B&C caught up with Mike Hartley, Managing Director of Praetura Asset Finance, to find out more about the problems the alternative finance market faced this year.

1.    What is your role and what does it consist of?
The role of Managing Director is to act as a conductor and to ensure that the entire orchestra (the team) is in tune. Because we’re a fairly new business, having launched January 2014, I’m still heavily involved in capital raising, debt funding and liaising with the banks.

2. How has the recent £15m of RBS funding helped expand your portfolio?
The type of funding was quite revolutionary because it was a wholesale facility. This has given us the ability to transact more quickly which makes a huge difference to the business. It enables us to achieve a better return on capital on the deals we do, even at a lower rate - something that’s required to become more competitive.

3. How will the summer budget announcement affect SME lending?
I really thought it was a budget for business with the chancellor recognising the enormous contributions made to the economy by SMEs. Revising the Annual Investment Allowance (AIA) threshold to £200,000, rather than reverting to £25,000, was a major step in the right direction. It has changed four times since 2008 and is fast becoming a major incentive for firms to purchase new equipment and take advantage of the 100% tax relief on offer.

4. What problems does the alternative finance market face this year?
FCA regulation has been a game changer for a number of banks, independent funders and, in particular, brokers. Firms within the alternative finance market now have to demonstrate that they have the right mechanisms and infrastructure in place to match the criteria of a deal.

Capital adequacy rules caused many of the banks to shun SME lending which has allowed companies like us into the market. It has, however, resulted in huge fragmentation with a number of spin-off firms. This amount of competition must come down and I expect a number of mergers and acquisitions to take place over the coming years.

The issues surrounding the Chinese economy devaluing its currency to trade internationally has also had a major knock-on effect. There is huge pressure on the global market, which will ultimately cause the interest and bank base rate to rise and drive default ratios up.

5. What would you ban from the alternative finance market?
Due to the large amount of market competition, one or two funders offer what I believe to be, excessive commission to intermediaries. Personally, I don’t think this is the right way to do business as it creates a greedy society. The majority of firms do, however, treat the customer fairly and work hard to do all the right things.

6. What exciting plans does Praetura have in store over the next 6 months?
We’ve recently formed a new internal sales team within our head office that is focused on supporting our broker network on a daily basis. This dedicated service enables deals to be turned around extremely quickly, enhances our service offering and, ultimately, keeps the customer happy.

7. A recent study revealed that small businesses prefer working with alternative lenders - why do you think this is?
I feel that more and more businesses have realised that they should not to put all their eggs in one basket. We’ve all read the horror stories about banks strangling firms to the point where they’re simply forced to cease trading. Spreading financial opportunities across a number of funders enables a company to negotiate and source a deal that suits its exact needs.

8. Do you think the alternative finance market is getting overcrowded?
As touched upon earlier, I do think the alternative finance market is heavily saturated with a large number of lenders. I don’t, however, envision this to be the case in the long term as companies start to merge and acquire.

9. What is the most interesting deal Praetura has been involved in?
Our credit director, Mike Dalzell, pointed out that one of our brokers was struggling to find a home for an extremely large deal. The company had a good credit history, assets and everything appeared fine - but the bigger firms simply weren’t reacting fast enough and failed to offer the client what they needed. Despite us being smaller in comparison, the contacts we have within our extensive network meant that we were able to speak with a much larger bank to get the broker exactly what he and the customer needed – significant funding.

10. What makes your business different?
We’re very much focused on the marketplace and the customer because we want to forge long-term relationships with our clients. We provide the right service for that exact business by sticking to solid principles and listening to what the client needs from the deal. We also  examine any additional items we can offer to enhance the funding. It is something which has seen Praetura Asset Finance fast establish a network of loyal clients and intermediaries.