Near a sleepy Hampshire town within spitting distance of the coast is based a remarkable success story in the motor finance industry. A company originally founded in the back room of a car salesroom has just taken over a unique space that will help it grow from the 90 employees it currently has to over 150 in the next few years.
That company is Moneybarn, a specialist in the near and subprime finance markets founded under the name of Duncton in 1992 by Oliver Harris, David Hoare and James Fforde. The purpose of the business then was to provide finance to the subprime markets in an ethical and, more than anything, measured way.
Go deeper with GlobalData
A few years later Peter Minter was appointed managing director. Minter, as many in the industry will know, was a former chair of the motor finance division of the Finance & Leasing Association and is currently a representative of the motor finance industry on the FCA’s small business practise panel, giving some weight to an often overlooked sector.
Under his management the business has continued to work with the strong moral attitude of its founders and increased its diligence in lending. So successful has the approach been that the business has now grown to the point where it needed to find new premises
The search ended with the lease of The New Barn, which marks the third stage in the life of Moneybarn and Motor Finance was invited down to the opening of the building to get an idea of what this move means for the company, its employees and for the subprime marketplace.
Speaking to Minter, and to director of sales and operations Shamus Hodgson, the reasons for the growth of the business and the need to move into the new premises becomes clear.
Moneybarn has spent the last nine years in a converted 15th century barn, and four years ago expanded into another converted building, this time a Victorian railway station.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataBeing spread over two sites was not an ideal situation for a growing company and while the previous buildings had their charms they also had their faults: Minter says: "If you walked into the barn you would have said ‘Wow’; it was just absolutely gorgeous inside. But it had no air circulation, no air conditioning, little windows in the side and only two toilets, so it was less than perfect. The other site was a converted station about three miles from it as the crow flies. That was a more civilised environment, but it was a collection of the waiting room, the station manager’s office and all the various rooms, so the biggest room had about 12 people in and so it all got very disjointed.
"I began to see a different style and ethos developing between the two buildings and it became a major concern of mine, given that we were growing rapidly. It’s difficult to guide the business forward if you have half of it facing one way and half of it facing the other way. Making decisions becomes more difficult."
For a company that prides itself on having a defined set of values, such a break between the styles of the different offices demanded a change, and the change came through the move to the new office near Petersfield in Hampshire.
The new building covers 20,000 square feet, and after a two-month refit has more than enough space to accommodate all Moneybarn’s existing staff.
The building has been fitted out with the comfort of its staff at its core. Minter says of the principles behind the refit: "We have tried to get the whole thing right but the three things I’ve focused on in terms of staff are air, light and chairs. So we got people good chairs, they can breathe good air and they can see what they are doing and they are comfortable all day
"And the result is that the staff are really pleased with it."
Following the old adage that a happy workforce is a productive workforce the firm feels that the move will be a springboard to even greater success, following on from years of growth for the business.
The business has met all of its objectives, exceeded targets across sales and new business and has made profit before tax for 2013 of approximately £5.9m. This is an impressive amount of growth on 2012 when profit was just over £1m.
"And it’s likely to be a significant improvement this year as well," Minter believes.
The basis for this success has come in part from the company’s ability to assess the risk levels of its customers. Minter says: "We have uniquely, and it really is uniquely, a large performance database for non-prime car finance customers since the credit crunch, because we are the only ones who have been doing it in any volumes. And that credit profile allows us to score much more accurately than anyone else. It’s a real jewel in the crown for us." This in turn has allowed Moneybarn to experience default rates at historically low levels throughout 2013 and into 2014.
Another reason for this is that even before the Financial Conduct Authority introduced rules on affordability testing, Moneybarn was looking for the same high levels of proof that customers would be comfortable paying for their new car. Even if at the point of sale it may have caused some uncomfortable moments. Hodgson says: "We are quite proud of the fact that we take things like affordability very seriously, even pre-FCA. Sometimes that’s difficult for people in dealerships to work with, we understand that," adding that dealers in his experience rarely have the time to walk non-prime customers through the extra steps they may need to take.
This means that to win new business Moneybarn works closely with the broker market who will put in the legwork to make sure that the deals that work best for customers in the subprime market are packaged and managed at the point of sale.
That is not to say that dealer groups do not play a part in the Moneybarn model. Car supermarkets are also good leads for new business. The reason is that they represent places "where you can have a real relationship with the people who are managing the F&I piece," according to Hodgson.
The ability to give these intermediaries what they need is one of the things that sets Moneybarn apart from other companies in their space, says Minter, but where they are most different is in their attitude to their customers.
"Although we have operated in the non-prime market for all of our existence we are a company with a moral compass and that does make a difference, so we treat our customers fairly," Minter says. "We have always taken the approach that the best way to treat your customers is to treat them fairly, because it has the best outcome for us, in all likelihood, so it’s a win-win," adding that this approach is one that has the happy advantage of also helping the company comply with the new FCA regulations.
"We recognise it’s going to cause us a lot of work, and we have a lot to do, but we don’t have to change the way we think quite so much. We have to document it, but we’re not panicking about whether or not we have to change our attitude towards customers . We think we are very good on forbearance and we think we are very good on treating customers fairly and work tirelessly on that," Minter continues.
Aiding the rest of the regulatory requirements are the bespoke systems that Moneybarn has invested in over the years "We have a sizeable IT team. It’s not the main competitive area, but technology is a competitive advantage if you can master it," states Minter, as he describes the paperless office and automated documentation system that has created a streamlined application process.
This is a process overseen by Hodgson, whose new office sits strategically between the teams responsible for dealing with the intermediaries and a new and expanding customer services business.
Part of his role is to make sure processes not only help the business operate at a higher level of efficiency and customer care, but also to ensure what they are doing with intermediaries is compliant with existing and forthcoming regulation. Hodgson explains: "We have a fairly small account management team given the size of business we run. A lot of that reflects pretty well on our introducers because they do such a good job. A lot of what that team will do is looking at and reviewing processes and procedures, and making sure it matches up with what our compliance team wants."
"I think that will accelerate, there’s no getting around it," he continues. "We will be in a space of regular recorded and published audits for introducers, but I don’t think anyone should be afraid of that. Everyone we work with, all of our introducers, have excellent processes. They are focused on doing things the right way and I don’t think have any fear about asking any lender to come in and look at their processes."
Closer to the end-user there’s more to worry about, believes Hodgson. He says: "The bit that’s slightly nerve racking is the dealer piece actually. You are dealing with a marketplace of about six to 8,000 depending on who you are speaking to, in different locations with quite a transient employee base; they move from dealership to dealership."
While Hodgson feels the dealers are addressing the problem through training, the risk still persists. As Hodgson says: "We deal with big dealer groups as well as small independents and there are a range of behaviours there, so we do rely on our brokers to help us deal with that. But it is something we are very mindful of, and I think the whole industry needs to watch because from a lender perspective it’s the area that probably causes me most concern; the customer engagement that comes at that part of the process."
According to Hodgson working closely with brokers has brought another problem in the light of the FCA’s new interests, and that’s how best to incentivise the intermediaries in a way the FCA doesn’t regard as dealers and brokers being pushed to "sell, sell, sell".
Hodgson explains: "I think the advantage we have is we’ve always been quite risk averse and quite traditional in our view of life – and that sort of seems to be somewhere towards where the regulator is sitting. Focus on just being transparent; focus on being open; focus on not being too complicated in terms of how you remunerate or how you incentivise."
One of the areas Moneybarn has long been open on is explaining to customers that a commission was being paid, something introduced well before it becoming a requirement.
Another area was the affordability assessment, which for Moneybarn has been a mainstay of how they conducted business for years anyway. As such the need for proof of affordability and the tests that the FCA will apply are already part of the Moneybarn application process.
The way that Moneybarn deals with customers does not have to change much to keep within the FCA regulations, believe both Minter and Hodgson, as the process itself already has the ethical standards of the firm built in, which tally with those the FCA is looking for.
Refining that process, from beginning to end, however, is what Hodgson sees as being the aspect of their business that has undergone the most change in the past four to five years.
"If you look back at where we were in the Duncton days, we were very much almost at odds with how the car buying process worked," Hodgson says. "We needed lots of proofs, we needed lots of information, we often went back for lots of information after we had the first set. And dealers don’t like that, brokers don’t like that, and most importantly, customers don’t like that.
"Now we have an automated, slick, online decision, a decision we will stick with as well, using a minimal set of proofs. With a turnaround or payout time of about an hour if we have all the proof sets, for some quite deeply subprime customers as well," Hodgson adds.
Moneybarn did this by listening to the customers and creating a system that works alongside the car buying process rather than against it, according to Hodgson.
The communication that exists between the customer and Moneybarn doesn’t stop when the customer has signed up either. The biggest area of growth for the company has been in the customer service team. Hodgson says that by maintaining contact with the customer throughout the life cycle of the loan the risk of default is reduced as problems are highlighted early.
The customer service team may be the newest area of the business, but it appears to be every bit as integrated into the business as team members who have been with Moneybarn since its inception as Duncton all those years back.
And this integration is something else in the company that seems to work. At the launch event for The New Barn, the children of staff were much in evidence, and a close-knit bond between the employees and the company was not hard to spot.
Both Hodgson and Minter were keen to emphasise that it was the staff that were key, not just to the company as it is today, but also in the future, and that they are resolved not to lose the bond the company has with its staff as the company expands.
As Minter sums up, the future of Moneybarn is encapsulated in the move to The New Barn: "The reason we have a building like this is because we see growth in the future and we want to have a building that will allow us to stay in one place, so this is a springboard for growth." And most importantly keep the close-knit atmosphere that the company has had since it started in a back room of a car dealership.
The customer service team may be the newest area of the business, but they appear to be every bit as integrated into the business as team members who have been with Moneybarn since its inception as Duncton all those years back.
