Former Fortis senior managers and contacts from their previous relationships have formed the core team for a finance provider looking to plug a gap in the market. Jonathan Minter reports

"There’s no substitute for the strength of relationships," is the first piece of advice Startline Motor Finance chief executive officer Paul Burgess offers Motor Finance when asked.

He would know this better than most, having co-founded the lender out of the ashes of Fortis Lease UK, which stopped lending during the recession.

He’d been named the company’s chief executive officer in 2008, just as the economic crisis was starting to bite. As businesses scrambled to make ends meet, Burgess says the motor finance arm eventually became an unwanted part of a much larger acquisition. While the business was pitched to a number of investors, ultimately the decision was made to run it down.

The time wasn’t wasted, however, as Burgess says the process allowed the senior management team to become versed in a sales process, and also resulted in an investor approaching him about possibly starting a new motor finance business once Fortis’s motor finance arm had been run down.

Many of the key positions were filled with ex-Fortis staff. Gregor Sutherland became chief operating officer and Alasdair Hannah became chief financial officer, for example.

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Burgess says: "One of the major benefits of our situation at that stage was that we could hand-pick people from the old organisation, essentially getting the best people for the key positions."

The company was also able to draw on relationships forged by the old Fortis team, people such as business development director Peter Cottle, who brought experience from a variety of senior management finance positions, and Craig Smith, who was previously a senior banker at Lloyds.

The other type of relationship which Burgess was able to count on was his existing relationships with dealer partners. He says: "In the formation of this business, we were fortunate to be heavily entwined with two of the largest dealer groups in the UK. They really assisted us in saying there’s an area of the market they didn’t think was being serviced. So close relationships with your introducers is absolutely paramount."

The area of the market these dealers felt was not being served was the gap between prime and non-prime. This relates to the second piece of advice Burgess has for those looking to enter the market: build a solution which dealer groups actually want. He says: "It’s all well and good coming in and saying we’re doing what everyone else is doing, but what we did was build a solution to a problem dealer groups have had."

The problem which Startline sought to solve was an apparent gap between the prime and non-prime offerings. Startline bills itself as an extension of the prime panel, lending at similar rates to the prime lenders, and therefore providing another option for dealers and brokers.

A key part of this provision is that Startline needs to provide good service and charge reasonable rates. Burgess says: "Ultimately if you take a customer into a fully restructured world, are they going to become a repeat customer or are they going to become disenfranchised? Arguably it’s the latter."

From a business development side, the company targets larger dealer groups, and the terms are negotiated with the senior people at dealer groups.

According to Burgess, the company has found the system successful, with five of the top 10 franchised dealers working with Startline, as well as a number of the rest of the top 200 franchised dealers and top 50 independents.

Recently there’s been talk of prime lender appetites beginning to bleed slightly further down the credit curve, and Burgess says he has seen some pressure from both above, but also below, where the likes of Moneyway have rate for risk products covering higher up the credit curve.

Despite this, he says: "If I look at the relationships we’ve got in the top 10, our accept rate has maintained over the period. Overall, we hear of the prime guys digging deeper, but have we seen it empirically in the data we’ve got? No we’ve not."

Cottle, also speaking to Motor Finance, agrees. While Cottle says he may have seen some instances of prime lenders digging a little deeper, he says this has been balanced out by dealer groups, which have looked to reduce the number of prime lenders on their panel as a result of the Financial Conduct Authority.

The next 12 months

All this has resulted in a robust business which has grown strongly since its inception. Burgess says the current aim is to continue this growth: "Startline has the desire, capacity and ability to continue to grow its market share and that’s our key aim for 2016," he says.

In order to push for this growth, the team is looking to implement a number of technological improvements. Burgess says: "We’re doing things around the payout process. E-signature will help there, and we’ve also brought some new technology to our payout process which will help us to engage with introducers and help with their payout process.

And, as a business, going back to the fact we’re data driven and analytical; we’re constantly tweaking things. Our scorecard is always evolving and growing to help us better manage our interactions with dealers. So the more data we gather, the longer we’re in business, the more we’re building that scorecard."

Life under the FCA

Another reason why Startline is reasonably confident of securing further growth is that dealers have become more used to life under the FCA. According to Cottle, in 2015 the FCA was a key focus for a lot of dealer groups, with senior staff devoting lots of time to understanding it, making sure they were compliant, and submitting for full authorisation.

"This year we’re finding that we’re having more interaction with a number of our dealer group prospects who we didn’t have a proper conversation with last year," he adds.

Burgess says that when Startline was talking to introducers, the general discussion it had was that they were more concerned with compliance than adding to their lender panels. Now he says: "We see dealers getting back into the operations of their respective businesses and that’s good for Startline and the dealers."

It’s well known the recession took out a number of players from the market, and severely restricted access to credit. In the case of Startline, however, the end of Fortis provided the senior management such as Burgess the chance to evaluate their offering and target a gap they saw in the market. With new technologies being introduced and a more settled regulatory environment, the company hopes this base will provide a firm basis for future success.