At the coalface: Exclusive interview with NACFB’s Norman Chambers
Norman Chambers, managing director of the National Association of Commercial Finance Brokers (NACFB), tells Kathryn Gaw what is happening at the coalface of the lending crisis…
Small- and medium-sized enterprises (SMEs) are in the midst of a funding crisis, and no one understands this challenge more than Norman Chambers, (pictured) managing director of the National Association of Commercial Finance Brokers (NACFB).
The NACFB plays a vital role in bringing together lenders and businesses in need of funding, using its vast network of brokers to match SME borrowers with lenders, including alternative lenders such as peer-to-peer platforms.
He tells us what the NACFB is doing to solve the ongoing SME funding crisis, and what alternative lenders can do to help.
Kathryn Gaw (KG): What does a standard day look like for you?
Norman Chambers (NC): I start by touching base with the team leads from across the business, so compliance, membership, communications, events and finance. After that, it varies considerably. There are always calls and meetings with member brokers, lenders and partners, and I speak to those that are looking to join the association, be it a high street or challenger bank, a specialist funder or a P2P platform. There are always emails and queries from our member brokers that need my attention and I have lots of interactions with other trade associations and government bodies.
KG: Can you tell us a bit about the NACFB’s work over the last year or so?
NC: Where do I begin? Over the last year we’ve done a huge amount of work with the Business Finance Council, with the Treasury, and with the British Business Bank to convey what’s happening at the coalface in terms of SMEs wanting finance.
As a trade body we are in a unique position, as the link between commercial lender and business borrower. We can comment quite confidently on the various appetites of lenders in the market, which sectors they favour, as well as the challenges faced by some SMEs who struggle to access the finance they need. We can also comment on service levels from funders, valuers and lawyers.
KG: How does one become a patron of the NACFB?
NC: NACFB patronage is open only to commercial lenders offering finance to UK-based SMEs. To become a patron, they must go through our application process and if they meet our requirements, the cost is currently £6,000 per annum. This gives them full access to our members, of which we currently have around 2,300 individual brokers across some 1,070 firms. The vast majority – 96 per cent – of these brokers are authorised and regulated by the Financial Conduct Authority (FCA).
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Members also go through our assurance process to ensure that they can provide the right service and comply with our code of practice. In addition to direct access to our members, patrons get to display the NACFB logo, which has long been highly regarded throughout the industry – we’ve been going since 1992, we’re fully independent and a not-for-profit organisation. The relationship between our members and patrons is symbiotic – brokers need lenders, and lenders need brokers.
KG: To what extent do you work with P2P platforms and other alternative credit providers?
NC: We have over 160 patrons, and a few are P2P lenders, probably around five per cent. We know that many of our members work with P2P platforms who are not NACFB patrons. Obviously, we would welcome any that wished to apply.
KG: What can P2P lenders do to increase their visibility within the NACFB networks?
NC: Become a patron! Any P2P platform can apply to join the NACFB. The first step would be to go onto our website nacfb.org and submit an application.
To establish if the funder will be a good fit for our members and SMEs, we will then ask questions around who sits behind the company, the structure of the organisation, what type of products are offered, the minimum and maximum loan amounts, where their funding comes from, in what parts of the country they lend, and so on. It’s a very transparent process and we welcome applicants from across the commercial lending community.
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KG: What is keeping UK brokers up at night?
NC: More than anything, I think it’s the ever-changing world of regulation. Regulation does not have a reverse gear. Whilst our members are very good at embracing changes which improve the industry and safeguard those within it, they are concerned about the often-unintended consequences that regulation can bring. For example, the interpretation of rules can differ quite substantially, not just from broker to broker but also from lender to lender. I think, a lot of the time, people – whether at a lender or a brokerage – just want more clarity about how the rules affect them and their business.
KG: What regulatory changes have been most challenging?
NC: Probably the introduction of the FCA’s Consumer Duty principle, especially how the rules have been interpreted by the various parties. I can see the value of protecting the consumer a lot more, but we all need to be following the guidelines in the same way and this is not happening at the moment.
KG: How can the alternative credit market help to solve the ongoing SME funding crisis?
NC: We’d like to see alternative credit providers working more closely with intermediaries, including NACFB members, to ensure that SMEs have access to a wider array of funding solutions. Brokers have replaced the bank managers of yore and their remit is bigger. The opportunity for alternative credit providers is obvious and it’s a win-win-win situation for lenders, brokers and borrowers. I think that’s the key.
KG: What do brokers need from their lenders in the current climate?
NC: Brokers only really require transparency. They want to know what products are available, the criteria, the rates, the terms and whether a deal is likely to be sanctioned from the outset. Unfortunately, many lenders are not clear enough at the start and whilst I appreciate there are many moving parts, those who can’t clearly articulate their proposition could miss out.
KG: What key trends are you seeing in the commercial finance sector at the moment?
NC: There has been a bit of a slowdown in the market with less activity than before but there is still good appetite from people wanting to grow their business. I think some of the loan sizes are probably slightly bigger than what they were before. There’s also a new cohort of SME that is likely to be borrowing for the first time. They are recognising how difficult it can be to engage with their long-standing high street bank. Often these new entrants believe that they need a loan or overdraft and are unaware of the many, many other options available to them – and to which they might be better suited. Intermediaries can be the key to unlocking those opportunities.
KG: Finally, if you were Prime Minister for a day, what would be on the top of your to do list?
NC: Top of my list would be to get all commercial finance lenders to recognise the importance of the intermediary community and achieve greater collaboration between the two. Lenders and brokers need to work more closely together to create solutions which provide access to finance for all SMEs to ultimately achieve good outcomes. There is a home for every deal, for every SME looking for finance, regardless of their credit history or sector. But only if we educate all parties and collaborate. If this doesn’t happen, then it will slow down economic growth.
The NACFB is an industry partner of this year’s Peer2Peer Finance Awards, which take place on 12 December at London’s Hurlingham Club. For information on tables, please email sales and marketing manager Tehmeena Khan at [email protected].