# B-North Unquoted SME lender with unique proposition

- Link: https://www.directorstalkinterviews.com/b-north-unquoted-sme-lender-with-unique-proposition/412801072
- Published: 2019-12-17T06:58:57+00:00
- Author: Amilia Stone

**B-North** is raising capital ahead of getting its banking licence (due spring 
2020). It will then attack the huge, profitable and poorly-served SME lending market.
B-North combines i) state-of-the-art technology (built from scratch to address customers’
needs), ii) offering the £20bn+ p.a. commercial broker market an unparalleled service
and an innovative remuneration model, and iii) experienced bankers based in empowered
regional hubs. It should be more efficient than its peers, and will use technology
to be close to customers. The financial model assumes a market share of just 2.5%
in 2027. Delivery of this sees a highly profitable, and valuable, business, in our
view.

 * **Near-term capital raises:**  B-North is currently raising up to £2m through
   private subscriptions through the Growthfunders and Crowdcube platforms. It anticipates
   raising a further £20m (through Berenberg), conditional on the approval of the
   banking licence due in March 2020. Further raises are planned.
 * **“Reality-check”:**  We have reviewed the company assumptions and believe them
   to be ambitious but credible. We have considered the absolute performance and
   the level of lending that peers have achieved. Importantly, B-North has multiple
   options to address any volume shortfall – most at a modest cost.
 * **Valuation:**  Given the growth profile of the company and associated uncertainties,
   any valuation must be treated with extreme caution. We provide a range of approaches(
   p46-48) that, on average, indicate B-North’s value in 2027 could be treble the
   amount of equity raised. We also provide a range of sensitivities.
 * **Risks:  **Credit risk is key for any bank. B-North will establish independent
   credit functions, and its technology will bring it close to customers interfacing
   directly with its management information. It has multiple options to address 
   any loan growth shortfall. The economic cycle is important. The model is yet 
   to be tested.
 * **Investment summary:**  B-North is still at the pre-revenue stage. Its model
   should be low-cost and deliver a superior service to customers and intermediaries.
   It has a conservative credit culture and uses state-of-the-art technology, written
   from scratch, to originate, service and manage its business. Funding will be 
   via the deep best-buy retail deposit comparison sites. The potential market is
   huge, profitable and under-served, and major incumbents have selectively become
   uncompetitive.

[DOWNLOAD THE FULL REPORT](https://www.hardmanandco.com/wp-content/uploads/2019/12/B-North-initiation-161219-edited-2-jf_kc_KM-1.pdf)

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