An update on the loan book

Our Head of Credit, Tim Harper provides an update on CBILS lending and the steps that we have taken in managing our existing loan book throughout the pandemic.

“In terms of the loan book, as soon as the pandemic showed signs of taking a firm hold, we moved quickly (with lender support) to offer all borrowers a three month forbearance extension to their current facilities. This was taken up by 60% of our developer customer base, and 38% of the remaining trading commercial/BTL/bridging customers. This proved prudent as it gave borrowers time, even when lockdown arrived, to take stock, reassess, plan, and enrol for various Government schemes and grants. We ourselves rapidly sought registration as an accredited lender under the Government guaranteed Coronavirus Business Interruption Loan Scheme (CBILS) alongside raising the significant institutional investment required to fund the scheme. In May we achieved both, being accredited by the British Business Bank for Commercial Mortgages and one of very few Lenders accredited for Development Funding following our lobbying for it to be included.

From March to August we paused new lending but continued to fund the circa 150 developments that were underway, without a single missed tranche payment to those borrowers, that in totality ran into tens of millions of pounds. We closely monitored loan redemptions and plot sales continued to trickle through in even in the peak of lockdown.  Whilst some of the loan redemptions have been a couple of weeks late here and there (mostly due to delays in Councils, Lawyers and Agents) we are now seeing the Stamp Duty benefits take hold, and if anything numbers are accelerating.

Refinancing by our borrowers to new lenders did pause, and we were faced with extending some loans that we did not originally intend to do that for, however refinancing by other lenders is sparking back to life through secondary lenders, though the High Street banks remain reluctant.

CBILS lending now enables us to:

• Offer those Developers who are midway through their projects a Government guaranteed CBILS loan for the remaining monies, providing they have been adversely affected by site closures, slow supplies or have been impacted by this new way of socially distanced working. This allows the borrower to complete the site with the monetary benefits that CBILS brings, even if a reassessment demands more funds and time, thus offering borrowers reassurance and certainty.
• Consider CBILS loans for our existing borrowers in any sector who may be struggling subject to eligibility and viability, which also includes funding future tranche drawdowns.
• Reconsider loan applications that were in our new business pipeline and also open up to the wider market for further new enquiries. The first weeks have achieved in excess of £70M of ‘Agreements in Principle’ which we hope to double before the current expiry of the scheme on 30th September 2020 and draw down the loans in the coming months.

So far, 85% of CBILS loan applications we have received are regional housebuilders who have limited funders willing to support them, but are as diverse as a hairdresser in Preston wishing to purchase present leasehold premises, to a new build care facility for abused children from all over the UK in Leamington Spa.

With regards to our existing book, most developments are pushing through the present and past difficulties. In the trading book, principally commercial mortgages, we are keeping a close eye on the care sector, office accommodation and all aspects of Leisure. It would be naïve not to think we will see further fallout in these sectors, but we are prudent property secured lenders and that will hopefully cushion any blow.”

- September 16, 2020