‘We’re more than a private bank’ – Arbuthnot Specialist Finance Limited

Launched in May 2019, ASFL was created to extend Arbuthnot Latham’s (AL’s) reach to provide short-term lending (STL). The lender offers residential, commercial, light refurbishment, heavy refurbishment and conversion and development products.

Based in Manchester, it currently finds itself a small fish in a crowded pond, with a very big, 189-year-old parent bank to back it.

This year ASFL had its biggest quarter to date, with loan enquiries exceeding £300m in Q1. It also hired two business development managers (BDMs) and an underwriter, and intends to hire two more BDMs by the year’s end, depending on the market.

Matthew Anderson (pictured), head of sales at ASFL, told Specialist Lending Solutions that he deems the competitive nature of the STL market with “a new lender popping up every two weeks, offering cheap fast money that some will gravitate toward” to be its biggest challenge.

Anderson said: “We are the baby of the AL family, and we’re the newest, but we have fantastic board-down support and they want us to succeed, [so the team and] I have the ability to react like a short-term lender, but with the financial stability and backing of a big bank. This gives us financial certainty that I suspect will become what borrowers will be looking for. The rates may fluctuate, but in times of uncertainty, people just want to be sure that you’ve got the money.

“We already had a real estate team, so diversifying real estate is letting us go that much further and create a one stop shop for our customers, with a quicker rhythm, by the nature of the sector. It’s still all property lending, but ASFL is different and reacts faster to get the borrower over the line.”

ASFL’s loan book, as of their audited final results for the year to 31 December 2021, exceeded £10.1m compared to £6m in 2020. It now intends to hit £40m by the year-end.

Anderson continued: “It’s going to take us the rest of the year to establish ourselves so we’re not looking to do vast volumes this year as it’s going to take us a little time to get away from that ‘private bank’ label, because we’re more than that, and brokers will hopefully see us as more accessible to investors over time as those preconceptions shift.”

Future growth

ASFL is seeing increased interest in student accommodation development and refurbishment, as more students return to university life post-pandemic, meaning that many universities are seeing “three to one” demand to supply ratios.

Anderson said: “For ASFL, the refurbishment products and around houses in multiple occupancy (HMOs) are where we’ve seen the most business. We’re happy to look at development finance as well, but that’s a more crowded market and there are a lot of people who do it very well. We’ve no aspirations to take them on because we want to be around a long time, but we’re gradually moving that way.

“In terms of real estate, we have been quite successful in student accommodation, which is an ever-increasing market. HMOs have been flavour of the month for a while now, though as investors move away from traditional buy to let.”

The lender’s current strategy is to hire two additional business development managers (BDM) this year as it grows its reputation through established customers “who understand our market very well”.

Anderson added: “We’ve had further introductions to new business. There are very experienced operators who we have a very good track record with so it made sense to support them further in a market that they understood and we understood a lot more.”

“We’re growing off the back of that and our aspirations are to continue to grow. We’ve got more than enough liquidity so we’re ready to go. Over time, through the team, we’ll get the opportunities to show what we can do,” he said.

Anderson doesn’t believe that investors are as rate sensitive as the industry might think.

He also has confidence in ASFL’s stability and certainty in its lending ability due to AL’s backing. “If there are funding issues with other lenders in the market, then we’ll be looking to service that, which will build our reputation,” he said.

Lessons learned from the 2008 crash

At the start of the year ASFL wanted to treble its loan book to £40m by 2023. But with current adverse events, it predicts “a knock-on effect that will make borrowers pause.”

Anderson is optimistic, having survived multiple recessions during his 30-year plus career, he added: “We’ve seen the property market survive every time.”

He continued: “In the latter half of this year, the fallout of the war and current economic climate will have a knock-on effect to this market, logically; but we seem to have become hardened to it as a country. We live, breathe and eat it.”

Pandemics, war and an uncertain economy aside, there is another threat to the mortgage market that Anderson is a little worried about – consumer behaviour.

Anderson said: “We’re looking at a seismic shift in what people are looking for. Maybe, for once, people aren’t looking at their own homes as income, and more as somewhere to actually live. It’s a different world we’re living in. We will know better where we are this time next year, and life moves on again.

“Where we are as a society doesn’t feel like it did back in 2008, but the STL industry really grew out of that crisis after all the banks disappeared. The industry wasn’t as established as it is now, but STL has now stepped into the shoes of those we lost in the crash.

“The players have experience, the businesses have evolved, it’s much more robust, but we won’t know until it’s properly tested. Hopefully we will have learned some very significant lessons.”