November 2019
By Johan Groothaert, CEO of Fiduciam
We speak to an increasing number of brokers and it is clear that the demands of UK borrowers are changing. Whilst the majority of bridging carried out by UK borrowers is still in the UK there is also a growing demand for cross border solutions. This demand is not only from individual entrepreneurs and property developers but also those running small and medium sized enterprises (SMEs).
Business is becoming increasingly international. Many borrowers, including SMEs want cross-border solutions. This means that they need a lender who can operate in different jurisdictions, for instance to provide a loan in one country secured over an asset in another country. Sometimes it is because the borrower has a property in somewhere like Spain and needs to release some capital for developments or working capital needs in the UK, sometimes it is the other way around.
To cater for this international demand for bridging loans, Fiduciam established a platform which allows it to lend in most west European countries as well as the UK. However, this is not an easy task. Firstly, there is the language barrier. Secondly, the legal and regulatory framework is different in each country; the differences can be vast between countries that use common law, such as the UK, and those that use civil law, such as France, Germany and Spain. Thirdly, there is the foreign exchange exposure to deal with. Finally, customs, traditions and markets, both real estate and financial, diverge substantially across multiple countries.
Therefore, lending in another jurisdiction is about making sure systems are fully set up to deal with the complexity and one has an international team that reflects the business. It is sometimes easier to deal with this when establishing a new business, as was the case at Fiduciam, than when modifying an established business.
We get a lot of local loan requests in each of these markets, but for FIBA members it is probably more relevant to know how you can help your UK borrower clients. In this respect it may be useful to look at some examples.
We have mentioned UK entrepreneurs who want to extract equity out of their Spanish villa to provide working capital for their growing UK companies or property portfolios. We have also helped UK entrepreneurs that wanted to develop a business in Ireland. We did this by providing loans in Ireland for their nascent local business when all local banks were closed.
We have worked with FIBA members to help many UK developers take their development capabilities all over Europe; giving them access to credit in countries where they would otherwise not be able to get loans because they have not yet established a credit score in such countries.
We have also helped mid-sized UK corporates to restructure their balance sheet by allowing them to extract more liquidity from their overseas assets. We have also helped UK boutique hotel operators to acquire hotels abroad, to take their hospitality concepts into overseas markets.
In short, as business becomes increasingly international, and SMEs and entrepreneurs follow suit, they expect cross-border lending solutions and brokers that can help them achieve this. And they are right to do so.