Shawbrook’s solution to fuelling growth

When did work begin on Shawbrook’s new CapEx product? 

We came up with the idea about halfway through 2023, after identifying a crucial gap in SME financing options. We were seeing a lot of demand from businesses looking to grow through CapEx investments not typically suitable for traditional asset finance. We wanted to offer a bespoke product to support those needs while removing the complexity associated with asset finance transactions.

We soft-launched the product in mid-November 2023 and following excellent feedback have rolled out to the wider market over the past few months. By investing in our auto-decisioning technology we’re now providing twenty-four-hour decisions, offering speed in a market where it’s essential. 

The offering aligns very well with what we’re trying to do at Shawbrook more broadly – support SMEs achieve their growth ambitions with products that are fit for purpose. 

 

Are these SMEs feeling let down by what’s out there in the market?

Definitely. The businesses we're aiming at are typically turning to unsecured business loans and in general there aren’t many providers out there who differentiate themselves.

As a result, SMEs end up with a homogeneous product targeting a broad range of use cases. Tier 1 lenders are mostly interested in serving the customers who bank with them, which makes it incredibly difficult to access unsecured lending. If a business wants a loan from its clearing bank partner and gets turned down, they’re forced into the alternative finance space where rates are significantly higher.

Our CapEx Term Loan bridges the gap by offering a simple solution at a competitive price, allowing businesses to make those crucial investments. We want Shawbrook to be the obvious answer to the question “how do I grow and evolve my business?”. 

 

How do you manage same-day turnarounds?

Most of the decisions are made automatically. We aggregate a large amount of data about the business and use technology to give a simple yes or no answer. When the deal is not so cut-and-dried, our people jump in and apply their expert judgment, which can still be done within twenty-four hours.

Broadly, we have a scorecard for the deal, we obtain the details for the business and its directors and have about eighty rules running in the background checking the data. If all eighty terms are met, the deal goes straight to a team member to do a quick check and give a decision to the broker. If we need to do a little more work, the system will triage the deal and highlight the areas we need to address so we can focus on specifics.

We’re continually investing in the system to automate as much as possible so that where any human intervention is required, it is as quick and straightforward as can be. This increases both speed and efficiency, which enables us to deliver fast funding at a very attractive price point. We’re continually looking at ways to further enhance that digital process and apply it to more and more deals. 

 

How much did you adjust the CapEx loan offering during the soft launch period?

We were making weekly changes based on the types of applications we were seeing, tweaking rules as we went along. One of the biggest benefits to the soft launch was that we could make real-time changes based on direct feedback from our brokers.

Throughout the process we quickly recognised the need to clearly communicate the product’s sweet spot, helping the brokers we work with to identify the best use cases that come across their desk. When a client is looking to invest in new assets to grow or expand, then we’re pretty confident our CapEx facility should be an ideal solution. But, if a business was looking for funding to pay salaries or bills, for example, then it’s not a CapEx Term Loan requirement and there are other products in the market better suited to that need. 

 

Who is the product suitable for, and who maybe less so?

The product supports a range of niche business-critical assets, as well as intangible costs such as fit-outs and refurbishments, upgrades, installations, and technology licenses. We’ve had lots of weird and wonderful deals come through which makes for a really interesting product. Almost any tangible asset is allowable with the exception of scaffolding and lending to pubs, bars, clubs, restaurants and physical retail at this stage, although these sectors are under review.

We have found businesses that require this sort of lending come in all shapes, sizes and sectors. All we ask is that the business can show at least three years’ trading history, and that it must be a GB based limited company, LLP or large partnership. This is not a product for start-ups or very early-stage businesses. 

 

Is 2024 a good year to be launching a brand new product and being ambitious about growth?

I don’t see why not! We are seeing a lot of green shoots right now. Look at Shawbrook’s history – we’ve always been an early mover. We were among the first to come out of the pandemic looking to support businesses. We’re very commercial with our outlook, and we like to get out there and build momentum during the period where the market is gradually improving so that we have products ready and available to meet under-served needs. 

 

Are you expecting a lot of repeat business?

Definitely. This type of funding doesn’t stop at one single investment. For businesses looking to grow, continuous investment is required, which means that on-going financial support is often key. 

There are many use cases for this product and another differentiator is that it can be used in conjunction with our other solutions. For example, we can offer a Hire Purchase facility to acquire hard assets and then support the asset installation costs with a CapEx Term Loan. And we can auto-decision both parts of the deal! In fact, we’ve just enhanced our exposure cap for auto-decisioning meaning we can auto-decision up to £250,000 in any combination of Asset Finance and CapEx Term Loan. 

We’re very happy with how the product is evolving. We’d like to move beyond the £100,000 lending limit and during this year we’ll be trying to push that towards £250,000. By doing that we may not leverage full automation and it will likely be a combination of using the decision engine for the easy-to-automate decisions, and then experienced underwriters to focus on the deal points that require human ingenuity. That’s the power of using automation to do the heavy lifting. It gives our people more time to focus on the slightly more complex elements of a case.

 

What’s demand been like so far, and how do you see things going for the rest of the year?

The interest in the product has far exceeded our expectations already, which demonstrates that gap in financing options mentioned earlier. We’ve seen that customers and brokers hugely value the fast decisions and simple payouts associated with the offering, as well as the favourable terms it offers versus standard business loans.

We want to significantly grow the proposition and respond to the needs of the market in terms of catering for additional use cases. We’ve seen just how broad ranging the product can be and want to take it even further.

The main focus now is on helping brokers who may have previously struggled to place this kind of deal. We can provide them with the all the information they need to fully understand its potential and how it can help them support their clients.