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Friday, September 20, 2019

Opinion > OakNorth

What a CFO is looking for when it comes to taking out a bank loan

Cristina Alba Ochoa, CFO at OakNorth Bank | 16:47 Tuesday 10th September 2019

Throughout my career, I’ve been fortunate to be involved in numerous transactions between companies of various shapes and sizes.

Prior to joining OakNorth, I spent 18 years at GE Capital International, where in my last role, I led a team of experienced senior finance managers and analysts who facilitated the management of over $100bn worth of sales across multiple jurisdictions. At OakNorth Bank, I have sat in on too many credit committees to count and have met hundreds of entrepreneurs that we’ve lent to.

It is this unique experience that inspired me to write this article, as it is something that the CFOs, CEOs and founders of the businesses we lend to say is refreshing (albeit intimidating!), and unlike any other experience they’ve had with a traditional bank. The management team gets the opportunity to discuss their business and borrowing needs directly with the decision makers — rather than the high street bank approach, whereby a relationship director pitches to credit on the borrower’s behalf. From our perspective, it’s hugely helpful as we’ve had times where on paper the numbers look fine, but upon meeting the management team, we’re convinced that it’s a business we want to lend to. Conversely, we’ve had scenarios where on paper the numbers look great, but upon meeting the team, we don’t feel it’s a loan we could support. However, even in a situation such as that, we make sure that there’s full transparency and give the borrower feedback as to why the credit committee declined the transaction. 

The management teams of SMEs have enough on their plate. They don’t want to spend weeks or even months going back and forth with a bank. They want to get the loan and then get on with growing their business. At OakNorth Bank, we pride ourselves on our speed — quick yes (or no) decisions. If there’s interest from both sides, we can typically get indicative terms to a prospective borrower within 24 hours and complete the entire transaction in a matter of weeks.

Our competitive advantage not only stems from our ability to move quickly, but also from the simplicity of our model. We don’t offer business current accounts, credit cards, short-term loans etc, so there’s no caveat to the finance team that they can get a loan with us, but only with the caveat that in six months’ time they must switch to us and make OakNorth Bank their clearing bank. We’re not interested in cross-selling various products to the finance team. We don’t have any other products to cross sell. We simply want to provide them with a debt finance product that’s structured to their needs in a timeframe that works for them.

This leads me on to my final point: flexibility. Another aspect that CFOs will particularly value when it comes to taking out a loan for their business is the bank taking the time to understand their business and their specific needs. Here, I’m referring to flexibility in terms of structuring the loan, but also flexibility in terms of the assets used to secure it. Unlike traditional lenders, we don’t default to real estate as the only asset to secure the loan against — we’ll also look at other assets such as stock, debtors, plant and machinery etc to deepen the collateral pool.

Since our launch in September 2015, we’ve been fortunate enough to work with some of the UK’s most ambitious and successful businesses — from care homes, nurseries, restaurants and bar chains to private equity firms, recruitment companies, art galleries and hotels. In doing so, we’ve lent to businesses across the UK from multiple sectors, funding everything from expansion, acquisitions — including management buyouts and management buy-ins — to financing mergers and growth capital. Being on the credit committee, I’ve had the opportunity to meet with the management teams of every one of these businesses and hear directly from their finance teams. This ongoing dialogue has enabled us to continue evolving our proposition and build a bank that has earned its title as a ‘challenger’.

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