The UK’s biggest commercial property lender is transforming the way it offers loans of up to £2m by streamlining the vetting process to give borrowers a lending decision over the phone within 45 minutes.
Natwest, owned by Royal Bank of Scotland, expects to handle 1,500-2,000 senior debt loans each year using the new process, which will see funds transferred to successful applicants within two to three weeks.
This compares with the current industry norm of two to three months.
The move follows a pilot that began in December in the North of England, run from Liverpool, and extended to London in January. More than 150 loan applications have been processed through the new process, covering commercial and residential investment and residential development.
Paul Coates, managing director for commercial property lending for NatWest and RBS, said the bank would put all of its lending of this size through the new streamlined service from June. RBS now lends £6bn-£7bn a year to commercial property.
“The demand for things to be quicker and more efficient is a reality and that’s what we are trying to respond to,” he said.
Coates said Natwest had taken its existing process apart to focus on what information was essential to make a lending decision the bank felt confident in. Customers will need to provide this information before the 45‑minute phone call.
“At its heart, we are very interested in the track record, experience and capability of a customer to execute the plan they’ve got,” he said. “We are also being very precise about the quality of the asset, the nature of the cash flow and the project they are embarking on.
“The third element is the amount they wish to borrow to make that work for them. We were asking a lot of things that were nice to know, now we are asking what we need to know. And we are empowering some people within the business with the right skills to make the decision.”
JLL and GVA have been appointed to a new panel to handle the valuations work and have committed to a maximum 10-day turnaround. Solicitors will not be needed for the documentation work as this will become standardised. Time could also be saved by the bank using the customer’s solicitor to provide some key information.
Tim Crossley-Smith, national head of valuation consultancy at GVA, said: “This initiative will dramatically reduce both the time and cost for SME customers to access the smaller-ticket debt markets, especially in the UK regions where many banks seem unwilling to commit. Many lenders adopt a ‘one-size-fits-all’ approach when it comes to assessing new loan applications, whereas this model has been designed to specifically address the needs of this particular segment of the market.
“The introduction of approved valuers and bespoke reporting formats will streamline the valuation process and provide borrowers with greater certainty of delivery.”
RBS is already looking at whether the process could become more automated in the future.
“If a developer wants to raise finance or get a decision late in the evening online, how do I respond to that? It isn’t a short- term plan, but it is something we are looking at,” he said.
However, the streamlined process is unlikely to be extended to bigger-ticket deals. “This is aimed at transactions under £2m,” Coates said. “That’s a large volume of the UK market. We felt this was a sweet spot we should focus on.”
Changing customer expectations
Natwest’s Paul Coates said the new loan approval process was already changing customers’ expectations.
“One customer in the North asked, ‘When are you going to credit committee?’ Our answer was, ‘No, no, the deal is agreed’. There was a pause on the call as that message sunk in. From there we issued the loan agreement to be signed. It is always subject to the valuation work, but the decision is made,” he said.
“There isn’t this black hole where it is going through the bank’s internal processes or the processes that all lenders have. That’s the biggest change, that certainty almost at the first point of contact. They can get on site and start building or they can complete their investment.
“It’s different to what they’ve experienced with most lenders before now. I think it’s the way forward.”
Key questions asked
The streamlined loan approval process focuses on three key areas of information from the applicants:
■ What is your record and experience regarding a transaction of this nature? Do you know the local market? Customers not already known to the bank should expect a longer process.
■ What are the specifics of the asset? What quality is it and what is the nature of the cash flow?
■ How much do you want to borrow to fund it?
If the applicant meets the bank’s criteria in these areas, a positive decision will be given on the phone. Loan documentation will be issued and valuation work carried out.
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