lawyers to entrepreneurs 13
How many start-ups setting out in the sub-prime consumer lending sector, widely blamed for the financial crisis that led to the 2008 recession, would you expect to be honoured globally today among the top three ’Fastest-growing Companies of the Year in Europe’*? None? Well, Coffin Mew Solicitors spoke to one based in Portsmouth and discovered not only a story of successful entrepreneurship but also a different approach to lending. This is from …
Mark Smith founded The Car Finance Company in 2007 having just left a personally successful but unfulfilling corporate job in financial services. He was aiming to create his own destiny as a specialist car finance broker within a buoyant market.
Things started well, then the financial credit crunch and recessionary downturn happened.
“There was catastrophic failure within the UK, and inside three months all the risk-lenders bar about two had left the market, and even those were retrenching. We had lots of customers wanting finance and dealers wanting to sell cars, but very few avenues to place the business.“
Smith decided on a strategic gamble. He pulled together around £1.5 million through re-mortgaging his home, personal loans and borrowings from friends and family etc, and morphed the company from a broker to a lender.
He also adopted a very simple business model. His cash loans were not complicated by cross-selling of other financial products (in hindsight, with today’s FCA regulatory focus, a very wise move), so pricing was exact and transparent for customers.
The Car Finance Company also only supports trade car sales, and, surprisingly perhaps, targets a market of non and sub-prime borrowers – customers with less than ideal credit ratings.
Smith explains: “Around 35% of the UK adult population can’t get a standard bank loan. It is a huge under-served, under-banked customer market. And, there’s the social good we do, enabling 30,000 people, who might otherwise be excluded from funding, to buy cars that can take them to work to support their families and live normally.“
That customer-centric and ethical attitude to responsible lending is a feature of The Car Finance Company. It has an interactive website but all loan applications are followed up by personal interviews to establish suitable and affordable payment arrangements.
Every loan is finalised with a face-to-face meeting with one of the company’s 150 field-based representatives. “Each loan we make is based on customer ability, stability and intent to pay, not credit-scoring.“
In many ways the operation is traditional in its principles of a close working relationship, understanding of customer needs, and mutual trust.
However, like many successful entrepreneurs, Smith has adopted modern innovation. The Car Finance Company is now the world’s largest user of an in-car technology that assists both customers and company operations. Customers’ cars are fitted with a ’black-box’ payment reminder system; an ignition interruption device that requires a code-entry provided upon monthly payment.
It sounds intrusive but Smith says it “stops people going into ostrich mode about their debts“ and enables his staff to talk to late-paying customers to resolve their problems in a personal and caring manner. “After all, our main source of income is through people paying us back on time.
“A lot of what we do is about helping people through tricky times in their lives.“
How caring can a finance company be? Recently, when a customer revealed she’d been unable to meet her monthly bill because of the cost of her young daughter’s funeral, The Car Finance Company waived the payment and sent her £1,000 to help overcome the family distress.
Feedback surveys reveal 80% of customers are happy to refinance through the company, with ’helpful, friendly, and efficient’ being common
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – NOVEMBER 2014
www.businessmag.co.uk
. .. The Car Finance Company
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testimonials. Smith’s business was focused on treating customers fairly (TCF) long before the FCA reaffirmed its expectations of firms through its TCF programme in 2013.
The 326 staff are treated well too. Newcomers get a full induction programme covering company culture to legal requirements. Job-role and career development training is provided; promotion from within is the norm. Staff share 5% of the company based on seniority and service, plus a corporate bonus four times a year based on performance, and free company social events.
It all obviously works well because the company has grown very rapidly, underpinned now by funding from an innovative foreign bank. Company turnover has grown to £45m this year – a compound annual growth rate exceeding 350% over the past three years. Currently it has £165m available lending and aims for £500m by 2017.
While Smith has invested in boosting awareness of the company locally through sponsorships – Portsmouth FC, Royal Navy Boxing Team (Smith is ex-Royal Navy Police) – and gives Youth Entrepreneurship Scheme talks in Solent schools, his entrepreneurial mind is already thinking further afield.
The business model is easily scaleable. Europe is an obvious complementary market and last month the company opened an office in Vancouver, Canada.
Smith’s best investment? Perhaps the £8.99 spent on licensing The Car Finance Company name. It does exactly what it says and customers obviously like that straightforward approach.
* 11th Annual International Business Awards, announced September 2014
Details:
The Car Finance Company
www.thecarfinancecompany.co.uk
Coffin Mew Nick Gross, partner
nickgross@coffinmew.co.uk www.coffinmew.co.uk
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