Life in the crunch: panic and uncertainty

The departure of a number of lenders of late means UK
asset-finance and motorfinance brokers face an uncertain immediate
future.

This issue was picked-up on by delegates at an industry seminar
held last month by icenet, the lease technology supplier, in
Harrogate.

They stressed some smaller brokers were “panicking” as their
funding sources dried up. “There is genuine concern out there,”
said one. “Some brokers are looking to diversify away from their
traditional sectors – asset and motor finance – towards other
specialities, such as commercial mortgages and the like.”

“What we are experiencing,” said another, “is not so much the
increasing control by funders of costs, but rather increased
control on the cost of risk. Many funders, for example, are pulling
their personal contract purchase products because of the balloon
residual risk. We are also seeing an overall tightening of credit
scoring and credit terms.”

Some delegates believed there may be a move towards a US-model
where, for example, in the sub-prime “buy here, pay here” sector,
customers pay a commission to the finance provider for supplying a
finance facility. This system has been practiced in the past in the
UK.

Also, given the current strictures upon brokers, there seems
growing evidence that UK broker consolidation may be speeded
up.

Technology is also an issue of concern. A broker business that
fails to adopt the latest technology has little future. Survival
under the credit squeeze means brokers must display a high level of
professionalism and commitment – particularly where technology is
concerned.

Another route to survival in the credit squeeze is through joint
ventures.They work to eliminate wasteful practices such as
multiproposing and reducing the ratio of proposals to acceptances.
Fortis Lease was one of the first funders to develop the concept of
a joint venture with brokers. Prior to the crunch, JVs were
becoming increasingly common and this is considered to be a trend
that will continue.

Yet another potential route open to brokers to brighten what
looks to be an uncertain future.