As we head into our 20th year, we've recently been reflecting on the transformational year in our journey that was 2021.
Records were set for new facilities originated (£125m), total funding advances to clients (£1.9bn), loan book size (up £40m to £280m) and client numbers (over 3,000 SMEs). 2021 represented our highest ever revenue and profitability, allowing us to reinvest in product and technology enhancements to enable us to take the next step in our growth plans. We also secured £220m of new wholesale funding facilities, giving us substantial capacity to support the ambitions of even more businesses around the UK with asset-based lending solutions.
Beyond the numbers, it was a year that we were back out doing what we do best – building and cementing the relationships with our clients and introducers that are so important for us. Fewer restrictions on our lives allowed us to focus more on in-person interactions; the part of the job that our client-facing teams enjoy most and puts internal and external partnerships at the heart of the business.
As we look ahead to what promises to be another fascinating year, we will continue to deliver upon our differentiating factors – speed, flexibility, personalised customer service, deal team approach, data and technology driven, and our entrepreneurial DNA. All the while ensuring that we keep Ultimate Finance as a progressive, supportive and fun place to work.
What are we expecting for 2022?
A recent presentation from professional services firm Kroll highlighted a wide range of economic headwinds, including the risk of further lockdowns, the removal of Government support schemes, enforcement action from creditors, labour shortages, supply chain issues and inflation, and further interest rate rises. Enough headwinds to disrupt even the most robust business model and strategy.
But my colleague Andy Ribbins, our Group Sales Director, has been talking repeatedly about the upcoming Lunar New Year and 2022 being the Year of the Tiger. This feels remarkably appropriate when considering the balance of risks and opportunities, and our approach as a funding partner.
“Tigers are extremely competitive people, known for their courage and ambition. Tigers are ambitious, but they’re also extremely generous with a drive to help others.”
Undoubtedly there are challenges on the horizon for businesses of all sizes, but we will bring the energy that tigers are known for to the asset-based lending market. The role of a broker or adviser is never more important than through periods of uncertainty, with the knowledge and understanding of how lenders are dynamically judging risk and appetite. We will work tirelessly alongside our introducer partners to use our combination of funding and personal service to keep business moving in 2022.
Ambitions and plans for 2022
Last year saw the pendulum of borrower demand swing from short-term liquidity needs, often delivered through Government-backed lending schemes in term loan structures, to more strategic use of funding to help support working capital, investment plans and acquisitions. This gives us massive confidence that our continued focus on value-add lending solutions and personalised service will be of immense value to our clients and introducers in the year ahead as we seek to establish ourselves as a leading SME lender.
Working Capital Finance
Undoubtedly, the Invoice Finance sector was one of the most impacted through 2020 as the Government-lending schemes distorted the market. As those schemes largely unwound through last year, we saw growing Invoice Finance facility utilisation and, pleasingly, our closing loan book was up 26% in 2021. Within this, client performance was extremely strong with a record year of invoicing volumes and our highest ever level of client retention.
The inherent flexibility in a facility that grows directly in line with turnover ensures that Invoice Finance remains an extremely valuable way of financing investment plans and working capital needs, powering growth and enabling the refinancing of existing short-term debt.
Through 2022 we will look to play a major role in the further rebuild of the market and increase our share of targeted market segments, combining an unwavering commitment to quality personal service with increasing digitisation of processes. Within this, the focus will be on making the best use of our accounting data integrations to improve our product offering and minimise manual client processes through automation opportunities.
We will also continue our gradual shift into larger parts of the market through a track record of delivery and success, increasing our maximum Invoice Finance facility size to £7m. On top of this, we will relaunch our Structured Finance offering that provides up to £10m of borrowing against multiple assets through a single point of sale and relationship, with speed, flexibility and the ability to creatively tailor a facility to client requirements at the heart.
Asset Finance was a stand-out success story for us in 2021 with new business volumes up 28% to our highest ever level of £46m, with over 1,200 new clients supported with an investment or refinance need, and a closing loan book above £75m for the first time.
Our growth was in the context of a strong overall market performance, with new business volumes in the eleven months to November 2021 16% higher than the same period in 2020, despite well documented supply chain pressures and equipment shortages that will continue to be an unwelcome feature. The fall-out from the failure of Arena Television, which we have no exposure to, on the Asset Finance market will be interesting to watch too.
With business investment forecasted to grow significantly in 2022 (+13% forecast by Oxford Economics), demand for Asset Finance will remain high, with almost 40% total UK investment in machinery, equipment and purchased software funded through the FLA’s Asset Finance members. The Government’s super-deduction capital allowance and the shift towards Net Zero will act as further stimulants.
Our intention for 2022 is for more of the same, maintaining momentum from 2021 to further accelerate sales and book growth, supported by operational efficiencies and process improvements to enable scale. We have recently increased our maximum facility size to £1.5m and will seek to provide a frictionless client-broker-lender journey and service with technology at its core whilst maintaining personal touchpoints. Our decision-making and pay-out times are market-leading, and this will remain a priority.
Bridging Finance was another area in which we set records in 2021 – a record high loan book of £75m, £80m of origination in the last 18 months, and over £60m of facility redemptions as we worked with our clients and their brokers through various challenges they faced and supported them through to successful sales and long-term refinance solutions.
The Bridging market takes its lead from overall property market dynamics and structural drivers of change will remain in both the residential and commercial markets. Within the residential space, we expect to see more refurbishment projects facilitated by permitted development / planning changes, and more development exit or finish & exit demand as developers remain stretched to complete projects on time. Within the commercial world our focus is narrower, but our funding will enable the pursuit of residential conversion opportunities and we’ll look to support businesses acquiring their commercial premises, with the mortgage market supportive of owner occupiers.
Bridging is a competitive market with a huge influx of new lenders in recent years. Price always plays a prominent part and whilst there is less room to differentiate on service than in other products, we will stay true to our delivery model and stand behind the quality of our product offering across purchase, development exit, finish & exit, and refurbishment options.
Further enhancements to our offering will be announced soon and we’re also looking to expand our team to further establish our presence in the market.
2022 – the Year of the Tiger
The year of bold ambition at Ultimate Finance as we look to deliver market leading service for our clients and introducers across our full range of solutions. Watch this space, and if you haven’t already don’t forget to register as an Ultimate Finance Introducer.