Warren Mutch, Head of Speciality Finance at Shawbrook, explains how specialist lenders can continue pursuing growth while keeping the lending taps on with a Platform Lending facility.
Lending businesses are highly capital intensive. But capital may be less certain to come by in the coming months. So, how can specialist lenders secure funding certainty in uncertain times?
In today's macroeconomic climate, the cost of funding is increasing and the capital required for these businesses to front even the equity portion of a loan, after senior lenders and mezzanine lenders are in place, has become increasingly challenging.
This is where Shawbrook's Platform Lending facility can make the difference, providing 100% of the loan value up front.
Through Platform Lending, the lender can originate and service the loan but sell it to Shawbrook. That compares to the typical process of a provider lending to the alternative finance business, who then lends the money to the end-customer.
For non-bank lenders, there are a number of sources of wholesale funding - from a relatively straightforward Block Discounting facility through to committed revolving credit facilities. These products are designed to enable the lender to build a loan book over time by leveraging their initial capital.
A Platform Lending facility is another option, allowing the non-bank lender to originate and service loans but without retaining them on balance sheet.
As such, Platform Lending makes the process less capital intensive. In principle, each loan is purchased at a premium to its face value, determined by the economic profile of that receivable, with the lender also receiving a servicing fee.
The sale of the loan effectively represents a 100% advance, so specialist lenders don't have to worry about securing a senior and mezzanine funder, while leveraging their own equity.
Platform Lending is already giving more flexibility to providers including The Mortgage Lender and Bluestone Mortgages and helping these businesses to fully utilise their origination capabilities. By using the purchasing power of Shawbrook, they can maximise their ability to drive originations and earn income from it.
Andrew Voss, director at Bluestone Mortgages, said:
"Our home finance products are already helping thousands of customers across the UK that struggle to get past automated application processes. Whilst Bluestone has a diverse range of funding for its mortgages, the platform lending arrangement with Shawbrook provides a stable, flexible and simple source of capital. This allows our management team to focus on delivering mortgage products to those that are underserved by traditional mortgage lenders and high street banks."
Uncertainty in the economy could restrain investors for some time to come. So, while the capital required to sustain and grow a lending business is less certain to come by, speak to our Speciality Finance Team about how Platform Lending could help your specialist lending business grow and thrive.