The Deal Team is just one of the advances Recognise has implemented to improve the service we offer UK SMEs
If you ask any SME or broker what is most important to them when applying for a business loan, good communication and speed of decision will usually top the list. Cost of funding is of course important, but in the fast-paced world most companies operate in, waiting several weeks or months to get a lending decision from their bank could actually cost them in lost business or missed opportunities
That is why when we began to reimagine lending for the UK’s ambitious and growing number of small and medium sized businesses, we created the Deal Team, a unique approach to loan applications that employs a tight-knit group of experts to speed up the decision-making process, aiming to give applicants a decision in principle within 24 hours.
Brokers often talk about the frustrations they have with many lenders over the time it takes to get a decision on a business loan application, or the delay in lenders asking for additional information before they even begin to make a decision.
This is because, in the drive for cost savings by many financial organisations over the last decade, most business lending has become centralised and automated to the point that SME customers are really just a name and a number. This shift has not only made the quality of service much poorer, it has also robbed the sector of expertise in the form of managers who understood their clients’ needs and were willing to build a face-to-face relationship with them.
Recognise was created to bring the personal approach back to business lending with a network of Relationship Managers (RMs) based in regional hubs across the country, supported by cloud-based banking technology to make processes quicker and more efficient.
Creating a new bank from scratch also gave us the opportunity to completely change the way SME lending works by fixing some of the pain points, such as loan approval timescales. That’s how the Deal Team was born.
Our Deal Teams are made up of the Relationship Manager, or Business Development Manager, who will normally receive the initial loan application; the Credit Partner, who is responsible for the underwriting decision; and the Loan Manager, who handles other vital elements of a successful deal, such as valuations. The big difference with the Recognise approach is that the Deal Team will be involved from the beginning and gets to work as soon as the application lands.
This is a world away from how mainstream banks normally operate. The traditional model is that the business manager will structure the draft loan application, pulling together all the paperwork and additional information, which could take up to a week or even longer depending on how busy they are. At this point the application would be submitted to the bank’s lending queue, with the business manager not having any idea who the underwriter is or how long the process will take.
Not only is this a recipe for a slow decision, it also means there is no way of knowing whether the underwriter allocated has a good understanding of the applicant’s industry sector, their funding needs or the circumstances under which they are looking for finance. The application essentially falls into a black hole within the bank. Communication between all the parties is disjointed, making decisions slow, often resulting in an unsuccessful application due to a lack of understanding about the SME’s business case.
With our Deal Team approach, the Credit Partner aims to review the application immediately, so we may be able to give an initial answer within 24 hours. And if it’s a positive response, we can also make a decision in principle and also aim to issue a Heads of Terms within 24 hours.
At this point the offer is assessed by the customer and the broker, and if they want to proceed, the third member of the Deal Team, the Loan Manager, steps in to take control of the finer elements of due diligence, such as credit checking, as well as other important parts of administration, including legal paperwork and valuations.
The team approach even extends to Credit Partners often accompanying Relationship Managers on client visits during due diligence to get a better understanding of how the business is set up and run, looking for some of the intangible cues that are vital to a successful company.
By creating the Deal Team, not only do we make the entire application process more efficient, we also free up our Relationship Managers to spend more time with businesses, building long-lasting partnerships. They become a trusted friend to the businesses they work with, often identifying the best funding options to suit their circumstances. As their business develops, we may be able to propose other solutions that we feel might help the business in future.
Needless to say, the brokers we work with like this approach, because it means they can recommend us as a lender that understands the pressures and requirements of the SME sector. We need a good level of disclosure from the broker introducing their client to us and making the application. This is enables our RMs to be able to distil the crucial elements of the application into a document that is reviewed by the Credit Partner for the initial decision.
Having an entire team in place, rather than just one person, also increases the level of communication available. While the Relationship Manager will always be the main point of contact, brokers and customers know they can also turn to the Credit Partner or Loan Manager with a query or for an update, if the Relationship Manager is on leave, for example.
As the UK looks to rebuild from the impact of the Coronavirus pandemic, the country’s SMEs will play a key role in helping the economy to recover. As they invest in their businesses to grow, or just to manage some of their financial requirements along the way, they will want to work with partners and lenders who place client needs at the very centre of their service.