Fast becoming one of the most talked about alternative commercial lenders in the market today, Aldermore Bank has hit many a headline in the first half of this year following its pledge to support SMEs amidst the banking crisis.

B&C thought it was about time we sat down with the Managing Director at Aldemore Commercial Mortgages, Rob Lankey, to take a closer look at how the bank has grown to its position as market leader and to find out a bit more about Rob’s plans for Aldemore’s future…

How has Aldermore been able to make such a big impact in the market using a traditional banking model?

We were fortunate in that Aldermore launched at a time when the market was desperate for a new style lender. Borrowers were being starved of funds and had been left with a bad taste in their mouths by big banks that had treated them poorly.

Business owners with perfectly sound trading records found that they couldn’t obtain further funding, despite having enjoyed long relationships with their banks. I’m sure it’s a story which is very familiar to the clients of many intermediaries. The door was therefore wide open for a new lender such as Aldermore to enter the market and address the issues created by other banks.

Our business model is simple and straightforward. We raise liquidity in the form of deposits from consumers and we lend that money to homeowners and small and medium sized businesses throughout the country. We don’t have a high street branch network and are focused on being reliable, expert, dynamic and yet straightforward to deal with.

How has Aldermore’s position in the National Loan Guarantee Scheme (NLGS) as the only alternative lender aided its business proposition?

We’re currently working with HM Treasury to agree the basis on which Aldermore will participate in this scheme and are hopeful that we’ll be up and running soon.

The National Loan Guarantee Scheme is designed to enable small businesses with a turnover of less than £50 million to raise finance at lower rates than are normally available to them - usually one per cent lower. The scheme can do this because the government is able to pass on the benefits of the very low borrowing costs it is currently enjoying.

The scheme allows banks to raise up to £20 billion of funding guaranteed by the government. Loan applications are assessed and approved by lenders in the normal way, with banks such as Aldermore continuing to carry the credit risk.

This means that Aldermore will be able to offer cheaper mortgages to business borrowers, which has to be good news! Businesses will pay less interest which means more profit, which benefits not just them but also the general economy.

Most of the lenders participating in the NLGS are large high street banks, so Aldermore brings greater choice to the market from a smaller, more dynamic lender.

Are there any SMEs Aldermore won’t lend to?
 
We provide funding for established businesses which must have at least a two year trading record. We don’t lend on a non-status basis and conduct careful affordability checks based on a company’s financial accounts. We want to establish that a company can not only afford their mortgage repayments today but also in the future, if and when interest rates start to rise once again.

We’re happy to lend against a broad range of commercial properties including offices, industrial units, modern factories and warehouses, retail units (with and without living accommodation), commercial and residential investment properties and licensed houses in multiple occupation.

We will consider applications from most industry sectors but, at the moment, we aren’t open for business in the leisure sector (e.g. restaurants, hotels and pubs) which always tends to struggle in the midst of a recession.

Aldermore wiped out its losses last year, is the bank now on track to make a profit in 2012?

Aldermore has grown rapidly since first opening its doors for business in the summer of 2009 and started generating profits after just two years of trading, which is unheard of for a new bank. It was also two months ahead of plan.

With a balance sheet of just £70 million in 2009, it now stands at £1.7 billion and is continuing to grow. Aldermore now has 65,000 retail depositors, 4,300 residential mortgage customers and has lent £812 million to over 10,000 SMEs.
 
Where does Aldermore get its funds from?

The funds that we lend come from retail deposits and to date we have raised more than £1 billion of deposits from a base of 65,000 depositors. Our savings operation is a ‘direct’ offering either via the internet, phone or post and if you keep an eye on the best buy pages of the national press, you will frequently see Aldermore savings products featured.

We have no ambitions to lend to large corporates or become involved in marketing any of the exotic banking products that have been the cause of problems for so many financial institutions in the past. Our plan is to stick to the knitting and remain focused on our core markets, where there is plenty of potential for continued future growth.

Where do you see Aldermore in five years’ time?
 
Ah, being run from a tropical paradise where all senior managers are fanned by palm fronds and served long cool cocktails from dawn till dusk!

On a more serious note, I see Aldermore being clearly recognised as the British bank which is the champion of SMEs; the bank that really understand the needs of small and medium sized businesses and which is recognised as being the leading authority in its field.

At Aldermore we talk about our ‘core DNA’ by which we mean those characteristics that set us aside from our competitors and they include being reliable, expert, dynamic and straightforward in the way we do business. I believe that in five years’ time those core values will still be at the heart of a far bigger business that has firmly established its position as the champion of UK SMEs.