Reasons to be cheerful – Carrick chalks up three years

After an 18-month spell working from home, the team is gradually returning to our offices to continue pursuing our remit of working with a small, targeted group of introducers and further develop its distinctive service-led, personalised approach to business. Here, Martin Stewart, our Managing Director, outlines Carrick’s Covid journey so far.

 

Naturally optimistic though I am, I’d never have expected our business to be in the positive position it is as we approach the third anniversary of our launch. Whilst it’s not lost on me that the tail of the Covid pandemic could yet provide some bumps in the road ahead, over the last year or so we’ve managed to progress and develop the Carrick operation in ways I wouldn’t have thought possible given the general trading environment.

 

People power

We’ve been very fortunate on the people side of things in particular, where we’ve managed to grow our team by 50 per cent since the start of the Covid-19 pandemic and have enhanced the organisation with some high-quality staff. Each of them has shown tremendous resilience in dealing with the challenge of joining a business and taking on a new role without having visited our offices or met any of their new colleagues. Over recent weeks we’ve taken our first baby steps towards a return to normality by arranging for small groups of our staff to spend short blocks of socially distanced time in the new offices we took on a couple of months ago. Watching some of them meet in person for the first time after more than a year of Zoom calls has been interesting and seems to have whetted everyone’s appetite for a return to office life in some shape or form.

 

Service first

As well as marvelling at this resilience, I’ve been amazed at the team spirit and camaraderie that’s developed across the business. To say we’ve risen collectively to the numerous challenges we’ve faced is an understatement, and I couldn’t be more proud of the sense of unity we’ve been able to foster. I think this has been a major contributory factor to the exceptional levels of service we’ve sustained for our brokers and customers throughout the pandemic.

The national sentiment of ‘we’re all in this together’ has played out in our little world as well, and the team’s determination to ensure the challenges of working from home didn’t cause any aspect of our service to fall away has been gratifying to watch.

I firmly believe our service has improved significantly as a result of the Covid crisis. With credit-decisioning times averaging 5.5 hours; a document production service for brokers that consistently produces the goods in two hours or less, and an execution capability that sees us payout over 95 per cent of transactions same-day – we’ve materially enhanced every dimension of our offering.

I think we can lay a credible claim to having a service proposition that’s up there with the best in the market, with regular feedback from our brokers suggesting we’ve flourished in areas where many others seemed to have struggled.

 

Still growing

It’s also been pleasing though to see how we’ve grown and performed in financial terms. We’ve increased our lending book by 75 per cent since the start of 2020 and our broker panel by 60 per cent since the beginning of Covid – no mean feat given the extent to which social restrictions have impacted business development and relationship management norms.

Our brokers have been hugely supportive over this time, and I can’t thank them enough for trusting us with their business, particularly when activity levels have been low and there’s been less to go around than normal.

We decided quite early on not to seek accreditation under the British Business Bank’s CBILS scheme. This left us able to focus on dealing with any customers requiring payment forbearance while simultaneously providing an uninterrupted and effective asset finance offering.

Our view was we’d rather try to do two things well rather than risk doing three things badly, and our brokers seem to have responded well to that approach. It meant there was an important strand of their business which we couldn’t service, but the portfolio growth we nevertheless managed to achieve shows there was still a good quantity of regular business available – which we were very happy to service.

A combination of consistent, reliable service and fair pricing has allowed us to develop a steadily increasing business flow over the last 18 months.

As our lending book has grown we’ve been able to demonstrate greater appetite for larger transactions, and in several recent months, more than a fifth of our total caseload has comprised cases involving balances beyond £100k – many of them significantly so.

 

Stress-tested

Early signs suggest the commercial asset finance sector has weathered the Covid storm pretty well. That said, the true viability of many of its SME customers won’t be proven until the various government supports completely fall away, so I don’t think anyone with an existing lending portfolio can guarantee they’re out of the woods yet.

Aside from that potential ‘back book’ risk though, I think the leasing industry can take great credit for its performance through this difficult time. What we’ve observed, through our broker interactions, is a sector that enjoys deep, practically-orientated customer relationships, and a product range unrivalled in its relevance and value to the businesses that use it. Customers have known who to turn to when help was required with new or existing funding requirements, and in many cases, it hasn’t been their bank manager.

 

‘Can-do’ DNA

The transactional nature of asset finance demands agility from providers of those products, and generally drives a more ‘can-do’ mindset than often prevails in other areas of financial services. There’s no doubt having this as a key strand in our industry’s DNA has helped us and our competitors deal with many of the stresses encountered over recent times.

Intermediaries operating in the market have rightly expected funders, whatever other pressures they are dealing with, to still service the demands of the asset-supply led sales-cycle that underpins every new deal. When the customer lets everyone know they’re taking delivery of the asset tomorrow, both they and the broker expect us (pandemic or not) to facilitate that – rather than being the reason it can’t happen.

There’s zero room for complacency, but thankfully Carrick seems so far to have passed that test and, over and above everything else, the thing I’m most proud of is that we’ve never paused our lending activities for a single day throughout the crisis.

 

Horizon gazing

Whatever challenges lie ahead, we’re determined to keep growing and developing the Carrick business. We’re tracking very favourably against the fairly aggressive 2021 budget we set for ourselves, while steadily building our market profile and our team.

We’ve recently strengthened our credit and operations functions; will be recruiting further business development staff over the next few months, and our outlook and day-to-day actions across the business are all underpinned by a fundamental optimism about the future.

We are intent upon doing everything we can to capitalise upon the near and medium-term opportunities we think are on the cusp of unfolding in the UK asset finance space and are excited about the prospects that lie ahead.

Reasons to be cheerful? We’re knee-deep in them.

WORKING IT OUT AS WE GO ALONG

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.

Forbearance

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.

Risk outlook

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.

Deal doing

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!

Shifting sands

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.