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12 | NACFB
Every deal
tells a story…
There are only a few 'story' lenders left in the commercial
mortgage market. 'Story lenders are ones who don't tick boxes,
but assess each deal on its own merits – looking at the risk
involved and listening to the 'story' behind the deal. This kind of
lending used to be the norm, but standardised procedures have left a gap
where the front line risk-assessment used to be. The NACFB's
Adam Tyler looks at the problem – and a possible solution
he commercial finance broker of brokers. After years of advising business cus- now is the time for brokers to really make the
T
today is changing: they are tomers, they now have their own businesses: they most of the market conditions. We all know that
returning to their strengths. spend their time reviewing potential deals for placing business is very, very difficult at the
Looking back, it wasn't that long clients, assessing sets of accounts from a cus- moment and there are no signs that this is going
ago that a lending proposition tomer's business and putting together commer- to ease. But what about the business that wants
was presented to a bank manager cial loan applications. to borrow and approaches the only source of
after an initial interview. It was funds that it knows, its own local bank? Even if
then assessed by a person, a human being, Risk assessment that business has been thriving, there is a good
who did not tick boxes; but who had the This is part of the problem for lending banks. In chance that further borrowing may be refused. A
knowledge and experience - including a per- a market where risk assessment is everything, recent survey by the Federation of Small
sonal insight into that individual and their they have lost many of the old style managers Businesses reveals that many of its members are
business. Every single deal had a story behind who would be able to make that kind of a deci- still struggling to find finance and are having to
it, and it was that story that either made or sion without a tick box in sight. Caution in a cut back as lenders are still very reluctant to lend.
broke that deal for the broker and lender. But downturn is one thing, but it seems as though The results have also pointed out that the new
the human element of risk assessment has this lack of experienced risk assessors at the coal initiative from the Government, the Enterprise
vanished in a flurry of forms, call centres, sales face is beginning to translate into a 'Be safe, do Finance Guarantee Scheme, has only been made
people, and boxes to be ticked. nothing' approach. One broker joked to me that available by lenders to a tiny 8% of businesses.
I think the old fashioned way of considering a the only way a client could get any lending out of What is an SME to do? Small businesses are fail-
loan is returning and, whilst we make huge tech- his bank was to prove he didn't need it. So is the ing, not because they aren't good businesses, but
nological advances in areas such as IT, communi- answer to the question of the missing generation because their credit lines have been strangled.
cations and media; the banking world of 2009 of bankers to ask a commercial finance broker to
will wind itself back some twenty years or more appraise the application before it is offered to a Sophisticated
in terms of lending principles. But where will the lender for consideration? For an SME, the answer It doesn't necessarily mean that because you are
expertise come from? All the experienced com- has to be yes. The other big advantage to the cus- an SME and running your own business, you are
mercial lending bankers from that period are tomer, of course, is the old selling point that he is a sophisticated borrower. You may believe that
long gone, having been pushed aside to make getting 67 possible funders (in the case of an because your own bank has said no, then the
way for younger (and cheaper) sales teams. NACFB broker) for the price of one visit. other four in the high street will all say the same.
Interestingly, many became commercial finance I have said it a number of times before, but After all, if the one place that knows your busi-
March 2009 Commercial Finance Introducer www.mortgageintroducer.com
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