1pm plc (LON:OPM) Chief Executive Officer Ian Smith caught up with DirectorsTalk for an exclusive interview to discuss the increased funding facility with NatWest.
Q1: Investors will have seen your announcement that 1pm have further increased the back-to-back invoice finance facility with NatWest. Why are these additional funding facilities important to you?
A1: Well, we are a money lending business, the name 1pm is actually derived from 1 payment monthly so gives the clue that we lend money. We particularly focus on small businesses in the UK so the S in SME’s so these businesses need cash to run and expand their businesses.
So, our raw material is cash so we need funding facilities from our finance and banking partners to be able to lend on to our customers. It’s always important for us a varied and extensive volume of lending facilities so extending the facilities whenever we can take the opportunity to do so is important to us for that purpose, for lending on to small businesses in the UK.
Q2: So, what is the total of your funding facilities and what type of facilities are they?
A2: There’s a range of facilities, we like a spread in everything we do whether it’s on the borrowing side or on the lending side so lots of small facilities that we provide to UK customers and therefore a number of different facilities on the borrowing side too.
In total, they amount now to about £170 million of finance facilities at our disposal and we’re lending around £100 million at present so plenty of headroom in our facilities for further growth.
We have different funding facilities for the different types of lending we do. Asset finance, so that’s lending to businesses for business-critical equipment, tends to be block finance facilities from the traditional challenger banks as well as the British Business Bank. For lending to customers for loans, we have a secured loan note facility and as referred to in the announcement this morning, invoice finance facilities that we lend to small businesses, we have back-to-back facilities from NatWest.
Q3: Why is the range of facilities so important?
A3: I think it’s important for us to work with a number of funding partners, simply for the reasons that I mentioned in terms of spread.
Some funders do come in and leave the various markets that we are involved in from time to time so it’s important that we have a range of different providers of finance to support our lending activities.
Of course, from a commercial point of view, it allows us to make sure we’re getting the most cost effective terms from those funders in enable to make a good margin and also to pass on cost effective terms to our borrowers.
Q4: What do these new facilities mean for 1pm’s Net Interest Margin?
A4: I’m pleased to say that with the increased facilities from NatWest and the additional loan note facilities, we’ve been able to maintain our Net Interest Margin. So, in very broad terms, our average interest rate that we charge our borrowers is around 16% and the average borrowing cost is around 4% so there’s a Net Interest Margin of around 12%. That’s important to us to maintain that and I’m pleased to say that these additional facilities allow us to do that whilst still continuing to grow our lending to UK businesses.