With corporate activity strongly rebounding this year, it certainly seems that economic recovery is in full swing despite lingering COVID cases. Looking at the road ahead, as the post pandemic healing journey continues, the importance of the role of alternative funders in facilitating financial inclusion has arguably never been higher.
Marion MacInnes and I were delighted to attend the Global ABS conference in London earlier this year and it was fantastic to catch-up with people face to face after a long 18 to 24 months. There was one theme in particular during the conference that stood out to me; the increasing activity of alternative funders in the market. In particular, I was interested to hear the extent of the appetite that alternative funders are seeing from their customer base for all types of financing arrangements. Whether that appetite was for working capital, revolving and/or term loans, buy-to-let arrangements, residential mortgages, development finance, bridging loans, asset finance or other types of financing arrangements, the message seemed to me to be that activity in the market was high and projected to be higher going forward. There may be many reasons for the anticipated growth. One driver could be the complexity that the pandemic has added to the credit profile of certain businesses as well as individuals, which in some cases has resulted in it becoming more difficult for those affected to obtain finance from more traditional sources.
Whether forward flow, warehouse, or securitisation arrangements, the alternative funders I heard speak at the conference were keen to discuss how important their own funding structures were in sustaining the origination of loans for their customers as well as for the growth of their own business. From a legal perspective, our addition to the conversation would be to stress the importance for funders seeking to extend their books into the Scottish market to be aware of the differences between Scots law and the laws of England and Wales. There are broader considerations that may not be immediately apparent and which are important not only in relation to the origination of individual loans, but also in relation to understanding how those loans (and their related security) will be treated when they are brought into a structured funding arrangement such as a securitisation. When dealing with customers based in Scotland, or assets located in Scotland, ensuring that the underlying loan and, where relevant, security documentation are appropriately documented can streamline due diligence processes and ease the inclusion of those loans into structured funding arrangements when desired.
We would be happy to discuss the relevant considerations in further detail. Please get in touch with me (Peter Brading) or Marion MacInnes. In the meantime, we have recently updated our Handy Guide to Securitisation, which can be accessed here.
Contributors
Senior Associate
Head of Banking and Finance & Partner
