Amid one of the most challenging periods the industry and the country have ever experienced, our sales director Iain Corbett takes a quick look over the shoulder and reflects on how things have gone so far:
Apart from those brief, day-dreamy moments when I wish I owned the commercial rights to use of the word ‘unprecedented’, there’s not been much time to pause for thought in the three months or so since the COVID-19 pandemic bore down on us.
Straight off the bat, I should say we’ve been very lucky at Carrick. We’re a young business that’s been able to adapt quickly to the whole ‘working from home’ regime. Our team is experienced; our processes already paperless; and we had recently run a dress-rehearsal of our disaster recovery plan. So, to paraphrase the well-known song, we’ve had 99 problems, but our ability to keep delivering a service ain’t been one of them.
Like everyone else in the market, March and early April were dominated by an avalanche of forbearance requests. They all needed immediate attention, and we had to quickly develop a stance on how we’d assess the requests, plus work up some new processes for documenting and executing them on our systems.
As regards our approach to assessment, we settled swiftly on three core guiding principles:
Firstly, we took the view that each case had to be individually assessed and there was no scope for a ‘one size fits all’ response.
Secondly, we concluded it would in fact be difficult to turn down any request for help. Although aware some of the applications for assistance were precautionary rather than essential, given the speed of the slow-down caused by the social restrictions put in place, neither we nor anyone else had visibility over how matters were likely to develop – so differentiating between customers in real need and those just being careful was impossible.
Thirdly, we decided we wouldn’t ask customers questions about their businesses that we couldn’t answer about our own. A detailed cash-flow for the remainder of the year….are you kidding?
Business as Usual?
Having settled on the above approach, and aided by bucket-loads of understanding and pragmatism from our funding bank, we were thankfully able to get our arms around the issue reasonably quickly. By mid-April we had agreed, documented, and processed all applications – something we’re proud of considering more than half our customers asked for help.
Soon we were back on the front foot and projecting an ‘open for business’ message to our introducers. May saw us reach nearly 50% of usual business activity levels, and we’re doing even better than that in June.
So, not quite back to normal, but a quicker return to a semblance of that than we ever expected in the first few dark days of lockdown.
Are we being careful in our credit decisioning? Yes, of course we are.
The relevance of historic trading performance is limited; asset values are either significantly reduced or incapable of being determined with any accuracy; future trading conditions are unclear; and many businesses are in payment arrangements with us and other lenders.
So, not the easiest of lending environments to say the least.
All that said, we’re determined to remain flexible and keep an open mind to new business opportunities, as well as being keen to avoid tagging any specific sub-sector or asset class as being totally off-limits.
So long as we can get an understanding of the impact COVID-19 has had on a prospective borrower, plus obtain information on steps taken to mitigate the position (furloughing staff, CBILS loans, payment arrangements with other lenders etc.), then our only other requirement is for full visibility over the cash position, which is obviously most easily achieved by viewing bank statements.
So far, our introducers seem to have readily accepted these temporary requirements. Over the last few weeks proposal numbers have increased steadily, and our approval ratio is closing in on where it would normally be.
This has been helped in no small part by the access brokers get to our underwriters. This direct dialogue gives us the opportunity to work with our introducers to structure proposals where necessary, as well as demonstrate at first hand our flexibility and the appetite we still have for providing funding to all parts of the SME market.
More of the same…
In the short term, a further wave of forbearance requests is looming large in the windscreen. We’ve prepared for this as best we can and will work hard to deal with them efficiently and fairly. Our approach is more proactive this time around and early indications are that customers are welcoming this, as well as understanding that with the decisioning criteria and circumstances being different in this second round, they need to provide more information than they did in the first.
Time will tell if we’ve pitched things correctly. Can we simultaneously deal with this work whilst at the same time offering a high-quality new business service to support the reawakening SME market? We’re sure we can… but watch this space!
Beyond that, our longer-term prospects and those of our competitors will likely be dictated as much by the possibility of a general correction in the asset finance sector, and by the post COVID-19 SME failure rate, rather than by anything we can control ourselves.
Life being what it is though, opportunities will no doubt present themselves and having had our agility, experience, and reserves of common-sense well and truly tested over the last few months, the Carrick team are confident we’ll do fine if we just keep working it out as we go along.