As finance and portfolio management house Marsh Finance speeds towards £100m of funds under management, Richard Brown talks to MD Andrew Marsh and new recruit Craig Rutherford about the astonishing growth of a family business, and its development of some ambitious dealer joint ventures.
The Marsh family, based in Rochdale, has been lending money for household expenditure since 1973. Andrew Marsh was four years old at the time.
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"I cant take much of the credit," he says.
The company spent the next quarter-century in a cycle of growth and contraction, with 11 branches at its peak. Today Marsh Finance, while still based in Rochdale and with Andrew as managing director, is a much more specialised business.
The change came in 1999, six years after Andrew took a role in the business, with the sale of the familys finance portfolio and the semi-retirement of Andrews parents.
"There was a day in October, sitting at our dining room table, where we thought What are we going to do with the business now? Wed just started to dabble with car loans, and I said Id carry on with the book on that basis," he says.
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By GlobalDataEarly Marsh car finance business was all broker-introduced, but the winning of an account with Carcraft, which only operated two sites at the time, brought the company to the attention of dealers along the motorway from Liverpool to Hull.
The company began to shift away from small used retail sites to pursue franchised dealers, and saw a corresponding change in the quality of applicants.
"It was almost as though the customers were underwriting themselves. If they were confident enough to go into a franchised retailer then they had a greater propensity to pay," says Marsh.
With its channels expanded, its staff roster overhauled, and heavy investment in IT, Marsh Finance saw its proposal volume increase tenfold during 2006.
The company began to make substantial use of scorecards to quicken the grading of lending quality, while accounts secured with Perrys and Stoneacre took the companys work as far as Kent and the Isle of Wight.
When Reg Vardy, which Marsh Finance had been working with for three months, was taken over by Pendragon, the companys partner base jumped from 60 or 70 dealers to 350 retail sites.
When the market crashed in 2008-2009, the large portfolio that had been built came in handy, as the decision was made only to lend out what was coming in as receivables.
"We used the cash to sustain a level of lending that brought us through the credit crunch," says Marsh. "Unfortunately, we had to make a third of the staff redundant."
When the dust settled, those able to write non-prime business were suddenly in a position to move up the food chain into space left empty by the contraction of prime funder appetite.
"We were small, flexible, adaptable. As soon as prime lenders said they didnt want business, we wanted first grab of that, and thats where weve always been," says Marsh. "It dragged us over the line into writing prime customers. The quality of portfolio we have now is fantastic. In hindsight, the crunch has been a positive."
While Marsh Finance was getting back into its stride, Carcraft was entertaining the idea of running a finance portfolio following the collapse of Welcome Finance. An off-hand comment from a block discounter gave Marsh Finance the idea to take on the management of the portfolio, and a new division of Marsh was born.
Two years later, the portfolio management side of the company is now a separate entity returning £400,000 in profit to Marsh, and £4m to the originators of its five portfolios, which include two car retailers, one bank, one traditional asset finance company and a prestige manufacturer scheme.
"Were able to underwrite everything from high net worth ultra-prime individuals on behalf of the manufacturer, through to customers who might be subprime beyond a level we would normally underwrite.
"Were confident we can bespoke a scorecard on behalf of any third party, since each of the five parties we work for currently are unique. Its their risk and they outsource everything to us in some cases, they supply the customers as well," says Marsh.
Marsh Finance hopes almost to double revenue from its portfolio management business in 2012 which is where national business development manager Craig Rutherford steps in.
"There are certainly credit-worthy customers, but nobodys prepared to take the risk," he explains. "Dealers know their customers are worthy of driving cars away with Marsh Facilities Management managing the process, they can lend them the money.
"Its made them able to sell more cars. Its empowering dealers to make the decisions and fill the gaps."
Rutherford seems ideal to champion this service. From managing accounts for Advantage Finance, setting up his own brokerage and managing F&I at Waters AutoPlanet, he has known Marsh Finance as both a competitor and a customer.
"The crucial message to understand from dealerland is to design the product around the needs of the dealer. Many lenders out there just dont fit into dealers because they dont know the market."
Marsh Finances managed portfolios now total in excess of £94m in receivables with an average APR in the low 20%s, of which Marsh says just under 0.04 of 1% is in serious arrears.
With both sides of the business performing well, and with Rutherford pursuing new dealer JVs for the company, Marsh has reasons to be optimistic. "Were at a tipping point," he says. "The infrastructure is in place, the core business and the new venture are both extremely solid. Craig and I have some other tricks up our sleeves. Its definitely time for expansion."
"Weve taken the traditional, regional shackles off and are starting to attract business, whether it be from Penzance or Scotland," says Rutherford. "Were now looking into joint ventures with dealers to write deeper and broadening underwriting tiers. Its a brave new world."
