Our lives have been changed by Covid19 forever and identifying what that means in terms of our business, and the potential consequences to our stakeholders, is our key priority. Like the Financial Crisis of 2008, funding has been curtailed with many banks battening down the hatches and withdrawing access to lending, just when businesses need it the most!
In an economic downturn, cash is king and so managing our cash flow is even more critical than ever. We want our borrowers to be able to rely on us so that when we commit to funding, we don’t let them down. And we want our families and investors to be reassured that we will continue to keep our money safe and earning the interest payments on which we all depend.
As most of our loans are arranged so that the interest is paid at the end of the term, we only have two clients who requested an interest payment holiday (a Somerset social club and a pub in Dorset). Consequently, the Covid19 shutdown hasn’t impacted our cashflow and the cashflow of our borrowers significantly.
However, the economic shutdown has caused delays in development programs and postponed sales transactions. It is inevitable that some loans will need extending, and so we are working closely with our borrowers to ensure their cashflows have sufficient room to see through their projects while still maintaining our limit of no more than 70% loan to the value of their security. We review our loans weekly and remain satisfied that our loans are secured sufficiently.
It is encouraging to see the housing market reopening, allowing our property developers to restart operations and sales, which were held up, to move to completion. Local agents are reporting a surge of interest in the West Country. A survey of registered buyers and sellers by Savills found that 54% of those with school-aged children found a countryside location more attractive than before Covid19 and 40% regarded village locations as more appealing.
We are pleased that our business has proved to be resilient even in the face of this economic shock, and we will continue to focus on picking up the high-quality loans overlooked by the mainstream banks.