Small, but mighty

Funding in an ‘area the size of Wales’

Wales may be small on the map but it packs a real punch with the amount of business owners looking for commercial finance. It’s certainly a hive of activity. We are seeing London investors looking to buy here as you get a bit more bang for your buck when it comes to rental returns and investment.

Under pressure

Both the mortgage and commercial finance market are under huge pressure with less staff, more bureaucracy passed down from the regulator, and more people looking to obtain finance. The knock-on effect is that in a large proportion of the market the lender service standards have been very poor and with very little in my opinion actual care for how this affects us the broker and ultimately the customer. Your challenger style lenders on the other hand have really come to the forefront and lead with example in the customer care side of the market. Not only from a broker point of view but also from the view of clients. However, I won’t bore readers with the issues we face with the high street commercial lenders… if you know, you know. I think as a country we have some huge challenges ahead but with challenges comes great opportunities. The lenders who give the most during these times are the ones who will stand when all others fall.

Closer to home

There are however a few challenges that we face when trying to support our clients here. Let’s take a typical Valleys area property with a sub £100,000 purchase price and then a loan of less than this price. The very first hurdle for many is that this falls below many lenders’ minimum loan amounts. This is even more evident with some specialist commercial lenders who want a minimum loan of £250,000, which certainly slims the market here in Wales. One trend we at Sanctuary Financial Planning are seeing is the growth of short-term council accommodation required especially in the Unaccompanied Asylum Seeking Children (UASC) area. Now, as you can imagine this is a huge challenge for lenders, it is such a niche requirement that it can spook many lenders unfamiliar with the concept. At last count less than a handful are comfortable with this risk. Their standard objection is that there is a ‘reputational risk’; whilst we do understand that stance, as a pure investment opportunity it remains a very profitable area. The UK is home to approximately 1% of the 27.1 million refugees who were forcibly displaced across the world. With this area growing and the need for accommodation for the homeless likely to increase with an unavoidable recession on its way, there is a hope that more will put their heads above the parapet and come to the market. There is a need for funding in this area and there are too few lenders operating here. This needs to change.

"The lenders who give the most during these times are the ones who will stand when all others fall "

Gareth Shears Co-Founder & Chartered Financial Planner at Sanctuary Financial Planning