"One area that will continue to grow in stature is crowdfunding. It’s clearly an attractive proposition for many businesses, with multiple new providers entering the market in recent times. "
We spoke to Richard Waldman, group sales director at Ultimate Finance, about the firm's recent merger with Ashley Finance and what challenges face commercial brokers and lenders in the current financial landscape.
CR: Ashley Finance recently merged into Ultimate Finance – what benefits will this bring to the group and what are Ultimate Finance’s plans following the consolidation?
The past couple of years have seen significant growth at Ultimate Finance with regards to customer numbers, revenue and funding provided. In fact, we’ve just announced a record milestone as we’re currently lending £200m to UK SMEs. Alongside this, we’ve enjoyed a 260% increase in bridging loans year-on-year in H1 2018.
The consolidation of Ashley into Ultimate means that the sales, operations and support arms of the business are now under one roof pushing towards the same objectives. This in turn will further improve the customer journey and ultimately our service offering. Whether contacting us directly or through an introducer, any SME that contacts us looking for financial support will receive the same high-quality customer service. With any potential confusion removed and all of our sales and support teams under one all-encompassing brand, the decision has set us up well for not only a strong finish to the year, but also continued growth in the long term.
We believe the decision to bring our bridging and traditional loan products in particular, under the Ultimate banner will not only drive increased growth, but also more consistency. Previously, prospective customers that approached Ultimate Finance looking for a bridging loan would be channelled through our Ashley Finance team. On occasion, this could cause confusion for those SMEs that didn’t realise that Ashley was an extension of our business. They could think a competitor was getting in touch or, even worse, that we’d passed their data to a third party. This will no longer be the case – from start to finish, the bridging product is now an Ultimate Finance offering.
CR: What challenges face commercial brokers and lenders in the current financial landscape?
A key challenge facing commercial brokers currently is keeping fully aware of the appetite that their lenders have. As there is a fair bit of uncertainty in the economy at the moment, this is impacting on both lenders and SME’s. What will Brexit look like? How will it impact their business? Will interest rates rise? Will there be sufficient labour and talent available to meet requirements? Until these questions are answered, investment decisions may take much longer than they traditionally would have. To maximise opportunities and to place deals swiftly, brokers need to be fully aware of which lenders are the best fit for their deals. Brokers could also risk a reduction in business as fewer companies are looking to them to find them financial support. Commercial brokers must keep this in mind when contacting customers and be as flexible as possible to make sure the pipeline doesn’t begin to dry-up as SMEs wait to discover exactly what the future holds.
Flexibility is equally as important for lenders as the biggest challenge for them in the current financial landscape is the vast amount of competitive pressures on them. The alternative finance sector has stolen a march on traditional banks – the industry grew 43% last year. Although, it’s only a matter of time before the banks begin the fight back. Similarly, with the vast growth on show throughout the industry, how long will it be before the giants of the tech world enter the fray too? Amazon has already started offering financial support to SMEs so it may only be a matter of time before the likes of Google and Apple see this as another revenue stream. Lenders need to look at their products and ensure they are not only fit for purpose but also futureproofed. Are they delivering the right solutions and funding quickly enough for example? The provider that can guarantee high-quality service and swift financial support will undoubtedly prove successful in the coming years.
CR: How can commercial finance brokers best position themselves in 2018 – what opportunities or challenges should they be looking out for?
The key for commercial finance brokers for the rest of the year and into 2019 is to continue offering more and more financial support to their clients. Indeed, brokers should look to position themselves as an indispensable and trusted business advisor. This is all about adding value to their clients at every possible turn. Long gone are the days where brokers just send customers to any lender - instead effort should be taken to get under the skin of the business to understand the challenges they face and how the right financial support can help their company. Matching the borrower to the right lender is vital. If brokers can offer a service that not only improves cashflow but also resolves challenges they’re facing, they’ll undoubtedly be held in high regard by their clients and be used time and time again.
Equally as important is having an in-depth understanding of the market, the upcoming trends and potential issues that could be facing their customers. Whether it’s uncertainty over Brexit and rising interest rates, or industry disruption from technology giants, there are a vast amount of variables that could change SME plans overnight. The role of the broker must now include high-level business advice regarding forward planning for such eventualities, ensuring customers have not only the right financial support but are fully future-proofed. This combination will completely change the way the customer looks at brokers and in turn, offer increased opportunities to support the business, improve cashflow and increase turnover.
CR: What new products and lending trends do you think the market will see over the next few years?
I don’t believe we will see many new products entering the industry in the coming years. Instead traditional products and solutions will evolve, be digitised and further streamlined. If you look at commercial mortgages for instance, the actual product hasn’t really changed much in the past 10 years. The only real difference is its digitisation to make the proposition as slick as possible through self-service online. I see the same being true of commercial lending in the next few years.
Digital transformation has been modernising almost every industry over the past five years and alternative finance has witnessed this first hand. The introduction of digital loans is only the beginning though – true self-service and increasingly quick approvals will work to create an increasingly flexible and streamlined service. Exactly what the future holds for brokers and lenders from a technology perspective is still up in the air, but the introduction of the likes of artificial intelligence and IoT will no doubt ensure personalised service becomes the norm.
One area that will continue to grow in stature is crowdfunding. It’s clearly an attractive proposition for many businesses, with multiple new providers entering the market in recent times. Many SMEs and brokers view it as a simple way to gain access to financial support. If embracing crowdfunding aligns well with the needs of their customers – a start-up with a truly innovative idea with mass-appeal for example – then it can be the perfect financial solution. However, traditional and alternative finance services shouldn’t be pushed to the wayside by crowdfunding; it simply doesn’t fit for some customers. That said, I’m sure we’ll see a steady growth in the number of providers offering a platform to crowdfund alongside more traditional loans.
CR: If you could see one headline about commercial finance in 2018, what would it be?
Alternative finance drives continued growth for British SMEs.