OakNorth Bank: the new lender founded by entrepreneurs (rather than bankers!) which is taking a traditional approach

By: Stuart Blair, Director of Debt Finance at OakNorth Bank

I’ve worked in banking for almost 20 years and whilst so much of it has changed, especially following the financial crisis, commercial lending for the most part has remained the same.

It was for this reason why in 2017, after more than 15 years at RBS, I decided to take the plunge and join OakNorth Bank – a new lender which had been around for less than 18 months at the time.

For those who may be unfamiliar, OakNorth Bank launched in 2015 providing fast, flexible and accessible debt finance (from £0.5m to £60m) to fast-growing UK businesses (including care homes) and established property developers. It has teams in London, Manchester, Bristol, Birmingham and Leeds and was founded by two serial entrepreneurs, Rishi Khosla and Joel Perlman – neither of whom had ever worked at a bank before, but who understand the challenges and pain points entrepreneurs face having personally experienced them. They were inspired to launch OakNorth Bank following the negative experience they had in trying to secure a loan to scale their previous business, Copal Amba, a financial research outsourcing company. In 2006, about four years after its launch, the business was profitable, had strong cash flow and a great list of retained clients, yet none of the UK high-street banks were willing to lend to them unless they could provide property as security. This wasn’t an option for them and over the years as they met more entrepreneurs, it became clear that they weren’t the only business owners who’d experienced challenges when it comes to securing a bank loan.

So, they decided to launch a bank with a different lending proposition focused around four key areas:

  1. Speed: at OakNorth Bank, we complete transactions in three weeks on average compared to the months it takes traditional lenders. We want our clients to avoid the opportunity cost of having to wait months for an answer and get back to running and scaling their business.
  2. Transparency: we invite every potential borrower to Credit Committee to discuss their business and borrowing needs directly with the decision makers, rather than having to go through an opaque process where a relationship manager who doesn’t know their business as well as they do pitches on their behalf.
  3. Flexibility: rather than defaulting to property as collateral, we’re willing to take the time to understand a business and the other assets they may have to deepen their collateral pool. This way, we can design a loan facility and terms that are specific to the unique needs of that business.
  4. Entrepreneurial: as a bank founded by entrepreneurs, for entrepreneurs, we aim to connect the brilliant businesses in our loan portfolio to one another. Whether it’s to do business together or simply to share learnings and swap war-stories, we help facilitate introductions and face-to-face interactions between our clients through a variety of events during the year.

It’s a strategy that’s clearly working as to date, OakNorth Bank has lent over £4bn to several hundred businesses across the UK – in 2019 alone, we completed several care home deals and distributed more than £45m in loans to these businesses – a 75% increase from the previous year.

One deal that I particularly enjoyed working on last year was a £20m loan to LV Care Group, a leading care home provider founded in 2011 by Nick Bettany and Chris Shelton. The business was established to develop care homes for elderly clientele in the community including home care, dementia care, mental health, and wellbeing care, as well as nursing and residential accommodation. The group, which now employees 300 staff, used the bespoke finance package from us to acquire two new care homes – the Jeanne Jugan Residence in Jersey and Kings Reach Nursing Home in the Isle of Man and development funding on a new site. They also used the capital from us to refinance the three existing care homes that they already owned in Jersey – Lavender Villa, Cheval Roc and Rosemary Cottage.

The well renowned Jeanne Jugan Residence, now known as St Joseph’s Care Home, was officially acquired by LV care Group on 20th December 2019. The property offers 72 beds and various amenities including a library, cafe, and a theatre. Located in an established residential area of Ramsey, the Kings Reach Care Home site offers 52 en-suite rooms across two stories. LV Care’s three existing homes in Jersey provide a variety of premium facilities and amenities such as en-suite rooms, therapy rooms, hair salons, landscaped gardens, TV lounges, library corners, dining rooms, and sun patios.

For a new bank, OakNorth takes a very traditional approach – using technology to help debt finance directors like me save time on the manual, time-consuming tasks that don’t add value to the customer, so we can spend more time on understanding their business and structuring a facility that genuinely works for them.

If you’re a care home operator looking for a loan to grow your business in 2020, I’d love to hear from you – stuart.blair@oaknorth.co.uk

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