Bridging and Commercial Interview

Our sector is rebuilding and entering a new phase, ripe for investment and opportunity. It stands to reason, therefore, that its backing, potential for M&A, and regulation are all timely topics for conversation, and I could think of no one better to dive into them with than long-time Bridging & Commercial friend Ray Cohen, director at Jackson Cohen, and new friends Lee Doyle, partner, and Matt Pentecost, counsel, at law firm Ashurst.

Ray has held several positions in the bridging space on behalf of lenders and associations and is widely considered the industry’s go-to consultant for regulatory matters. As well as acting as a conduit between the FCA and Treasury and the bridging world, he has been instrumental in assisting several well-known specialist finance providers, including Masthaven, Octane Capital and Market Financial Solutions, get things right.

For the past few years, Ashurst—which has been involved in numerous high-profile transactions in the wider banking arena—has increasingly worked with bridging and commercial lenders, specialising in funding arrangements, risk and portfolio management. Upon first meeting Lee and Matt, it is clear that they have a passion for the future of this industry and the shape of things to come. And, tasked with advising on lenders’ loan books, they have a unique perspective on what is going on under the hood.

Lee Doyle: I’m a partner at Ashurst, where I’ve been for just over 11 years. Prior to that, I was in-house counsel at the Royal Bank of Scotland. In my last four or five years there, I was general counsel of the corporate commercial banks and, for the last two or three, attendee to the UK board. This was after the problems started, not before — I always try to make that clear. My time in the bridging and commercial space really started then. I had certain credit committee attendance rights, some watch committee rights, and focused on the fund finance—what we call 'specfin' in the broader sector. When I went back to private practice, it felt natural to move into that space. I worked with the likes of Norton and Octopus then. I did my first few deals as a private practice lawyer around 10 years ago, and I've stayed active ever since. Although, realistically, we've had a significant uptick in this sector in the past four to five years.

Matt Pentecost: I’m a counsel in the loans team with a focus on the speciality finance sector, and that goes across the real estate branches, such as bridging and commercial, and asset and car finance as well. We are in the sector precisely because we didn’t think there was a law firm that considered the needs of the market participants in the very holistic way we can. So, we obviously handle lenders’ funding lines, but we also advise them on equity raises, investor instruments and their corporate documentation. We have a very strong regulatory team, including consumer credit, so we can take care of all their regulatory needs. We also look at their tax structuring and work very closely with our capital markets team. A lot of your readers will, at some stage, be seeking to access the capital markets. Lee and I specifically bring all those pieces together.

Ray Cohen: Jackson Cohen has been going since 2004, when mortgage regulation first came in. We specialise in mortgage lenders; we don’t deal with brokers—it’s not our scene. We’ve been heavily involved with Caron over the years, dating back to the Association of Bridging Professionals. I have been the retained adviser for the Association of Short-Term Lenders (ASTL) since we first started talking to the FCA. I got them to actually meet with a regulator, because they didn’t want to do that in the first place. [laughter] I said, “No, you have to have interaction.” I go to all their meetings with the regulator and the Treasury, and draft their responses to consultations. And I now sit on the committee of the NACFB on the bridging side of things. We do compliance work for lenders, getting them regulated through to helping keep them on the straight and narrow. In addition, we do a lot with unregulated lenders, particularly around what is and isn’t regulated, money laundering and data protection etc. Funnily enough, we also provide a bit of advice to solicitors that struggle sometimes with the complexities of the legislation and whether loans are regulated or not, because it’s very poorly drafted.

LD: We’re not going to disagree with you on that one. [laughter]

Caron Schreuder: We're on the cusp of being in a post-pandemic world, we all hope. So shall we kick off our conversation with some of the after-effects our industry may be facing as we're easing out of lockdown? Where do you think we're going to feel the pressure and challenges in the next few months?

LD: I'll start. Ray, you can then point out where I've got it horribly wrong. Looking back at it as a whole, I think the sector has excelled through the pandemic. Obviously, it’s been a terrible time, so trying to find any positive is rife with challenges, but I believe the good lenders have done well. The sector has shown itself to be resilient, which is important, because you need to go through downturns and difficulties for lenders and investors to realise a model that’s sustainable—and I believe they’ve found that. So, I’ll begin with that as my overarching piece: the sector has proven itself and come out stronger. It’s set up for a very interesting 12-24 months ahead.

RC: Yes, that’s fair. You’ve got a mix of lenders, some that just pulled out initially and others that lent through it—sometimes, though, to their own detriment, because they then got swamped with business and their service levels dropped. Then, some came back in and picked up on that. As with the crash in 2008, bridging was the area where people kept lending. The big thing that’s probably going to affect some lenders is the cases which are long in default that haven't been able to go to court, with LTVs that could now be getting to the stage where they may lose money.

MP: Yes, I’d echo all those comments. In particular, we saw a diversity of approach when the pandemic hit. Some bridging lenders didn't shut their doors, but certainly didn't actively seek out business, while others saw that as a huge opportunity and were doing their best to hoover up the deals out there. Another thing we witnessed was that some institutions we advised saw this downtime as a real opportunity to get their house in order and refinance some of their debt, and review their corporate structuring, thinking that this is not going to last forever—and it hasn't. I have a strong suspicion that those that used the past 15 months to do that are going to come out flying once the markets open up more, and that those that haven't are probably going to play a bit of catch-up.

LD: Taking that forward, Matt, it seems to me that the sector’s in good stead for growth over the next 18 months.

MP: Yes.

LD: When you look at the bridging and commercial lenders, you can see some very clear demand increases there, maybe even spikes on certain occasions. And at the same time, big bank, if I can refer to them as that, still probably don’t have the same appetite for moving into the sector. They still have an awful lot of regulatory constraints and are going to be hugely distracted by all this LIBOR noise and other major regulatory projects. Consequently, while I believe demand will increase, I don’t think big bank is going to be there to fill that gap. So there’s still significant opportunity for the existing providers in that market to increase their books—at a time when the investor community and investment banks are probably regarding the sector, ironically, in a more positive light than they have for some time, because of the resilience it's shown.

RC: You're right. There's no doubt that they've done well. During that downtime, has also been spent on systems.

LD: Yes, good point.

RC: Some lenders have used that period to go over how they do what they do, and they’ve done some training, which will act in their favour. Whereas those that have traded all the way through maybe haven’t had that focus, so they could well have to catch up. I see that happening. Certainly, there are going to be great opportunities for business. We’ve had a lot of traditional regulated bridging business recently; people are desperate to get a house because of the tamp duty relief. There’s huge demand out there and house prices are shooting up. There’s a lot of competition for it. I don't think that will necessarily be sustained at the same rate going forward, because it’s been a real spike and, once the stamp duty push disappears, it may well drop. On the other hand, brokers that perhaps haven't seen as much of that sort of thing in the past, may decide there is an opportunity to discuss it more in the future. I'd say the development of new-build stuff, particularly converting offices, that's going to be big, and I expect the development side of bridging will be much more popular.

LD: Ray, because you're closer to the underlying assets and deals, and based on the conversion of office space into domestic or residential, are you noticing a greater desire outside London for a different quality of residential?

RC: We're seeing that push, and I think that it will grow. I'm curious about what will happen in London, because converting offices there to residential might have been attractive a while back.

LD: A while ago, yes.

RC: But, who wants to live in London?! [laughter]

LD: Exactly.

RC: And that’s going to be a challenge, although I'm sure there are plenty of people who will want to live in the Capital. Whether they can afford the properties is another thing. If you’re asking what the people want to buy, a lot more obviously want houses rather than flats. They want a bit of land. It’s cheaper to do that when you’re not in central London, but converting offices into that doesn’t really work so well. The opportunity for a really good developer is to consider, ‘If people are going to buy a flat, what do they want it to be?’ Because it’s not a traditional new build. You want it to be a decent size, with a proper living area, as well as your kitchen/diner and an office, and some grounds where you can sit out in, even if it’s shared. You wouldn’t necessarily make the same amount of profit, because you’re not squeezing so much in, but I feel that’s an opportunity for developers to set themselves apart, and for bridgers to fund that. Will it happen? I'm not so convinced.

LD: The new normal, lifestyles, and the work-life balance, have got to make a significant change—if not immediately, certainly over time. But what you’ve just described, Ray, the residential demand and what it looks and feels like, and obviously lending into the sector to meet that demand, will be interesting.

RC: Intriguingly, on local high streets, which you'd think are dying a death, there are quite a few small places opening up. People starting local businesses, not mass-chain stuff, and breathing a bit of life back into it, which you wouldn’t have expected.

LD: Everyone thought the high street was dead, but you’re right, it’s not dead, it’s different. I guess if everybody’s not getting stuck in the centre, there are more people living locally, so the high street's got more footfall, hasn't it?

RC: Yes, a lot more restaurants and cafés and boutique-y shops opening up. Hopefully they’ll survive.

CS: This might be a result of changing values, because there was a move to support local and independent businesses throughout the pandemic, which perhaps is driving a bit of demand. And if you can set up a business in what we went through last year, then surely you've got something to add to the landscape. Lee, you highlighted that the sector's gone through a stress test and proven that it can sustain itself and that this should lead to more investors and funds looking at it. I'm aware that Ashurst forecasts more M&A in this space—let’s chat about that.

LD: If I may, there are two topics there: you've got your investor appetite, which I'll come to now; and you've got what is normally expected after any market turmoil—some form of consolidation. Ashurst has been truly active in this space since 2014 and we’ve observed a different investor base coming into the sector. Previously, it was high-energy, committed entrepreneurs—who deserve a huge amount of credit for building up their businesses by themselves—mainly backed by a family office or managing to raise money in a few different formats, with some good commercial lenders putting a very traditional revolving facility in there and they just worked bloody hard. Following those successes, people saw that there was money to be made. Wherever good money's made, you're going to get an investor pool. And so, you're obviously seeing more family offices supporting that, but now private equity houses are also coming in and taking small stocks of companies. The minute private equity gets interested, the rest of the world does, too—there’s no doubt about that. And, suddenly, investment banks are also getting involved. The likes of Glenhawk and MT Finance have been able to tap into very sophisticated financial products, backed by major US banks. It's now not unusual to find JP Morgan, Goldman and Deutsche lending in a sector that 15 years ago, frankly wouldn't have gone anywhere near, but now really value. They are making a range of different facilities available. Based on the arrival of investors, capital and debt providers, liquidity has really grown, which is making the product more available. As a result, demand has increased. It's been a very self-sustaining cycle.

RC: You’re spot on with that. The number of lenders just keeps growing, and you keep thinking, ‘How many more can come in?’ It seems to be self-fulfilling. They used to find difficulty getting funding. They would start up, get to a book of somewhere around £5m–6m, which they might have cobbled together with family money, then they’d want to borrow. They’d have trouble finding backing because they sought, say, £5m–10m and they didn’t have the facility to lend more than that; they didn’t think they could do the business. Sometimes they’d want £20m, but banks didn’t get out of bed for less than £50m. Going from £5m to £50m—they couldn’t do it. Now you’ve got a whole variety—those which will buy just a portion of your book, others will give you £5m or £10m, and some £50m. Some will give you £100m, and the world’s your oyster. It’s very different. So, it supports people coming in and starting their business. It'll be interesting when we talk about M&A; how many people would want to sell?

LD: Yes, that’s a really good question. Matt, you’ve been heavily involved in an awful lot of forward flow of late.

MP: Yes. The financial crash saw arguably the leading retail bank leave the market, and it never really came back. That gap was filled with the likes of Paragon and Shawbrook, which were able to bridge the gap between £5m and £15m. At that stage, there was a relatively well-trodden path: it was investor, family money, or similar, which would get you that initial seed book. You would then try to go out to one of the retail banks to get a small warehouse facility. But now there are much broader funding options available. You can put in place a forward-flow arrangement, which we’ve done a lot of and for which we’ve seen a significant uptick in interest, both from funders, ie purchasing those assets under those arrangements, and from sellers—the corporates/bridging lenders. And the range within that is quite broad as well, depending on the sophistication and the desires of those two counterparties. This leaves a bridging lender, if it’s advanced enough, in a decent position to go out to a much wider range of investors or funders and look at what they offer and their cost of capital and how that works with their business. One thing most of the bigger or more sophisticated ones have come to realise is that it’s not an either/or decision. You have pots of assets which you can fund in different ways, and you can have those all sitting alongside one another and working well. In fact, a lot of the investors like that; if they don’t want to be exposed to a certain concentration or type of lending, but the lender wants to do that, they can go and get that funding elsewhere. We’re seeing many businesses which have, in effect, set up distinct vehicles; for example, you may have a regionally targeted entity that’s planning to lend only in the North. We’re talking to a company right now that is simply putting different LTVs into baskets and structuring it in that way. It’s giving the lender the ability to move sideways from any ceilings that appear. Because if a certain sector slows down, they’re not completely committed to just that avenue. Some smart lenders are creating different funding programmes to back slightly different asset classes—often all within bridging and commercial, but with pricing that truly reflects the appetite of the underlying investor.

RC: Some of the lenders just need a bit of help and support about who to go to and where to get the money from.

MP: Absolutely.

LD: You’re right. They’ll speak to a few people but, because they don’t go to the right funder for the right asset, they think they’re not interested. But quite often that funder just needs the asset tweaked slightly. The amount of investors who simply want access to this risk because they expect there’s a good return on it right now is significant.

RC: I agree with that.

MP: And I suppose that's a really good point in this particular asset class; because of the returns, you may open yourself up to a wider community of investors. Global debt funds are looking at this because they know that it's commensurate with their cost of capital, whereas on some of the resi, they wouldn't be able to get anywhere near it because the returns aren't high enough.

RC: There’s a space for someone to market themselves as, ‘We can help you get the funds’. Because the broking of the funds, and finding who to speak to and how to present it, that’s a gap for some of the lenders.

LD: I think you’re right, Ray, because, at the larger end of the debt scale, there’s a number of players—EY are out there— but for those who perhaps aren’t quite at that level, and frankly don’t want to pay that advisory cheque from day one, there probably is a paucity of advice. They should speak to Ray. I reckon he knows everybody. But Matt’s also someone they can certainly speak to.

RC: I don’t do that side of it.

LD: I know you don’t, but you should [laughter]. Set up a subsidiary. Shall we move on to the consolidation point? After any turmoil in the market, you see consolidation, don’t you? You see the strong survivor, standing there with a degree of balance sheet and investor support. And you’ve got those that, for whatever reason, found it harder. Whenever there’s a boom in a sector, it’ll always pause at a certain point for consolidation. I’d say just from almost a general economic cycle perspective, you’re going to get some consolidation. But big bank is also starting to eye it. And we all know that the challenger banks are struggling to get assets on their books at the moment. If anything, the assets are coming off quicker than they’re coming on, so they’re trying to find ways to retain them—they’ve got to to get their return on capital. Therefore, they’re considering other good platforms that they can access, which will happen either through M&A or consolidation. To an extent, forward flow can be seen as consolidation, because that is an entity finding a way to access those assets, when it hasn’t got the ability to build the model to reach all the brokers. It can just pump money straight into one of these other specialist lenders and give them its balance sheet. One of the challenges behind consolidation, particularly in bridging is, what have you got to sell? The assets themselves are short term in nature. If it was a retail, mortgage or credit card book, the assets would be two- to 15-years long. You can package them up, put a big bow on them, and sell them quite easily. We’ve done dozens of those. So, the very nature of the corporate’s activity, if you like, is something you have to take into account and realise is probably more sophisticated than people give it credit for. Consolidation in bridging will involve buying platforms and credit processes, getting access to that broker network, possibly through a forward flow arrangement, as opposed to a more traditional M&A piece.

CS: Can we deduce that there may be more mergers then? We saw it recently with LendInvest taking on an entire development finance team, not just the loan portfolio. Because, to your point, if we’re looking at relatively short-term portfolio assets, then you actually want the team’s expertise, the processes and the contacts. The distribution is the big one, isn’t it?

LD: I’d say that’s right. Which is always, of course, a large amount of risk, because one of your problems with any merger is you can merge names and buy the corporate shell, but are the people going to come with you? That will be something to watch. Again, you look at TML; there was a forward flow put in place with Shawbrook, a small equity stake taken, and two-and-a-half or so years later, they were acquired.

And maybe there will be more of this type of partnering, where they get to know each other, figure out how things work, share balance sheets, then a little bit further down the line, decide whether to make it more of a traditional corporate merger.

MP: Forward flow is used for a whole bunch of reasons, but a lot of canny investors use it as a try-before-you-buy model. Particularly if you’re investing in a young specialist lender, you’ll want a degree of corporate recourse and information. And, actually, you’ll find out more about whether you like that asset class, how well the market’s performing, and ultimately, how much you like the lender as well. It’s a dynamic that can be very beneficial to both parties.

RC: The part investor, rather than the full merger or acquisition, has been around a long time—you can go back to the likes of Masthaven with The William Pears Group. They came in, funded the business and took an interest, but sat back and allowed the firm to run it, because they were the specialists and had the skill sets to do that. They haven’t got the time to do it. Even though they lend in the same space themselves, they haven’t got enough people and they can’t manage.

LD: The models just don’t fit any more, do they?

RC: No, they don’t. And so they’ve done funding lines, other ways in which they could get closer to making it happen. And then, as you say, it’s all about the people, isn’t it?

LD: Yes.

RC: And if you acquire and lose the people, then you’ve got nothing.

LD: You’ve bought an expensive shell, haven’t you?

RC: Yes, and the book itself runs off so quickly. You can buy bridging books, and it has happened, but by the time you’ve done the due diligence, the book’s already disappeared. And you’re obviously going to want to pay less than the full value, because that’s where you’re going to make your money, running it off. So, it’s never been a great option for businesses that do well. It’s a notable viewpoint, but I don’t think you’ll see it in the traditional sense, as you said.

LD: Agreed.

CS: Ray, you’ve mentioned that you were slightly doubtful, because the market is doing well and people are making money, about what’s going to encourage or incentivise people to sell.

RC: If you’ve set up your lender, done well and expanded but want to do more—why would you want to get out of the market, unless you’re planning to retire? There might be a few people around that have given it some thought. So, do they want to pass it on to somebody else, or do they just want to sell, take the money and run?

CS: Perhaps we’re at the stage, because a lot of the people who run these lenders are edging on 15 years in it, when is it natural to start thinking about that?

RC: The thing is, do you step back from the duties and allow other people to run it, and just take profit, or do you consider selling out? One option gives you a very long-term income, one doesn't.

LD: You're right, Caron; most are 10 to 15 years in this, but we're probably still a good 10, 15 years away from most wanting to exit. You've still got, in a really good way, a relatively young group of CEOs.

CS:  In fact, we've agreed that we're heading into a period of growth and opportunity, with the market taking a turn in terms of who it's attracting and how it's levelling up. So, indeed, why would you leave at this very exciting junction in its history?

LD: If there is a challenge ahead, it's regulation. My view is that the regulator hasn't quite decided how it wants to operate in this sector and what it thinks of it. They've battered big bank over the past few years, probably because it was required, and there are some who believe that the regulator is going to move its focus in the next 18 months to two years and, if it does, there's one major sector I believe will be in its sights: challenger banks and specialist lenders. There has been such growth that they must now be perceived to be a key component of the lending community within the UK and therefore bring some degree of systemic risk, ie, if they started to fall over, there would be an impact. These bridging and commercial lending books are now becoming quite significant and I find we're getting a bit of a different message from the FCA around how they're going to look at this. In certain aspects, they're encouraging lenders to become banks—the New Bank Start-Up Unit that's been set up is interesting. Ray, you've got your big sign up, Regulation made easy, so I'm going to give you a call every day from now on. [laughter]. What's your view on all of that?

RC: Andrew Bailey made no bones about the fact that he thought all of the mortgage market should be regulated. Whether that was a political play before he got his job, I can't tell. But the government had no interest in it; they don't want expansion of regulation. We [the ASTL] spoke to the Treasury several times, and they said, "Not on the agenda", so I don't see it happening. At the moment, the regulator's got a lot more on its plate to worry about than specialist lending, although it is an area which is does have concerns about, and it has indicated in the past that it would like to regulate more of it. It has concerns about some lenders; as always, a few give a bad name to everybody else. What was illuminating was the approach with the payment holiday and not being able to take people to court, because the regulator made it very clear that unregulated lenders should pay attention to what they're recommending and requiring regulated lenders to do. If you were not going to follow that guidance, and you ever asked to become regulated, the FCA would take that into account. So that was a warning shot across the bow. But, as I said, the FCA has got a job to convince the government. One of the things about coming out of the EU was that we wouldn't have so much regulation, so the last thing Boris wants is more of it.

LD: Matt, what are your views?

MP: No one wants to stifle a market that appears to be part of a period of recovery, and I think that's been made quite clear. The comment Ray made about the unregulated lenders having to look at how the regulated entities conduct themselves is quite a shrewd move, because it means they don't really need to do a huge amount extra, yet they've almost put the onus on those unregulated businesses to do more. In addition, the way a lot of these businesses expand is by going into regulated lending; as more and more lenders become regulated, the systemic risk will increase. The larger that sub-segment of the market becomes, the more scrutiny it will attract.

LD: We touched upon the change in the investor base and the access to the capital markets and lending lines. What lenders have to be ready for, when they make that shift, is the diligence that the US banks or the capital market requires is certainly greater than it would have been from a commercial/retail bank in the past. So, it's certainly not regulation, but to tackle those lines, they'll look at your structure and, on occasion, at your licencing in a bit more detail. We've certainly come across certain circumstances where the entities weren't quite perfectly aligned. They absolutely worked and weren't noncompliant, but seen by an investor through a different filter...If you want to access capital markets, then there is a need to prepare yourself; you want a clean back book for a period of time, instead of just trying to be clean for one day.

RC: I think in the past many lenders wanted to become regulated because they thought it would be help them get access to more funds. It gives them that air of respectability, because you have to follow certain structures and processes. When investors come in, they want to find some structure. They want you to have a proper policy and some procedures that they can follow. Often, when you're a small unregulated lender, you don't have all of that. Actually, it's good business practice because it captures knowledge.

MP: Yes, absolutely.

LD: The main thing we've seen is the need for CEOs to bring in stronger people around them. The really successful lenders in this market have been those who've invested in people, quality and experience. If there's a step change in an organisation, I believe it is when that happens.

RC: Yes, it is. It's much different from when you've got a small team of five to 10 people and then suddenly you've got 40 or 50, and you can't be taking every decision. Going back to the regulatory bit, the FCA and the PRA pay a great deal of attention to asset class. So, from that perspective, it's not such an issue, because they are already turning the screws. How do you understand your risk? What's your risk weighting? What's your propensity for loss in this type of business as opposed to this bit? So, they go through the hoops on a lender's unregulated lending, as much as they do on their regulated.

CS: There's a lot of pressure on the market at the moment. It is doing well, of course, as we've established, but it's extremely competitive and there are people employing different methods to get the edge, if you like. Third parties, of which you both form a part, are coming under a lot of scrutiny as well, as lenders want more from you. They demand a lot. I'd like to get your views on whether we have enough specialist resource to cater for the growing market.

LD: How much do we make this into a picture, Ray, about how important you and I are to this? [laughter]

RC: We talk about regulation and new stuff, but actually quite a few people don't do the existing things. There are a large number of unregulated bridging lenders that haven't registered with the FCA for money laundering supervision—something they're supposed to do. They don't understand the AML requirements, so they think all they need to do is check identity and possibly the source of funds. But, actually, their legal obligations are much more than that.

LD: Ray's got it dead right. It was actually what I was alluding to when I mentioned lenders moving from one funding line to another and having different people looking at their business and realising things. That is to say, the operational model is still working, but it's working almost despite certain aspects—not because it's aligned properly. Your point's quite well made, Caron. There is a need for good third-party advisers. A lot more is required now. It often does take time for the adviser community to grow around that because, candidly, and Ray's the obvious exception, all advisers are parasites. We just take from the businesses. Lawyers are the biggest parasites in the world. We wait for people to be big enough to pay our fees, and then we arrive.

CS: You said it. [laughter]

LD: I said it; you can print it. So I think there is always a time in a growing market when the advisers are playing catch-up, because it's not been sustainable before. It is a pitch line, but Ashurst moved into this market because no one really was considering it holistically, from understanding assets to regulatory environments, as well as commercial lending and access to capital markets. We're not alone, but we're one of the few that view it from end to end. There are certainly not many people like Ray in the market, who can take a small lender through what is a bit of a minefield. As a lawyer, I'm probably slightly more conservative than Ray is about how I think the regulator may be indirectly getting involved in the sector. I'd advise people to be making sure their book is clean as soon as possible and that they're not in breach of anything.

MP: It's growing pains, isn't it?

LD: Growing pains is the right way of describing it, yes.

MP: These businesses are great. There's no two ways about it; they're very successful and driven by hugely entrepreneurial, determined people, generally speaking. They also need to have a sense of what they don't know, so they can go to Ray or us or whoever it may be, and say, 'We've got to this point, now we want to go to next stage. How do we do that?' Often we find that these companies are growing with good, but limited, advisers, who eventually cap out.

LD: And what I would say to your readers, Caron, is don't necessarily come to Ashurst; go to anyone that you want to do it—but the sooner you get those structuring issues right, the less it's going to cost you further down the line. I don't think anyone expected to see the capital markets open up the way they have. So, there is absolutely no criticism to anyone who, four years ago, didn't structure their business to access them. But if there's anything they should be doing now, if they've got the aspirations and want to bring in the more sophisticated investors: get your structure right, or as best as you can, to save you the pain in two or three years' time when you want to tap into that. 

RC: Because actually, if your structure and registrations are looking right and you've got your ducks in a row, they feel much more comfortable lending you money.

MP: Absolutely. 100% agree.

RC: I wish that a lot more people would come to you, Lee, in the first place, because, unfortunately, they're using solicitors, and some of them are very good in terms of setting up their documentation for lending and advising, but they don't understand the regulatory part.

LD: There are cost implications, and it's difficult for everybody to do it.

RC: Yes.

LD: But when they can, they should try to get that advice and work out where they want to be, rather than just where they are today.

CS: I'm pretty taken aback by some of this, because when new lenders come and chat to us, I always give them Ray's details!

LD: And so you should. [laughter]

 This article was first published by Bridging & Commercial - words by Caron Schreuder.