Interview with Richard Norton; Our products, and how brokers work

CS Richard, recently I met someone from a Company which arranges Mergers and Acquisitions. I told her we could fund M&A deals, although the main problem we solve is Property developers who cannot get all the funding they need.

RM We would potentially be able to help a Company specialising in M&A. Did you get her details?

CS Unfortunately she said, Pooh, we work with brokers who are on the panel for the banks.

RN Perhaps she did not realise that we are brokers with our own specialism?

CS I explained that to her

RM The fact is that finance brokers tend to have a niche market – for example we do not do funding for aviation, so we don’t put in applications to fund managers on the aviation board  which would be  a waste of time

CS Yes, as a mortgage broker some twenty years ago I became aware of the niche lenders which were right for my clients

RN Equally, brokers have a relationship with the banks and institutions which suit the client’s needs best

CS So for us, does that include the High Street banks as well as the Challenger banks?

RN If the High Street banks lend in the particular sector, no problem.

CS You tend to take cases to the Challenger banks, why is that?

RN Some of the Challenger banks favour investment in property developers, and they have specialist products

CS Is that what is now termed “Stretch funding?”

RN Yes, the Challenger banks will look, first and foremost, at the Gross Development Value of the project

CS That means the value when the project is completed and the flats are sold? The sale value of all the flats and houses?

RN Yes, so, rule of thumb, we can usually raise a good percentage of the site cost – say 65% -- and 100% of the development costs

CS What does development costs include?

RN The materials – steel, bricks, mortar, labour – all the costs required to create a unit ready to move into

CS What about planning permission, architects, surveys and legal fees?

RN Good question. We like to see that a developer can make a contribution to the project, however, some of these items can be negotiable. We will cover the question of PGs as we said we would, in the next interview.

CS Then, if there is a shortfall, we have specialist equity partners who can fill the gap on a JV basis?

RN Yes, there are many permutations. We will be looking at the product list to see how the different ones can work in practice with the applications we have on the table.

CS Essentially, then, as brokers, among a plethora of finance brokers in the UK, we have our specialism, and, as those lenders know our deals are likely to be ones they want to fund, that is the way we work?

RN That is the way the industry works, Catherine. Good luck with networking – my time is taken up with the specialist lenders and funders with which we are forming new business relationships – your lady might have been one, but, as you know, you can’t win them all.

CS Thank you, Richard.