Fiducia's 'Commercial View' - The Podcast - September 2021


Schools are back this month - and so is Fiducia's 'Commercial View' podcast, looking at news and trends in UK property and the commercial finance market:

  • Delighted to hear the Commercial View this month of Jonathan Sealey, CEO of Hope Capital who discusses the changing face of the UK property landscape, and how their product ranges have adapted to meet client' demand. 
  • Property repurposing, conversion and refurbishment are taking a far bigger slice of the short term lending market post-pandemic - we look at why. 
  • Without the benefit of a crystal ball to assess affordability of commercial mortgages, lenders are sharpening their pencils and diving deep into past performance to shine light on the road ahead - we look at how. 
  • Trading Businesses will share a lot of common issues as they trade out of the Brexit and Covid period - we identify the issues and look at how we could help mitigate them in some ways. 

We would welcome the opportunity to help source suitable solutions for your commercial finance requirements - please drop us a mail to or call in on 01636 614014. 

Have a good month.


“The One Where The Chicken Didn’t Cross The Road”


Even by my own low standards, this may be taking mixing metaphors and analogies a little too far – ‘Friends’ episode titles, fast food and chronic issues in UK supply chains. But given the high profile examples in the last week, it seemed to hit the spot.

Nando's announced that it had been forced to shut 40 restaurants (10% of it's chain in the UK) last week due to staff shortages at food processing suppliers - hot on the heels of KFC UK reducing its menu the previous week due to supply delays.

The UK supply chain landscape is suffering some chronic issues:

·       Staff shortages widespread in food processing, retailers and hospitality

·       A shortage of drivers in logistics, and container freight costs at record levels

·       Covid isolation issues still not out of the economy after further easing of rules last week

I have talked to a client this week who had a short notice and urgent order in from a client, and needed to source the product from Holland. He was quoted 4 weeks in shared haulage – or a dedicated lorry that week at 5 times the standard haulage costs. How do you rate his chances of maintaining any margin in the deal in the required timeframe?

If the major firms are restricting trading operations, imagine the effect these issues are having on SMEs broadly in the UK and the drain on their cash flow from long delays and far higher costs.

We help UK businesses fund their supply chain from within the UK and overseas with Supply Chain Finance and Trade Finance, and wanted to lay out how broadly it can help business in a variety of sectors in the UK economy – especially at the moment.

How can Supply Chain Finance and Trade Finance help you?

Let’s lose the common misconception first – Supply Chain and Trade Finance can be for stock, materials or goods sourced within the UK, as much as it can be used the purchase of raw materials and finished goods or parts internationally.

Trading with suppliers or manufacturers can begin with either an order from a client that you have to fulfil, or having to ‘stock up’ on the goods that you sell because your customers will expect a quick delivery after they make a purchase.

Depending on the nature of their business, companies either buy raw materials that they manufacture or assemble to create finished and saleable goods, or they will purchase ‘finished goods’ from a manufacturer or supplier – packaged and ready for delivery to their customers.

How can the finance be used?

Supply Chain and Trade Finance can be used to fit a wide range of business types:

·       Purchase raw materials or finished goods

·       Trade can be with UK based companies as well as overseas

·       Commonly finance companies are also experts in FX

·       Goods can be pre-sold, or to provide a stock for sale

Your business can improve prices and terms from having the backing of a trade facility and being able to pay earlier; Supply Chain or Trade Finance facilities can be flexible to accommodate deposits if required on order, and other costs including import VAT and freight / haulage if these are applicable to you.

Is the cost of taking finance justified for your business?

In the current environment companies need to conserve cash within the business as working capital can become strained without much notice.

Funding the purchase of goods or materials that are either pre-sold or to provide you with stock leaves crucial cash in the business to cover overheads and unexpected cash calls on the company.

This is especially true when supplementary costs like transport or freight may now be a multiple of what you had first budgeted for when pricing the project or order.

A common objection to arranging finance is the cost of the facility and funding these transactions; beyond the fact that lenders that we work with offer extremely competitive rates on their facilities, I would suggest that these are a great example of the ends justifying the costs of the means.

The cost of funding will slightly reduce your margin on the transaction – but with very little effect on working capital, and consequently you are still able to meet other demands that you face – as well as to fulfil any opportunities that are presented to you.


If you buy materials or goods in the UK or from overseas, don’t let that be the reason you cannot accept new business or orders, or take up any new opportunities.

Why not get in touch and discuss how we can support you with suitable Supply Chain or Trade Finance options?

How do you want to be supplied?

Mark Grant, August 2021.  / 01636 614 014

Are You Considering Buying A Company? We Look At Asset Based Lending To Fund Your Acquisition.


If you are looking at the acquisition of another business (MBO), or the purchase of the business that you already manage from its current owners (MBI), then top of your agenda will be your ability to fund the deal.

We are not all fortunate enough to be considering the acquisition of a FTSE 100 company – so the headlines about “all cash” or “cash and share deal” transactions do not apply to the vast majority of companies changing hands in the UK.

There may be an element of cash involved, either that is on the balance sheet of a company involved, or from new or incumbent directors in the business.

But as you look beyond cash for your source of funding, is a term loan the best solution or even viable? We’d suggest that you could do well to look at the assets of the acquisition company, or your existing company if an MBO, to source a suitable solution.

What is ABL?

Asset Based Lending (ABL) is exactly what is says on the tin – lending that is based on the assets of a business. This includes:

  •       Property and Land
  •       Stock
  •       Assets (such as machinery or vehicles)
  •       Sales Ledger (Debtors Book)

By using ABL to raise all or some of the required capital for your acquisition, the result is a bespoke finance solution based on the business and not a ‘one size fits all’ off the shelf solution.

ABL leverages the assets that one or more businesses involved already have, but may not already be using to generate capital yet – so they are potentially more efficient and cost effective than seeking unrelated and unsecured finance separately.

Property and Land

A company can own a variety of different property types or land, with or without planning permission. Where the business has headroom in the equity of this property or land, they can release capital towards the acquisition that they are considering with a secured loan.

For example:

A manufacturing business has a property worth £1m on its balance sheet that you are looking to acquire, with an outstanding commercial owner occupier mortgage of £300k.

Subject to credit assessment of the trading performance of the business, you may be able to look to raise up to 40% of the property value, or £400k, through refinancing the property, making a significant contribution towards your business acquisition.


A type of funding that will commonly be looked at alongside another facility, such as Invoice Finance, but where viable and relevant it can again help to release some capital in stock that is currently just ‘sitting there’ where the business commonly holds it.

Typically Stock Funding will release 15% - 20% of the value of stock levels, where the business demonstrates that it holds a fairly consistent level taking both sales and supply into account.

Assets (such as machinery or vehicles)

In simple terms, your company may own assets that are either unencumbered or partially financed. Lenders will commonly lend up to 70% of their current value less any outstanding finance.

On its own unlikely to be funding the complete business acquisition, but like Stock Funding you could get a valuable contribution from Asset Refinance towards the required total funding that you have.

Sales Ledger (Debtors Book)

You can help to fund the acquisition of the business by either leveraging the outstanding invoices of your existing business (your debtors book), or those of the target company in your acquisition.

The debtors’ book is an asset of a business, and when unencumbered it has the potential to release vital capital towards the transaction that you are looking to achieve.

This funding is then repaid through the natural flow of turnover through the business, and not via fixed loan payments every month no matter what turnover the business is doing – which could add a lot of value in the aftermath of your acquisition?

Packaging an ABL solution for your business acquisition

The beauty of using ABL funding is that is like a corporate tool box – or a funding “pick ‘n mix” almost. You literally just pick up and use the elements that are suitable and add value to your transaction.

To that end the funding does not have to be sourced all from one lender – and the ability to piece it together from more than one funding source can help you to achieve improved terms and rates – and ultimately the most suitable outcome to fund your acquisition.

We have experience of using multiple providers over a single lender for clients, and combining ABL where necessary with further funding facilities such as Term Loans and Trade Finance to complete the required acquisition finance package.


We work with clients to understand the acquisition requirement, and the underlying business/es involved in the transaction.

We do all the legwork to source suitable solutions to help the client achieve their required outcome.

How do you want to fund your business acquisition?

Mark Grant, August 2021.  / 01636 614 014

Fiducia's Commercial View - The Podcast - August 2021


Fiducia's Commercial View - The Podcast - August 2021

We have seen increasing demand for, and activity in, a diverse range of Commercial Finance products this month.

We felt that these HOT funding areas were worthy of our attention in August's edition of Fiducia's Commercial View Podcast:

Owner-Occupier Commercial Mortgages - With trading businesses increasingly back in action and planning for the future we have seen strong demand to fund the roof over their own company.

Commercial View with Allica Bank - We ask our panel lender about the reaction to their Commercial Mortgage rate promotion, and what it has told them about SMEs' outlook.

"It Ain't Heavy, It's Just Refurb.." - With the residential property market remaining RED HOT, we weigh up all the options to add capital value to investment properties.

Recovery Loan Scheme - An Update - 4 months into the scheme we ask if it is helping UK businesses, and whether you know all the ways in which clients can access it.

We look forward to the opportunity to find suitable solutions to your requirements in the coming month.

Mark Grant, August 2021. / 01636 614014

Commercial Mortgages – How Lenders Assess Affordability


We are seeing a lot of activity in Commercial Mortgages – both owner-occupier and investment – and just like with a personal mortgage it is logical to think that one of the primary things that a lender will look at is whether you can afford to repay the mortgage – both now and in the future.

We want to cut through the acronyms and smoke and mirrors to show that far from being some sort of ‘dark arts’ it is the same process they use to evaluate your business as we all might do our own personal finances.

With a Commercial Investment Mortgage the maths is relatively straightforward; you will have a commercial lease in place with your tenant and the lender will ‘stress’ your mortgage with simulations of interest rate rises to ensure that even if rates were to rise from their current levels then the commercial lease still makes the mortgage payments affordable.

Commercial Mortgages for trading businesses have far more moving parts as affordability is based on the future trading performance of the business.

In the absence of a crystal ball the lender has to use past performance as a guide to whether your business can service the mortgage moving forward.

Again we can draw a similarity here with a personal mortgage application – your prospective lender would want to know all about your income, together with the other debt and outgoings that you have to service regularly. From this they will derive how much ‘headroom’ you have in your finances to be able to afford the mortgage.


Debt Coverage Ratio (DCR)

I did say that we wanted to cut through the acronyms – so it’s high time that we started to use them!

When a lender takes away your outgoings for debt from your income, they will be left with the current ‘headroom’ in your finances from which your company’s mortgage can be paid moving forward. But there are still variables in this number such as your business turnover decreasing, or your other costs or debt increasing.

So the lender won’t want to see that your headroom is equal to (or less than) your future mortgage payments, but a multiple of them. This is called your Debt Coverage Ratio (DCR) – and commonly lenders are looking for a DCR of 1.5x to 2x.

Calculate your Debt Coverage Ratio (DCR):

Annual Net Income Divided By Annual Debt Payments = Debt Coverage Ratio

For example:

£82,500 Net Income Divided By Annual Debt Payments £45,000 = DCR of 1.83

Using the ‘right’ Net Income

Of course it couldn’t be so easy that the lender could just cherry pick a line from your company’s last set of filed accounts and use that; oh no, they have to go and make us calculate another number that they use in their affordability calculations too!

Your existing company accounts include existing lease or mortgage payments but the lender is evaluating future affordability of a new mortgage – so the ‘net income’ that they use will have certain items added back onto it.

This generates what lenders generally call ‘adjusted net profit’ or ‘adjusted EBITDA’.

We are not qualified accountants, so these calculations really do stay on the ‘back of an envelope’ for our purposes. In simple terms take the profit before tax and add back to that items such as:

  •       Lease / Rent
  •       Depreciation
  •       Amortisation
  •       Directors’ Dividends

Case Study – ABC Ltd

We can take the case of ABC Ltd, and then put into practice the above construction of the Net Income, and then use that along with the debt in the company to derive their Debt Coverage Ratio (DCR).

  •       ABC Ltd. currently pays £40,000 pa commercial lease
  •       Annually ABC Ltd. make £15,000 in Asset Finance payments
  •       They are applying for a 70% LTV mortgage on a £465,000 purchase price, meaning a £325,000 loan, estimated by the lender to be £32,000pa initially in annual payments

Accounting for the pandemic impact

Like a lot of businesses in the country, ABC Ltd was Covid impacted, and so if we moved forward to the current period, and included the financial year 2020/21, then that doesn’t present on its own a Debt Coverage Ratio (DCR) that the lender would see as indicating affordability.

The obvious addition to this table is the fact that the lender will strip out Covid related grants and income that are one off in nature, and this reduces the DCR to levels where the lender would not arrive at a positive decision for affordability.

But we are now a few months into the next financial year, and thankfully into recovery mode for many business post-pandemic restrictions, and so lenders are willing to include the accounts for this new current financial year in their assessment.

The April to June quarter 2021 actually showed a 25%-30% increase on turnover compared to the 2019 and 2018 figures for the same months, and so there is something here for the lender to work with and progress for ABC Ltd.


We are seeing a lot of demand for, and activity in, Owner-Occupier Commercial Mortgages – and armed with the accounts and facts we can work with lenders to find suitable and affordable solutions for the roof over your business.

How do you want to get funded?

Mark Grant, July 2021.  / 01636 614 014

What Should An Appointed Representative Network Mean For You?


I guess that I should be clear what I mean when I say ‘Appointed Representative Network’ or ‘AR’ as it will be easier to retype many times here!

An Appointed Representative in financial services is a person or company that is authorised to carry out specific types of activity under the regulatory umbrella of a firm that is directly authorised by the FCA.

Why might you do that rather than be directly authorised yourself? Headline reasons are cost, together with monitoring, administration and reporting activities that comes with direct authorisation, and for which you are wholly responsible as an FCA directly authorised firm.

So as an AR of a company that is themselves directly authorised, your costs are lower and most if not all of the administration of your authorsation falls to your network provider – BUT that is not to say that you don’t have obligations to uphold.

As an AR network provider we are vouching for the person and firm that is an AR of our network – that you are solvent, reputable and trustworthy, and that you will uphold the regulations relating to the area in which you operate and carry out your business in a compliant manner.

In short, it’s our neck on the block!

Our own authorisation and reputation are affected by your conduct as an AR – so therefore we put the time in to ensure that:

  •         you are trained in both our approach to clients and the areas in which you will operate.
  •         each case is conducted in a compliant manner.
  •         you access the necessary CPD and compliance training annually.

The most common examples in the UK of AR networks are in residential mortgage broking. There are multiple network providers in residential mortgages – underlining how well the process works, and we see examples of one man bands up to 40 or 50 advisers where the model is beneficial to the business.

We have the good fortune to work with one of the largest, and in our (slightly biased?) opinion best, residential mortgage networks in The OpenWork Partnership. We are one of only a couple of partners that their ARs can introduce Commercial Finance cases to.

Which in turn brings me to our own AR network – the Fiducia Commercial Finance AR Network – and back to my original question: What should an AR network mean for you?

To us it means a partnership and collaboration – we have a vested interest in ensuring that:

  • you are trained fully in all aspects of your role.
  • you are aware of your compliance obligations, and you have the tools and systems to carry them out.
  • you keep current in updates and changes in the commercial finance market and products.

The partnership and collaboration goes beyond the set up, induction and kick off of your AR activities; we have a USP as an AR network provider that positions us head and shoulders above most of the market - we do the same job that you do!

Beyond the compliance, administration, finance and systems support that you receive as an AR, your membership of the network should provide you with the business support that you need from when you start out to when you are established but working on complex cases.

We are not a commercial finance brokerage that has just set up an AR network as a sideline without putting in the ongoing and long-term support.

We are not a franchise that takes a large up front payment in return for a couple of webinars and a manual that points you towards your promised six-figure salary – because believe me if it was that easy then that’s where I would be and not blog writing this weekend!

We are not ‘working the numbers’ and just getting as many people through the door because then dissatisfied leavers don’t affect us too much.

We are commercial finance brokerage that works with our ARs to provide them with the tools and support to enable them to help their clients – and not just at the outset, but on an ongoing basis.

Especially in the current period of recovery, and what we hope will be the worst of the pandemic behind us, support from a team experienced with getting deals over the line that aren’t always straightforward could be the difference to being a successful AR.


That’s what being part of the Fiducia AR Network means for you – being part of something bigger that you can lean back on for support in multiple ways whenever you need to. We share your goal of wanting you to be a successful commercial finance broker – as an AR of The Fiducia Commercial Finance Network.

Mark Grant, July 2021.  / 01636 614 014

Fiducia's 'Commercial View' July Podcast


The weather may have cooled off, but sectors of the lending market are still hot, and we are seeing strong demand for both Commercial and Investment funding.

We have some great topics to cover in July's 'Commercial View' Podcast:

Just How Semi Is Your Commercial? Continued strong demand in residential property sets a value on how your Semi-Commercial property is divided.

Commercial View with West One Loans - We ask the lender about the level of demand for Bridging and Development finance - and how their appetite for business has changed post pandemic.

Lender Criteria - The devil, and your funding outcome, is in the detail as we discover.

- Cashflow Conservation - Limited companies almost without exception will be recovering or growing with demand, and we look at how commercial finance can support that.

We look forward to the chance to discuss your requirements this coming month. 

What is a Commercial Finance Broker?


And what do they offer to a company that’s looking to put finance in place?

Fiducia Commercial Solutions works on a very straightforward ethos – we work with clients to understand their requirements, source the most suitable funding solutions for them and to achieve the best possible outcome for their business.

Beyond that being sound bites on our commercial blog or on our website or on social media, we take some far more concrete steps to underline the sincerity of this for us as a company.

Fiducia Commercial is directly authorised by the FCA, a badge that we wear proudly to demonstrate how seriously we take the integrity of our business, and how we put how we treat our clients at the top of our list.

We have been active members of the National Association of Commercial Finance Brokers (NACFB) for some time – you cannot get more active than our CEO having chaired the association!

We are market leading in the transparency of terms and conditions and charges. And to emphasise this we hold a ‘security call’ with a client just to go back over their requirements and priorities to make sure that we have captured them correctly, as well as ensuring that they are happy with, and have read and understood, all of our terms and conditions and paper work.

So what does this actually mean in practice?

All businesses are different, and even two firms in the same sector or looking to fund the same type of property related transaction don’t have the same finance requirements.

With trading company clients we take the time to fully understand how a business works, its working capital needs and the challenges it faces; this allows us to identify the solution, or combination of solutions, taking into account the type of finance required and the costs to the company that would be involved.

Lenders can use confusing terminology and jargon in their product description, and the cost structure can be difficult to navigate if you’re not fluent! And there are a lot of lenders and commercial finance products out there. For example, our database has:

  •       Commercial and Investment Mortgage, Bridging Loan and Development finance lenders
  •       Unsecured and Secured Business Loan providers
  •       Asset Finance and Vehicle Solutions companies
  •       Invoice Finance lenders
  •       Trade and Supply Chain solution providers

Using a commercial finance broker helps you to cut through the crowd and to identify suitable products and lenders.

And beyond ‘what’ we can do for you, we guarantee our clients ‘how’ we will do it for them:


You can trust us to find the right solution for your businesses and funding requirements.


We offer ‘Whole of Market’ commercial financial services, giving you the security of choice.


We do all the hard work sourcing the market and providing you with the confidence that we can deliver the best terms available.

There is no comparison website out there where totally independent, unbiased and suitable results can be obtained by a business owner or director. We see many are promising indicative terms and decision in 2 minutes – but a consequence of the pandemic is that lenders’ criteria has and continues to change very often, along with their risk appetite.

Commercial funding is not agreed without human intervention – and indicative terms will be of rates available to ‘someone’ at best, and they will worry about where they source your funding from once they have engaged with you.

We do the leg work for you and use experience and product knowledge together with our lender network to source and present the most suitable options for you.

This leaves you to be able to get on with the important job of actually running your business!

We are looking to maintain long term client relationships. Companies grow, change and sometimes face their challenges over time. Having someone that already understands the business and its journey to this point means that you already have a partner in taking the next step, or fighting the next fire – whatever is on the horizon for your company.

Finance is not everyone’s favourite subject, and can take people at all levels out of their comfort zone – but business owners are engaged with us when the conversation is about finance for their company:

  •       To resolve a problem that is eating away at them.
  •       To buy the property they have been paying rent to a landlord for the last 5 years for.
  •       To find a lender because their bank of 10+ years has just declined them..
  •       To get funding for more operating space because orders have gone through the roof.
  •       To lease extra cars because they know if they could get more salespeople in front of customers then the product would actually sell itself.

People that we talk to are some of the most passionate and engaged that we have ever worked with, because it matters so much to them – they live and breathe their companies.

We can’t help but be inspired by that to provide the best solution that is available to them.


We can’t make your company profitable, increase your turnover, raise your credit score or double the deposit that you have in the bank – but if the market sees you as viable for finance then we will achieve the best outcome for you.

How do you want to get funded?

Mark Grant, June 2021.  / 01636 614 014

‘Commercial Mortgages’ – So much more than the name suggests.


The name ‘commercial mortgages’ is a wrapper for number of different commercial property related products. As a business we use it to describe a large amount of the work that we do for clients – and the industry commonly uses the same header.

The trouble with a single header for multiple products – all of which are quite different in the requirements that they meet – is that in the end the header becomes a bit like an acronym – and you can’t remember what it actually means!

So when Fiducia Commercial says ‘commercial mortgages’ what do we actually mean? And who can use them? Oh, and what are they?

Commercial Mortgages

Commercial mortgages are used to fund the purchase, or refinance of, commercial, semi-commercial or residential properties – and as we explain below the funding reason can be both to occupy the building, and as an investment.

In general terms there are 3 main uses for commercial mortgages:

Owner-Occupier: The purchase or refinance of the property where your company is currently trading, or the purchase of a new property to move to and trade from.

Commercial Investment: The purchase or refinance of commercial or semi-commercial property which will be rented to another company to trade from – essentially a commercial Buy-To-Let investment.

Residential Buy To Let: A limited company (‘SPV’ or Special Purpose Vehicle) can purchase residential property to let as an investment, and professional landlords / Buy-To-Let limited companies use these mortgages for the same purposes.

Commercial mortgages are, just like residential consumer mortgages, available with fixed or variable interest rates over a range of years, and the amount that you can borrow is set as a ‘Loan To Value’ (LTV) percentage of the property value.

The amount that you will be expected to have a deposit can vary according to different factors, including:

  • If you are an owner-occupier: the sector that you are in / your company’s recent financial performance / they type of property you are financing.
  • If you are an investor: the type of property you are financing / the sector that your tenants are in / the amount of revenue generated from the lease/s.

Existing property holdings with equity value in them may be considered towards the deposit by some lenders as security.

Bridging Finance

This effectively does what the name suggests – bridges the gap from one point to another in a financial sense, and are a short-term property finance product, between 3-24 months in term, but the ‘common’ term is 12 months.

At the end of the loan the ‘exit’ from the loan for your company is the repayment of the loan from the disposal of the property, or ‘re-financing the bridge’ with a long term finance product.

Bridging loans can provide a quick route to property purchase, and are commonly used to purchase property at auction and for circumstances when the normal conveyancing cycle would take too long to complete the purchase in the required time frame.

Bridging is a means to refurbish commercial or residential property, or funds to develop property – from light / cosmetic refurbishment of existing structures to ground up development of land.

‘Just’ for property transactions? Well, no.

Bridging is of course based on property as the security for the loan, but the business reason could be to release equity from a property already held by a business or director. Therefore it could be said that bridging finance is a cash flow tool for raising working capital too.

Given the specialist and short-term nature of bridging loans, interest rates can be higher than traditional commercial mortgages.

Development Finance

On the surface a complex area of finance – but you can start to lift the lid on its application for you and your business by looking at the amount of structural work that is required on your project.

Finance terms that are available to you vary according to:

  • the initial value of the property / land (Purchase Price)
  • the costs and fees associated with the development work (Cost Of Works)
  • the projected value of the completed development (Gross Development Value)
  • your previous experience of development

Commonly used terms for variants of development:

Ø  Light Refurbishment: Cosmetic refurbishment with no structural changes. Includes: Kitchens, Bathrooms, Windows, Doors, Decoration and modernisation.

Ø  Heavy Refurbishment: Contains cosmetic work, but usually renovation work including structural changes (internal walls) or changes to the footprint of the property.

Ø  Ground Up Development: Commonly starts from vacant land, can include demolition and rebuild projects. Lenders are likely to look for projects where planning permission is already granted, even if you might vary that once you have acquired the site.

So it is worth your knowing that ‘commercial mortgages’ isn’t a header for a single product – and there is no ‘one size fits all’ solution.

But that is where a commercial finance broker can add so much value to you – we can listen to your full requirements and match you with the most suitable lender and product from our large whole of market panel of lenders.


We do the leg work so that you don’t have to – how do you want to put the roof over your business?

Mark Grant, June 2021.  / 01636 614 014

Criteria – The devil (and your funding) is in the detail.


Lender Criteria – As the proprietors of the original commercial finance sourcing system, Optimus, it is something that Fiducia knows a lot about.

What are Lender Criteria? They are the details of what lenders will and won’t accept about a borrower and their requirements when they present an application for funding.

I appreciate that when we are asked for ‘just a quick idea’ of what is available for a client it is frustrating to either be told that we need to know more about them and their requirements – or to be told a very wide ballpark or range with a long list of caveats attached.

The temptation as a broker would be to quote what you know is available to someone out there, and what would be very attractive terms to get the ‘hook’ and engagement from the potential client – and then worry about finding someone who can justify that indication later.

But that is not how we operate – and it does the potential client no favours. It is a number generated from thin air, with no relation to their circumstances or requirements – and they could commit to a cost or transaction based on the ‘guesstimate’ that they were provided, which could leave them out of pocket if the indicative terms cannot be delivered on.

So when we talk to a client to get enough details to secure an indication of terms, there is still a caveat that the indication is subject to greater analysis of their financials and the requirements – but we will have gathered enough information to be able to match their requirements with eligibility criteria for different lenders’ products.

Below are criteria that we will cover with a client in an initial call to allow us to make an initial eligibility check and indicate terms. These are by no means exhaustive and are commonly just gathered in a conversation, so the client may not even realise they are providing as much information to us as they are:

  •       Geography – which home nation is the client/property based in?
  •       Sector – if involving a trading business, what sector are they in?
  •       Trading company – how long has it been trading, what exactly do they do and what is the recent financial performance?
  •       Business Finance:

Ø  What type of product they require

Ø  What size facility

Ø  What is the business reason for the funding?

  •       Property finance:

Ø  What type of building/structure is it? (Commercial/Semi-Commercial/Residential/Land)

Ø  What type of finance do they require? (Owner/Occupier or Investment)

Ø  What is the property value and what is their deposit/contribution?

Ø  What variable of funding do they require? (Term/Fixed or Variable/Interest only or Capital repayment)

Ø  What other property is held in the background by the limited company and/or directors?

  •       Credit – Any adverse credit for either the company or the directors?
  •          Anything else that we should know up front?

You would be amazed at what answers can come up on the last question – but seriously, if we are aware and can make lenders aware of any ‘wrinkles’ up front then it can make the proposal more likely to succeed than if the lender discovers these issues late in the process.

So what do all of the above have to do with lender criteria?

  •       Not all lenders lend to companies or on properties based in all 4 home nations.
  •       Lenders will have sectors that they won’t lend to – common ones that are excluded might be adult entertainment, munitions or gambling for example.
  •       Some lenders have a minimum length of time trading required, or a minimum level of experience with property or development.
  •       Lenders all have a minimum and maximum loan amounts.
  •       Property lenders don’t all lend on every type of building – some will only fund investment, some only owner-occupier and some both.
  •       Lenders vary in their appetite for any type of adverse credit – some won’t accept any, others might accept it if it has been cleared for a defined period – someone might accept an open credit event with a story!

The final thing that I wanted to mention was the pandemic environment, and its affect on lender criteria. Their risk appetite has changed and therefore their lending criteria have changed.

We have been updating our systems lender by lender to try to capture their current criteria – a long process but critical because there are not many that will have remained the same since pre-Covid.

And dauntingly we know that we will likely have to repeat the exercise again over the next year because as the economy recovers and evolves again, so will lenders’ appetite for risk and that is what drives their lending criteria.

Beware of the claims that someone (or their website) can match you with lenders in a couple of minutes based on their systems that hold the criteria of hundreds of lenders – I can guarantee that the criteria won’t be up to date across the board.

We see large lenders shifting slightly their criteria on a monthly basis, and in the odd case more often – so there is a manual check to be done and this is where your commercial finance broker is earning their money working for you.

So, sorry for wanting to know a bit more up front about you and your requirements – but my answer will then be based on your eligibility to lender criteria as we have discussed it – and not the best rate available to someone, with me worrying about how I get that for you later!


How do you want to get funded?

Mark Grant, June 2021.  / 01636 614 014

Fiducia's Commercial View - The Podcast - June 2021


Fiducia's Commercial View - The Podcast - June 2021

Some great topics to cover this month, and we take a look at: 

  • A Bridging Loan is just the way to buy a property when you still own another, right? 
  • Product and Process innovation with Bridge-To-Let, and some input from Lendinvest. 
  • Will this be an Asset-Backed recovery for the UK economy?  
  • We ask the Commercial View of Andre Parcin from the NatWest Group about Asset Finance.