These last few weeks I’ve been wondering why on earth there are so few new secured loan brokers looking to set up in business? Those of us who are already trading are swimming about in a pool far too deep for just us. It doesn’t seem to make sense: the opportunity is there, the lenders are back with a vengeance. The market has grown by some ridiculous percentage in the last 12 months alone, almost exclusively via existing packagers, so why the lack of newbies? Where are the entrepreneurs this industry is renowned for?
Undoubtedly regulation is a barrier to entry and that may be the mainstay preventing many from re-entering the space – perhaps they are waiting until things are clearer from the FCA. Also with the credit crunch lasting such a long time, those who would normally have come up through the ranks and started a business, have simply dwindled away into other industries leaving a knowledge gap in ours, similar to what is happening in the property valuation sector. The few that do have the required knowledge may not have the will or the capital to set up, and so it goes the secured loan broker market remains limited in its size.
I am unsure how many people have tried to establish just how big the potential of the broker-introduced secured loans industry is, so I’ve had a good go at it myself: earlier this year we polled the UK’s brokers who revealed that they come across seven secured loan enquiries a year on average, and a further six remortgage declines (perfect candidates for a potential secured loan). As there are currently around 10,000 brokers, that makes a shed load of enquiries.
If just 10% of those secured loan enquiries came through and completed (which based on an average loan size of £45,000 would equal £300m+ a year) there would be enough business for six additional brokerages the current size of Y3S – we have a team of 41 and complete £4m of secured loans per month, which equates to around 25%-30% of all the nation’s broker-introduced secured loans. From my reckoning there is another £50m a month from the intermediary channel alone. That probably gives you a feel for the size of the gap in the market… and demand is growing.
You’re probably wondering why I am offering this information, knowing that you could set up in competition to Y3S and take some of this delicious business away from us. No such thing as a free lunch, right? Yes, you are right. So what’s in it for my organisation? Frankly, the market potential is so huge that Y3S is far too small to ever take full advantage of what is out there. We shout loud and proud about our products and services, louder than most, but imagine using your daughter’s karaoke machine to entertain a packed out Wembley. Does that demonstrate the issue? What we need is for lots of other brokers to shout loud too, and especially lots of new ones, then we will be heard collectively, and from many different angles, which would make all mortgage intermediaries sit up and listen, not just the ones who already have an understanding of the benefits of secured loans and who already give their business to the likes of us and our colleagues. A direct result of such a mass marketing effort is a quicker and cheaper distribution system for everyone, reducing marketing costs and looking the wheels of the process.
Look, take it from me, the time is now to set-up and get going. I’m not talking about one man bands that do a couple of deals a month to survive – I’m talking about well-funded, well-marketed businesses that can provide proper secured loan packaging services to the broker masses. You’ll need to know what you’re doing, so make sure your underwriting skills are razor-sharp. And it’ll cost you an absolute packet, so make sure you’ve got plenty of excess cash or have a rich friend who doesn’t know what to spend his money on next. Failing those things, having lots of equity in your home would be a major bonus.
If it’s the latter, then give us a call – we can arrange loans for almost any legal purpose…
Matt Cottle is a director of Y3S Group