shifted

Only the likes of Mystic Meg could’ve foreseen the changes since the start of the GFC, and only a brave soul would’ve predicted, in 2007, that the last two years would’ve seen Brexit and a pandemic ravaging the globe.

But, despite these challenges, development finance has rarely been so readily available, with a vast array of lenders offering funding for a variety of debt sizes and project types.

While historical considerations like price, leverage, and confidence remain key, other characteristics, like speed, simplicity, and smoothness of process are now challenging for the top spot.

The key for borrowers and brokers alike is to find a lender they trust. This is where good advice, from a quality broker, adds genuine value, guiding the borrower to the best funding solution for their unique transaction.

The relationship between lender and borrower is sometimes seen as a conflicting one but it should never be; our goals are aligned as we’re all working towards achieving the same result. It’s this that we strive for at Hodge, creating long-lasting partnerships that will span the next 15 years – at least.

NACFB | 49

Opinion

Building momentum Should we be worrying?

Sam Howard Managing Director Magnet Capital

I

recall sitting at my desk in March of last year, with the COVID-19 pandemic’s impact starting to take hold and being told by surveyors and commentators that residential house prices would crash by 20%, possibly more.

One mentor of mine, an industry doyen, said this will be like the property crash of 1973 again. As managing director of a development finance lender, I felt the cold winds of a housing crash, as we decided whether we should change our lending criteria, based on these warnings.

Here we are 18 months later and not a day goes by when I do not read an article commenting on the surge in house prices. This is corroborated by our experience on the ground, where our borrowers are selling their completed developments in record time, at prices well above the levels we had originally valued the properties at. We are seeing houses selling off-plan or at the very early stages of the build. It is not unusual for there to be multiple offers from buyers, well over the asking price.

Our surveyors report the same is happening in other parts of the country. For example, double digit price rises in Nottingham, properties over £1 million in rural areas seeing 7% rises in the year to March and so on and so forth. Net mortgage borrowing was the highest in March 2021 than in any other month since comparable data began in 1993.

50 | NACFB

The reasons for this market mania have been well discussed. Low interest rates, a chronic shortage of supply of quality housing, and lifestyle changes, where buyers want more space and are prepared to move out of urban areas, have led to increased demand. Then throw in a stamp duty cut, a scheme to support 95% mortgages for first-time buyers and then the human element, whereby the fear of missing out leads to increased prices. It becomes a self-fulfilling prophecy, with the media, estate agents, and other parties commenting on the surging house prices and the record highs, which in turn leads to buyers worrying that time is of the essence.

My fears back in March 2020 thankfully have not come true, but I am concerned that the market is now overheated, and we could see a readjustment, next year. We will see the end of the stamp duty cut, the possible ending of quantitative easing, and interest rate increases. My sense is that the euphoria will stop and there will be a pull back. Hopefully, I am wrong, but I always prefer to hope for the best but prepare for the worst.

“

It is not unusual for there to be multiple offers from buyers, well over the asking price

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Listicle

mistakes to avoid when using a review site Jacqueline Dewey Chief Executive Smart Money People

4. Make sure to ask everyone for a review

A

ctively asking your customers to leave you a review is an easy and low-cost way to help increase leads which convert into actual customers.

Jacqueline Dewey, chief executive of Smart Money People, a financial services review site, shares the five mistakes people make when using review sites for their business, and explains how you can avoid them.

1. Don’t forget about your page Once you’ve signed up to a review platform, it’s important that you don’t just leave your page there and expect to start receiving five-star reviews. Think about where in your customer journey and internal processes you can build in asking your customers to leave you a review, so it becomes automatic.

52 | NACFB

2. Make sure you reply to reviews

You might be tempted to be selective and only ask customers who you know had a perfect experience with you to leave a review. Don’t. Future customers are going to be highly sceptical of a 100% perfect rating. People expect to see a balance of opinions in reviews, so a mixture of ratings and feedback is completely normal. The Competitions and Markets Authority (CMA) is also clear that you could be found ‘deceptive’ or ‘anti-competitive’ in UK competition laws by being selective with who you ask for reviews.

Once you’re set up to ask for reviews as part of your everyday business, it’s important to respond to the reviews you receive. If a customer has left you feedback that needs a follow up, make sure to acknowledge that you’ve seen their comments and will follow up with them separately. For future prospective clients who are researching you against your competitors, it’s also important for them to see that you care about your customers and have a good relationship with your clients.

3. Remember, the customer thinks they’re always right

5. Check out how your competitors are doing

You may find that sometimes a customer will leave you a less than perfect review.

While you may disagree with the comments left about your business, a confrontational reply will increase the negative impact of the unhappy customer’s review in the first place. We recommend acknowledging you’ve seen the review in your reply on the site, and then having a conversation with the customer privately to try and resolve any of their issues.

No matter what business you’re in, it’s always good to do a little competitor research. Understanding what customers are saying in reviews about your competitors can help you to understand where your strengths lie as a business. It can also help you to see what your competitors might be doing differently to you, and whether there’s anything you should consider incorporating into your processes that improves your customer experience.

Five Minutes With

​ ive F Minutes with: Rebecca Howitt Rebecca Howitt Head of Underwriting 365 Business Finance Describe your role in ten words or less?

Overseeing underwriting decisions, risk, and team development.

How do you make a difference?

I would say my strength is people management and development. I do this within work and I mentor for a charity outside of work.

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

Seeing consistency within a business is great within underwriting, it gives you comfort that they will be continuing to trade for a long while.

What recent professional accomplishment are you most proud of?

struggling with current commitments, we will put the deal on hold until they are in a better position.

If you were to start your own small business, what would it be?

A private detective agency; mainly involving cases of stolen pets.

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

I think technology is key, but also being organised and having a strong knowledge of the products on offer.

What is your favourite piece of management/leadership advice?

Completing my Professional Investigation award!

To empower those around you with knowledge and trust. Not only does it free-up your time to work on your own development, but it creates a great place to work and builds strong relationships.

What’s the most common reason for turning away a deal?

What has been your lockdown essential?

Affordability – if a business looks to be

Exercise! I joined the most amazing gym

54 | NACFB

with the best community, they have supported their members throughout.

What was the last great book you read?

Three Women – by Lisa Taddeo. The book explores the experiences of modern day women, through the stories of three individuals exploring desire.

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

I’m sure there are lots that I would pass and change! But for fun, I would open the gates to Buckingham Palace and have a massive party with a medieval band.

Where is your favourite place in the world?

A French market, eating all the cheese and drinking coffee in the sun.

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

Fleetwood Mac at Madison Square Garden!

And I love a solo bag pipe in the street.

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