“Does Size Matter?” - Colin Sanders tells Business Moneyfacts Magazine how smaller lenders can gain from the pandemic
Colin Sanders, CEO of bridging lender Tuscan Capital, makes the case that SME lenders will ultimately gain more from the Covid-19 emergency than they stand to lose.
I feel confident stating here that smaller-scale bridging lenders enjoy certain critical advantages over their larger peers. Chief amongst these is a nimble approach to decision-making that can provide brokers with reliable lending terms within short timeframes.
For instance, at Tuscan Capital, and in common with other similar-sized firms, we do not use credit committees. Instead, we operate as a fully-devolved lender able to make decisions on the spot and without day-to-day oversight from our funding partners.
This enables us to deliver quick and certain decisions. It also allows us to take a bespoke approach whereby we evaluate each enquiry on its individual merits - an attribute that is particularly important when presented with complex cases, such as those involving multiple securities and/or offshore SPVs.
Whilst larger lenders often find such propositions daunting, specialist players will take care to evaluate fully the nuances to reach a fair decision.
But big can be beautiful...
On the plus side for institutional players, their scale gives them greater access to a deeper funding pool, including retail deposits and generous government schemes.
This, in turn, gives them an advantage on price: the cheaper the funding costs to the lender, the cheaper the price of borrowing (or so it should follow).
Larger firms also enjoy greater structural ‘buffer’ protections that allow them to weather unforeseen storms, such as difficulties in financial markets or, of course, pandemics.
But size doesn’t always determine a better outcome for the customer. The larger the lender, the more formulaic and rigid their approach to lending is likely to be. When processing large volumes of perfectly-compliant cases, this works well. But for customers whose circumstances are less than perfect, not always so.
The Covid effect...
In many ways, what has come out of the pandemic has been positive for the future of SME lenders in particular and for the bridging sector in general.
The smaller players have become more efficient through their better and smarter use of technology, and they have learnt how to continue functioning throughout a real-life disaster-recovery scenario.
Also, and having had time to re-evaluate their business models during lockdowns, they have redefined their strategies and operating methods to make them more efficient in a post-pandemic environment.
Keeping us sharp...
Competition is the key element that keeps commercial markets sharp. Conversely, monopolies and cartels are usually detrimental to innovation, progress, pricing, efficiency and customer outcomes.
Smaller-scale lenders might not always be able to compete with the big players on price. But what they may lack in financial firepower is more than compensated for in energy, personalised communications and an ability to deliver binding decisions rapidly and without undue fuss.
The big players unquestionably fulfil a vital role in the bridging market. Their scale and robustness bring vital liquidity, security and reputational benefits to the sector. But bridging would be poorer and less progressive without the entrepreneurial skills, flair, flexibility and genuine passion of the SME lender.
To view this article as appears in the May 2021 issue of Business Moneyfacts Magazine, click here.