Speaking to other funders across the asset finance industry it seems that we’re all pleased with how our businesses are performing and it’s great to feel like we are in a growing market at long last. Alongside that, most funders are reporting record low credit losses and very clean portfolios. Clearly this is great news for the asset finance market and on the back of this it’s clear that major funders are keen to provide finance to help businesses grow. Our industry must acknowledge this is a unique period and we must prepare ourselves for a return to normal levels of credit losses at some point in the future; after all, we are in the "risk" business.
We find ourselves at this point as a result of the worst financial crisis most of us have ever, and will ever, witness. Our economy experienced a long and harsh recession which ensured that those who survived are typically strong businesses with robust balance sheets. There’s no doubt that most funders implemented tighter, more conservative credit policies in the aftermath of 2008. As I speak to our introducers, there is a definite feeling that funders are liberating themselves from those ultra-conservative controls and taking a more relaxed perspective in many areas. In addition, we are often benchmarked against newer entrants or even re-entrants to the market; entrants which are only seeing the positive times we are living through right now. As responsible industry participants, we should not focus on the ‘here and now’, but have a medium and longer-range view of the cycles. We all know that losses rarely happen within the first 12 months post funding. It’s as transactions mature that losses kick in. Any relaxation of credit policies need to be carefully considered in this context.
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It’s not just us lenders who are benefitting from these buoyant times of course. Introducers and UK SMEs have more and more choice and an array of rates in this increasingly competitive marketplace as more providers are proactively looking to lend. With variety comes choices and I firmly believe that innovation and quality of service should be the differentiating factor between lenders, rather than solely cheap rates and lax credit policies. It’s important our propositions are sustainable and built on robust principles within a framework of responsible lending, with an eye to the long-term outlook.
Innovation and quality of service is at the heart of what we are doing at Aldermore. We recently launched APP+ which is a great example of how we can leverage technology to provide a higher quality of service to our finance partners. The UK economy is now improving and it’s great that as an industry we’re in a good position to support the ever-increasing confidence and growth ambitions of SMEs and mid-corporates. It’s inevitable that interest rates will rise as the economy strengthens and this will create its own challenges for borrowers and lenders alike. We’re moving towards a more normalised state and as we do we shouldn’t forget the valuable lessons we learnt over the last five years. There’s no doubt that lenders have come out of the recession much better than they went in. It will be a disciplined and controlled approach to growth that will ensure balance sheets remain strong and credit quality high, while being enthusiastic to support the growth ambitions of British businesses.
Carl D’Ammassa is managing director of asset finance at Aldermore Bank
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