On 22nd June 2016, our loan book stood at £98m.
OakNorth had been trading for nine months and, overall, business was going well, but nothing could have prepared us for what the next six months would bring. Between June and December, our loan book tripled to £300m. In the first six months of this year, we lent the same amount as we did in the whole of 2016 and June was our busiest month yet, with £100m in deals closed.
Big banks are slow. Brexit makes them even slower
Before Brexit, we'd hear from our borrowers that it would take four to six months to get a “no” and six to nine months to get a “yes” from their clearing bank. Not ideal when you're a fast-growing company.
Since Brexit, these timeframes have only lengthened as larger banks have retrenched from the market and become distracted with passporting issues and potentially having to relocate entire teams abroad. One borrower – who we recently closed a deal with – said it took their bank seven weeks just to sign the NDA…
How OakNorth has capitalised on this:
- We give borrowers the chance to meet the credit committee and discuss their borrowing needs directly with the decision makers. Customers are kept fully up to date throughout the credit decision process, rather than being left in the dark while their lending director goes back and forth with the credit team.
- We also offer a lot more flexibility than big banks when it comes to the assets used to secure the loan: we'll consider stock, debtors, plant and machinery, intellectual property etc rather than just defaulting to real estate. We'll also lend on a cash flow unsecured basis, which is better suited to many of the UK's high-growth, small- and medium-sized businesses.
- This transparency and flexibility means transactions are typically completed in days or weeks rather than the months it takes at larger institutions. Everyone involved in the transaction – the business development team, legal team, credit analysis and risk teams, and client onboarding team – work together to get the deal done within a timeframe that works for the borrower.
The best entrepreneurs find opportunity even in times of turmoil
The other reason is that businesses want to grow and the most resilient of them will be able to do this even in times of economic uncertainty. In the months leading up to Brexit, many business owners delayed borrowing plans knowing that it'd be even harder to secure debt from the big banks because of ongoing uncertainty. When the result was announced – and it was clear that the uncertainty was only going to continue.
Last month, we closed a £20m loan to Brasserie Bar Co, which has 35 sites across two brands: Brasserie Blanc, the French brasserie business inspired by Raymond Blanc; and the White Brasserie Company, a quality pub-dining business, which takes the cuisine of Brasserie Blanc into a traditional pub setting. This is a business within a sector that is more sensitive to the rising price of raw materials than others, and which relies heavily on workers from the EU. However, as Mark Derry, the CEO of Brasserie Bar Co, said: “Everything that is customer-facing, we're investing in. Everything else, we're chiselling the hell out of it.”
This is just one example of a great business that's getting on with it and finding opportunity in times of turmoil, but we have completed over 60 transactions since January, so there are clearly many more that are doing the same.
By having faith in this country's entrepreneurs and our rigorous underwriting – which is more akin to what you'd find at a private-equity firm than a big bank – we have managed to grow our loan book six-fold and now count all the below as clients:
• Brasserie Bar Co
• Galliard Homes
• Bel & The Dragon.
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