Independent finance houses,
especially those still run by their founders, are an increasingly
rare breed in UK leasing. This month, Fred Crawley looks at two
firms that have been going strong since the early seventies and
which, rather than circling the wagons through difficult times, are
reaching out to market with an expanding network of
intermediaries.
Go deeper with GlobalData
Armada Finance Ltd and Black Arrow Finance (BAF) come from
very different places in terms of sales channels – the former has a
strong history of direct sales, while the latter is a funder with a
small ticket equipment book built up through many years of
introducer-led business.
Their similarities, however, are striking. Both
were founded by entrepreneurs at a time when SME leasing was
virtually unheard of in Britain, and both favour the specialised
and challenging deals that are left aside by larger funders with
automated underwriting systems.
Most crucially, both have decided that 2010 is
the year to secure a national footprint through increased broker
business.
Armada’s entry into introduced business came in
June 2009, when managing director Kirk Smith, who founded the
company in 1975, was approached by a broker seeking to place
business.
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By GlobalDataThe brokerage – like many – was looking for a
new funder to ease the pressure caused by the withdrawal of banks
from introduced business.
Armada, in turn, was looking for a wider market
to sell to. Within its regional home in the South, Southwest and
Wales, a downturn in capital investment had caused a sharp decrease
in lease finance applications, and applications were getting less
prolific.
The deal was done, the results were sound, and
Smith made the decision to start taking applications from
brokers.
Now, just eight months later, Armada Finance,
which is one of two subsidiaries of Armada Investments Ltd, has had
applications from around 80 intermediaries, with two dozen accepted
into its panel of regular introducers.
Transition to broker
market
The transition has gone smoothly since
Armada shares the same transactional, small-ticket business model
favoured by many brokerages, and considers finance applications
across all sectors and assets.
In fact, it is particularly experienced in
financing assets that most lenders have shied away from, such as
furnishings for hotels and scaffolding.
This, however, means higher risk pricing, but
this is de rigueur for a boutique lender in the midst of a
recession.
“We are not ‘tick box lenders’,” says Smith.
“We look at the customer’s business and the people behind it as
well as the asset itself, and each case is treated completely
individually.
“We have, of course, tightened up processes to
lessen risk, but our personal approach and the fact we take the
time to look at the whole picture means that, if we can possibly
find a solution, we will.”
Furthermore, having already provided a business
with funding based on the security of a particular asset, Armada is
often happy to lend on other assets within the business.
Using the example of a microbrewery, Smith
explains: “If we are already funding the brewing equipment, it
makes sense for all concerned for us to fund the casks as well,
when it is appropriate.”
Black Arrow Finance
Black Arrow has dealt with introducers
virtually since inception, but feels that it now needs to be more
visible in the broker community.
A dedicated small ticket lender, BAF generally
funds assets in the £5,000 (€5,588) to £50,000 bracket, with
£20,000 to £40,000 being the preferred range. Equipment often
encountered includes gym machinery, IT hardware, and office
furniture.
Underwriting is determined by committee rather
than by automated scoring system – this suits BAF’s preference for
specialist deals – “those that need a story”, as business
development manager Mark Jones puts it.
Because all proposed deals are addressed in
this way, BAF’s focus is on introducers that meet directly with
customers and can get as much information on proposed deals as
possible.
For the same reason, it is after brokers that
will supply well-researched, specialised deals rather than a flood
of flow rate business.
“This is relationship-based lending” says
Jones, “we’d rather take five good deals in a year through a
broker, rather than 50 per month of uncertain quality.”
Historically, BAF knows around 200 brokers,
but has active links with a relatively small proportion of them.
Jones is confident that the business can manage between 50 and 100
relationships with relatively low yearly volume and is keen to
build up the tally.
