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Why London’s calling for alternative investors

A Q&A with Andrew Thomson, chief executive of London Capital & Finance Plc

Who are London Capital & Finance Plc?

London Capital & Finance Plc (LCF) was established in 2012 to provide structured and secured bespoke lending solutions to British businesses, many of which have been let down by traditional sources of lending. LCF raises capital via various fixed interest offerings that in turn fund its lending activities.

The business strategy was shaped with the needs of both the borrowers and investors in mind. This approach has proven to be very successful for us delivering positive returns—in our last financial year we increased revenue by 725% and increased the size of our loan book by 525%, similar results are expected for the 17/18 year-end. To date we have in excess of 10,500 individual investors on our books and have issued bonds in excess of £140 million ($186 million).

What is your view on the opportunities in the UK commercial lending market?

At the end of 2017 there were 5.7 million businesses in the UK. According to latest statistics published by the British Bankers Association, cumulative lending to UK businesses between July 2011 and June 2016 had dropped by £9.7 billion.

A recent article in the Financial Times highlighted that traditional banks are still reluctant to lend and challenger banks are reverting to classic business models. Arguably this has been brought about by increased regulation, capital adequacy requirements, stress testing and liquidity risk. What this means to the banking world in short is that loans are more expensive to make and the more complex a loan is the greater the cost to the bank.

It is clear to us that UK businesses are not being catered for by traditional sources of funding and more are turning to alternatives for their financing needs. The centre for economics and business research has predicted that the alternative lending market will grow to £10 billion by the end of the decade up from the c.£4.5 billion it stands at today.

We looked at the overall lending market place and concluded there are a number of alternative lenders catering for the smaller straight forward lending market. The opportunity as we see it lies with those companies that have more complex and bespoke needs and are seeking debt of more than £1 million. Bespoke funding often requires an out of the box approach which very few lenders are willing to allocate the time and resources to. This creates a significant opportunity for us to target as we are not bound by the same liquidity and capital adequacy constraints that the banking world is.

What is ‘out of the box’ funding?

Out of the box funding is lending in reverse, starting with the required outcome and working back from there. This typically requires bespoke legal and security structures to be put in place that cater for the flexibility of funding required by the borrower to achieve their end result, but also needs to cater for the security and risk mitigation needed by the lender. In order to successfully unlock the potential opportunity in this market, the interests of all parties must be fully catered for from the outset.

When we review a lending proposition we conduct comprehensive assessments to understand every aspect of a borrower’s business, their financing needs and their business cycles. All aspects of the proposition must be taken into account to enable us to create an innovative solution that may not be apparent to traditional lenders who operate under standardised lending policies.

What can we offer your family office?

Due to the bespoke nature of our lending operations we are able to offer a tailor-made investment opportunity which can cater for varying investment strategies, whether you are pursuing a preservation income based strategy or looking for long-term capital growth. There are no costs or up-front fees to any of our investors, thus insuring you see the maximum returns on your capital.

In addition, occasionally our borrowers have more significant funding requirements outside our funding capacity. In these instances, we are able to act as a broker and to pass these opportunities to those family offices that are working with us.

 

London Capital & Finance Plc

The Old Coach House

Eridge Park, Eridge Green

Tunbridge Wells

Kent

TN3 9JS

www.lcaf.co.uk

info@lcaf.co.uk

T: +44 (0)203 861 9060


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