When the phone rings in our offices, it’s very often from brokers looking for advice in starting out in the industry. It puts us in a bit of a dilemma. On the one hand, if we extend a hand to brokers with no experience, we dilute the National Association of Commercial Finance Brokers (NACFB) brand. But then again, by rejecting them, we do nothing to strengthen the depth and breadth of commercial finance brokers. Right now we’re not set up as a training or mentoring body, but the demand is clearly out there.
If it’s not a call from an up-and-coming broker, it’s quite likely to be a query from an established broker – not necessarily a member – who are steadfast in their belief that they do not need to hold Consumer Credit Permission. We tell them, it’s a 99% probability that you do, and the FCA will make it very plain if you don’t, because they won’t sell you one.
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In most cases, the lenders who work with us are getting close to insisting all brokers who come to them hold a full permission from the FCA. Credit broking includes agreements which are for business purposes and more than £25,000. If you only source finance for Ltd Companies/Body Corporate then you are not involved in what are termed "credit agreements" – but there are still some circumstances under which this finance sourcing would be considered credit broking, dependent on the actions of your client. And the list of reasons why you would need to consider yourself regulated is a long one.
If you’re a broker who accepts business from introducers then you’ll need to consider in every case and every future case whether the introducer is giving you anything more than the name and number of a potential client.
"Capturing information about a client" or "fact-finding" both tip the introducer into the "regulated" category – and then of course as the broker taking the lead you would be bound to verify the introducer holds the relevant permission before proceeding further.
So those are the two commonest queries coming into our office these days. Meanwhile, the press is showing an interest in our survey results. As you might have read elsewhere, we have been reaping the data from our annual survey that we sowed three months ago, and as any farmer knows, there’s comfort in a good harvest.
Here are the totals of leasing business done by our brokers, year on year for the past five years., expressed in terms of actual and percentage growth:
2010 £992,380,000
2011 up £35 million (+3.5%)
2012 up 1,030 million (+101%)
2013 up 253 million (+12.4%)
2014 up 411 million (+17.9%)
…which brings us to £2,721,020,000.
The percentages themselves may have moved around a lot, but it’s unmistakably a consistent pattern of growth. Broker introduced business year on year (FLA data) is up 9%, compared with a smaller 5% increase in direct finance. And arrears, the FLA reports, remain near to historic lows.
Asset finance still accounts for about 30% of all capital expenditure (excluding property), which means that 70% of businesses still find another way of funding their capital expenditure requirement. That’s where the growth opportunity is – not in relying on the economy as a whole to reach empirically unsustainable 2008 levels, but in educating small businesses in the availability of different types of funding, so they reach out for the best one.
Initiatives like the British Business Bank and the Enterprise Finance Guarantee (EFG) are out there doing their work, but there is a risk here that someone says, "my work here is done" when they see positive figures. It isn’t. Small businesses will always benefit from a helping hand. That need doesn’t go away just because it’s been a good harvest.
Adam Tyler is chief executive officer of the NACFB
