Together Finance – September 2018 – Report Back

The first autumn meeting of HIGH PEAK BUSINESS CLUB took place as usual at Chapel en le Frith Golf Club. Over the breakfast pastries and bacon baps we got a fascinating insight on how to get funds to grow your business even when the traditional banks have said “No.”

Together Finance is not a bank, though it’s licensed by the Financial Conduct Authority. Few of us had ever heard of it, though they’re the backers for the new B & M store in Whaley. But it fills an important gap, especially in the north-west, where growth is rapid: in the last 18 months 200 new staff have been taken on and they now employ over 700 running a loan book of around £3 billion. Previously known by names including Auction Finance and the Cheshire Mortgage Corporation, the Together group offers residential and commercial mortgage loans to niche market segments underserved by mainstream lenders.

It started over 40 years ago, when a smart car salesman realised that he was making more from the commission on arranging finance than he was on selling cars. The business grew only slowly for many years and has retained its Cheadle base. Chris Baguley their Commercial Director had brought along a brand-new apprentice, Harrison, on his first week at work; the company prides itself on having been highly placed in the Sunday Times 100 Best Companies to Work For. This is not Wonga.

Since the banking crash 10 years ago, opportunities for new lenders and “shadow banks” have increased dramatically. Barclays, HSBC and the rest are now required to carry three times the reserves back then, they’re still paying huge fines, and are ultra-cautious (and very slow) in agreeing to make loans. “What it can take months from a Big Four bank can be settled with us in 45 minutes,” Chris explained.

He gave examples: a businessman who buys up dilapidated houses in Liverpool, spends about £30,000 on them with a new roof, bathrooms and kitchens, decorated throughout and rendered very smart on the outside – then sells them on at a decent profit. Working capital for him is essential, but banks are unwilling as there is no guaranteed outcome.

Another client had speculatively bought a large area of farmland thinking it might be suitable for development. Then suddenly it was in the Lancashire Housing Plan, zoned for housing, and he was fending off offers in the millions from national housebuilders. Cannily, he decided to apply for outline permission, thus adding to its value; but finance was a problem. A no-brainer, however, for Chris and his team.

“We deal with the “New Normal””, Chris explained. Borrowers who are good bets, but don’t fit the old model: who may have an interrupted work record, or be self-employed, or a retiree wanting a bridging loan to build a dream retirement home. This lending is cheaper than an overdraft or credit card and (depending on circumstances) competitive with other commercial loans, but you will need a hefty deposit.

Local knowledge matters here. Chris mentioned one client who successfully bid at auction for a buy-to-let property in Hale. It looked like a bargain, but it was the wrong Hale.. in Merseyside, not near Altrincham. “Always go and see what you’re buying” is sound advice.

Asked about Brexit, he felt it won’t affect them; the rental market will stay strong, and traditional mortgages will remain difficult. Asked where Together’s money comes from, it turns out that the banks themselves regard Together as a sound proposition; they’ve had no problems raising the cash they need. The main competitors are peer-to-peer and crowdfunding, where none of the experience or regulation applies: “Scary, much of it,” said Chris. And sophisticated mortgage fraud is a constant hazard.

Finally, they look after the future by ploughing back profits, and by looking after their colleagues, all of whom, John Lewis style, have a small stake in the business. Nobody is allowed into work on their birthday, and generous holiday vouchers are awarded depending on length of service. That helps keep experienced people working for the firm. “Our worry is that as we grow, we need to stay nimble,” Chris said, but from this account there’s no worry about that.