We asked our Directors for a lending market update, 12 months after the UK was plunged into the first national lockdown.

Richard, Alice and John take us through the trends they have seen emerge during the pandemic, the general sentiment across their client base and their predictions for the year ahead.

Business Finance Update with Richard Jones

What trends have you seen recently?

We have seen the market dominated by the government backed CBILs loans.  Understandably most clients sought to exhaust this avenue of enquiry before accepting ‘normal’ interest paying finance. Many lenders switched to offering only CBILS loans, which left non-qualifying clients with less options than pre Covid. 

What do you feel is the general sentiment across your client base?

It ranges from those who are cautiously optimistic to those who are actively seeking opportunities. Businesses know they cannot hunker down forever. Many are seeking a new way of working or trading if not permanently, certainly for the medium term.

What is the business lending market like currently?

Lenders are moving towards asset backed lending. A number of unsecured lenders (not including those who are CBILs accredited) have left the market. The price of true unsecured lending has remained high or increased.

What changes do you envisage over the next 12 months?

Lenders will look to become accredited for the new Recovery Loans replacing CBILs as this will reduce their risk to defaults and allow them to lend more. The appetite to lend to certain sectors will be entirely dependent on the speed of recovery in the economy and how quickly businesses can get back to normal trading levels.

Lending outside of recovery loans is likely to be asset backed or pricey.  Businesses made a lot of quick decisions last year to put in place emergency funding.  We expect to see a number of clients trying to refinance onto longer term structures, or products that are perhaps better suited to their needs, as they start to repay these loans.

Bridging and Development Update with Alice Williams

What trends have you seen recently?

We have seen a surge in enquiries relating to heavy refurbishments and conversions of commercial premises. With the pandemic causing so many businesses to rethink their commercial premises requirements, this trend is likely to continue in the short to medium term.

What do you feel is the general sentiment across your client base?

Developers are cautiously optimistic and eager to progress with their projects. Clients are allowing for longer build and sales times and working to a slightly reduced Gross Development Value. However, we still continue to see clients develop successful and profitable schemes.

What is the development lending market like currently?

There is huge appetite to lend amongst lenders. The majority were impacted by the halting of funding last year and appear to be making up for lost time! The increase in appetite brings an increase in competition. We have seen this reflected in some very aggressive pricing for schemes lenders wish to win.

Not all lenders have returned to pre-pandemic loan to values, but there are certainly some that have. This means whatever your driver when looking for finance (lowest rates, highest leverage, most flexible lender) there are certainly options available for you.  

What changes do you envisage over the next 12 months?

General sentiment in the market remains high. It is key to account for risks and contingencies in your planning. Allow a few extra months for the build and exit and work to a cautious GDV. But, providing the deal stacks, there will be appetite to lend.

Commercial Mortgage Update with John Shevlane

What trends have you seen recently?

Lenders are increasingly cautious when assessing loans where commercial premises are used for leisure, retail or office space. Rates for these sectors have increased and loan to values have dropped. This makes this type of lending hard to secure, unless the rent is very secure.   

The Buy to Let market very quickly recovered and we are seeing incredibly competitive rates and strong loan to values.

What do you feel is the general sentiment across your client base?

There is huge optimism from an investment point of view.  Investors are taking advantage of cheaper rates and are actively looking to acquire deals. The local rental market has seen a rise in demand as workers swapped city living for more rural locations.

What is the commercial/investment lending market like currently?

Very positive, at the beginning of lockdown 1.0 many investment products were removed from the market, but they are swiftly returning and we continue to see lenders increase their offering.  

What changes do you envisage over the next 12 months?

We expect to see caution from lenders when assessing commercial applications continue in the short term. This is expected to improve over the next 12 months as workers return to the office. A move back to the office will also mean a move back to cities for a proportion of workers so we can expect city centre rental demands to begin to increase. 

Similarly, lending options for those sectors that have been adversely affected by Covid restrictions, such as hotels and restaurants should improve once restrictions are relaxed. The perceived covenant risks will reduce over time once businesses get back to the new norm.