Sancus BMS Group The Future for Alternative Finance Andrew Whelan - - PowerPoint PPT Presentation

May 2017

Sancus BMS Group

The Future for Alternative Finance Andrew Whelan

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

2 | 11/05/2017

GLI Finance Investment Portfolio of SME Lending Platforms

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

3 | 11/05/2017

Bank lending to firms has collapsed over the last few years

£10

billion

Fall in lending to UK firms

Now finally stabilising

Source : Funding Options

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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4

Structural and permanent change – bank lending is next

1995 2000 2010 2005 2015

Auctions Real Estate Bank Lending

Future

Online Technology and Disintermediation

Disintermediation “reduction in the use of intermediaries between producers and consumers”

Airlines Travel Accommodation

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Alternative Finance - Taxonomy

Alternative Finance Model Definition

Marketplace /P2P Consumer Lending Individuals or institutional funders provide a loan to a consumer borrower. Balance Sheet Consumer Lending The platform entity provides a loan directly to a consumer borrower. Marketplace/P2P Business Lending Individuals or institutional funders provide a loan to a business borrower. Balance Sheet Business Lending The platform entity provides a loan directly to a business borrower. Marketplace/P2P Real Estate Lending Individuals or institutional funders provide a loan secured against a property to a consumer or business borrower. Real Estate Crowdfunding Individuals or institutional funders provide equity or subordinated-debt financing for real estate. Invoice Trading/Supply Chain Finance Individuals or institutional funders purchase invoices or receivable notes from a business (at a discount). Equity-based Crowdfunding Individuals or institutional funders purchase equity issued by a company.

Source : University of Cambridge Judge Business School

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Traditional Banking versus P2P

 Government Endorsed  Attractive Rates  Convenient

• Cost Inefficiencies
• High Margins
• Restrictive Lending

Lenders and Borrowers share the margin that banks traditionally captured

Lower Rates

Traditional Banks Sancus BMS Group

Costs and Margins

Costs and Margins

Margin & Costs Margin & Costs

Better Returns

Depositor Borrower Borrower Lender

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Alternative finance growth worldwide

Source : University of Cambridge Judge Business School / KPMG FinTech

(US$ billion cumulative)

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Alternative Finance Maturity by country (as at 2015)

Source : University of Cambridge Judge Business School / KPMG FinTech

Adoption of alternative finance by country, adjusted for volume per capita. The maturity of each market shows USA ahead, followed by China and the UK

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Total Quarterly P2P Cumulative Lending (UK estimate)

2.27 2.7 3.28 3.91 4.67 5.5 6.42 7.25 8.13 9.18 1 2 3 4 5 6 7 8 9 10 Q3 2014 Q4 Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3 Q4

£ billion

Total amount lent to individuals/firms at the end of each period Total Cumulative Lending Cumulative Business Lending Cumulative Consumer Lending

Source : University of Cambridge Judge Business School

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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BBB and ISIF – where do they come in?

The British Business Bank

• 100% Government owned business development bank;
• “Making finance markets work better for smaller

businesses”;

• Aimed at start ups, high growth and viable but

underfunded businesses;

• Working with over 90 trusted partners;
• Value of loans drawn 2016, £207m (2,015 loans).

Ireland Strategic Investment Fund

• Managed and controlled by the National Treasury

Management Agency;

• Policy of commercial investment to support economic

activity and employment in Ireland;

• Strategy to co-invest with trusted partners;
• Strong connections with both the public and private

sectors across multiple industries;

• Currently €8 billion available to deploy.

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Evolution of the P2P Marketplace, moving to I2P and hybrid models.

SME Debt Consumer Debt Lenders Borrowers Online Peer-to-Peer Marketplaces Real Estate Debt

UK SME Loans

Retail Capital Institutional Capital Balance Sheet Capital

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Retail HNW Family Credit Retail Retail HNW

Poised for Institutional Capital as at June 2013

US P2P loan origination growth of 6% to 8%+ monthly

$- $500,000,000 $1,000,000,000 $1,500,000,000 $2,000,000,000 $2,500,000,000 Jun-07Oct-07Feb-08Jun-08Oct-08Feb-09Jun-09Oct-09Feb-10Jun-10Oct-10Feb-11Jun-11Oct-11Feb-12Jun-12Oct-12Feb-13Jun-13

Lending Club Prosper.com

Lending Club SEC Registration Prosper SEC Registrati

• n

2016 Lending Club US$18bn 2016 Prosper.com US$10bn

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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The Good, The Bad and The Ugly

Not too far away

A strong global economy, but uncertainty lies ahead.

Across the pond Our back yard

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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What about Brexit?

Political and economic uncertainty What we have seen so far

• £ weakened against $ and €;
• Some real estate has declined in value;
• UK downgraded by several credit agencies;
• Disruption in the ability of UK banks to access funding.

What could happen

• Slow growth in UK;
• Imported goods more expensive;
• UK may create its own path in regulation of

domestic financial services;

• Significant uncertainty.

What does it mean for Alternative Finance?

• Banks still retreating from financing SMEs, more opportunities for borrowers;
• Short term funding opportunities more attractively priced;
• Lack of investment opportunities elsewhere makes alternative finance more

attractive for funders.

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

15 | 11/05/2017

Brexit – Corporate sentiment in the market

“What is the impact of Brexit on your plans for obtaining funding from alternative providers?” 10 20 30 40 50 Don't know No impact Creates opportunities Limits opportunities Puts plans on hold

%

Source Allen & Overy, Alternative Finance : A European Profile

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Brexit – Investor sentiment in the market

“What is the impact of Brexit on your plans for providing alternative funding to large, medium and small businesses?” 10 20 30 40 50 Don't know No impact I will look outside Europe Limits opportunities to fund businesses in UK Creates opportunities

%

Source Allen & Overy, Alternative Finance : A European Profile

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Sancus Group Overview

*Excluding Sancus Finance (estimate) Data source: Sancus Group as at 31/12/16

£578m

Cumulative Loan Book

£162m

Invoice Discounting Supply Chain Financing

£274m

Asset Backed Loans

£142m

Business Loans

£30m

Proprietary Capital

£3m*

2016 Profits

Ireland Strategic Investment Fund is an investor in BMS Finance (Ireland) SARL British Business Bank Investments Ltd is an investor in BMS Finance (UK) SARL

£152m

Live Loan Book

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Our Funding Solutions

Short Term/Ongoing

(1 to 3 months)

• Invoice Discounting
• Supply Chain Finance

Medium Term

(3 – 24 months)

• Asset Backed Loans
• Property Bridge
• Property Development

Long term

(24 – 60 months)

• Intellectual Property
• Mergers & Acquisitions
• Cash Flow
• Mezzanine

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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A profitable niche lending business operating different funding solutions in multiple jurisdictions.

Corporate Structure

Sancus BMS Group

Jersey

Sancus (Jersey) Ltd

Company No. 113391

Guernsey

Sancus (Guernsey) Ltd

Company No. 58612

Gibraltar

Sancus (Gibraltar) Ltd

Company No. 112755

UK

Sancus Finance Ltd

Company No. 7485900

BMS Finance (UK) SARL

Company No. 06008835

Ireland

BMS Finance (Ireland) SARL

Company No. 905187

Isle of Man*

Sancus (IOM) Ltd

Company No. 012528V

* Affiliate

Total staff 39

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Use of Proprietary Capital

Critical differentiating factor:

• Allows us to underwrite loans;
• Allows us to change shape of credit risk for Co-Funders;
• Ensures we can Co-Fund in every deal to control process;
• Ensures we share risk with Co-Funders and have “skin in the game”;
• Provides us with the ability to subordinate to Co-Funders to reduce their risk;
• Highlights our confidence in our credit process.

Sancus BMS is wholly owned by GLI Finance www.glifinance.com a trading business listed on AIM

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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• Certainty - commitment if borrowers meet clearly defined approval process criteria;
• Reliability - speed & efficiency of service;
• Simplicity - terms can be customised to suit individual borrower requirements;
• Transparency - on both costs and reporting;
• Trust - in a relationship business you know who you are dealing with;
• Flexibility - ability to repay early if circumstances change;
• Opportunity - access to capital in more complex situations than traditional lenders can cope with.

Benefits for Borrowers

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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• Diversification – via a low correlation to traditional asset classes with returns in excess of those from bonds and cash;
• Control – Funders can choose the type of opportunity they wish to allocate to;
• Simplicity – secured participation in a hassle free way with transparent reporting;
• Trust – in a relationship business you know who you are dealing with;
• Flexibility – ability to repay monies if circumstances change and interest paid monthly if required;
• Impact –

assisting the real economy, making a real difference in your local jurisdiction.

Benefits for Co-Funders

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Borrower Characteristics

What we look for in our borrowers, the six “C”s:

• Character – strong moral fibre;
• Capital – holistic approach to understanding a borrower’s total net-wealth;
• Collateral – what is our security;
• Cover – a sensible Loan-to-Value (LTV);
• Capacity – ability to repay and clear repayment strategy;
• Conditions – economic scenarios to understanding impact.

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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• Straightforward to deal with;
• Speed and certainty of execution;
• Pragmatic application of common sense;
• Highly experienced credit team in multiple jurisdictions;
• Ability to review complex scenarios.

Conclusion

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Appendices

• 1. Case Studies
• 2. Contact Details

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Case Study – Asset Backed Loan

• Type/Location: Trust/Isle of Man & Edinburgh;
• Purpose of loan: bridging loan;
• Loan value £7.2m;
• Funding: Sancus £450k with £6.75m spread between 14 Co-

Funders;

• Borrower’s Interest Rate: 18%;
• Co-Funder’s Interest Rate: 14%;
• Interest Serviced: Rolled up;
• Term: 6 months;
• Security value: £43.1m;
• Security: first charge on properties, security interest agreement on companies, two debentures, & guaranteed by

Trustees and Ultimate Beneficial Owner (UBO) of Trust;

• Repayment strategy: refinanced from traditional lender;
• Completion: August 2015;
• Fees: Commitment fee 0.50% & Arrangement fee 1.50%;
• All legal fees paid by borrower.

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

27 | 11/05/2017

Case Study – Supply Chain Finance

• Engineering business in South of England with turnover of

£120m;

• Needed to source working capital to support new projects in

continental Europe and the UK;

• Sancus provided £2m of working capital through 90 day

supply chain finance programme;

• Extended days payable outstanding by 45 days;
• There was zero cost to our client who was able to gain a

3.5% increase in gross margin;

• Sancus paid approved supplier invoices within 3 days of delivery to our client, allowing the client to negotiate 8%

early settlement discounts;

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

28 | 11/05/2017

Case Study – Invoice Finance

• Industrial coatings business based in North of England with

annual turnover of £7m;

• Client had won 2 large contracts creating a need for an

additional £750k working capital;

• Incumbent bank declined to support;
• Traditional invoice finance solutions required control over

the whole sales ledger and restricted the amount of funding available;

• Fees based on all turnover meant that traditional invoice line was too expensive;
• Restricted funding from traditional invoice finance meant that company would not have sufficient funds to carry out

new contracts;

• Sancus Finance provided a £750k invoice finance line for the 2 new customers only;
• Company generated in excess of 10% contract values and they have now been invited to tender for additional

contracts, ensuring the company’s continued growth.

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Case Study – Business loan

• Simulity Labs Limited is a software company based in Bangor, Wales

specialising in embedded communications and related server applications, serving over 45 mobile network operators;

• Their pioneering eSims and Over The Air platform enable their customers

to embrace the Internet of Things with no compromise on quality, security

• r privacy;
• Simulity was growing impressively (>50% CAGR) but was constrained

by the working capital required to deliver the additional demand from their customer base;

• Sancus provided a £1.5m loan, amortising over 3 years which unlocked delivery of the trapped extra revenue and

enabled Simulity to continue on its growth trajectory;

• A further tranche of £500k has been provided to assist in the development of the new eUICC suite of products

(embedded SIM), repayment of which has been structured over the remaining term of the original loan;

• Since Sancus’s involvement, the business has increased revenues by 100%.

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Contact Details

Richard Whitehouse

Sales Director, Sancus Finance e richard.whitehouse@sancus.com t +44 (0) 3301 003636

Callum Scott

Regional Director, South Sancus Finance e callum.scott@sancus.com t +44 (0) 1256 657852

Michael Hennessy

Managing Director, Sancus IOM e michael.hennessy@sancus.com t +44 (0)1624 604101

Simon Brown

Managing Director, Sancus Guernsey e simon.brown@sancus.com t +44 (0)1481 713335

Stuart Hamilton

Business Development Manager, Sancus Jersey e stuart.hamilton@sancus.com t +44 1534 708902

Stephen House

Business Development Manager, Sancus Jersey e stephen.house@sancus.com t +44 1534 708908

Stephen O’Brien

Managing Director, Sancus Gibraltar e stephen.o’brien@sancus.com t +350 200 13702

Lino Brydges

Business Development Manager, Sancus Gibraltar e lino.brydges@sancus.com t +00 350 200 13705

Shane Lanigan

Managing Director, BMS Finance UK & Ireland e shane.lanigan@bms-finance.com t +44 (0) 20 7092 6700 (UK) t +353 (0) 1 477 3272 (Ireland)

Rachael Bajard

Business Development Manager, Sancus IOM e rachael.bajard@sancus.com t +44 (0)1624 604104

Peter Hudson

Director, Property Finance Sancus Finance e peter.hudson@sancus.com t +44 (0)1256 898000

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Important Information and Disclaimer

Legal Disclaimer

(page 1 of 2)

This Presentation (this "Document") relates to Sancus BMS Group Limited (the "Company") and its subsidiaries (the "Group") and has been delivered to you (a "recipient") for information only. This Document does not constitute an offer or invitation to subscribe for shares or other securities issued by the Group, is not capable of acceptance by any recipient and shall not form the basis of any contract or other arrangement between any member of the Group (or any other person) and any recipient (in any jurisdiction). Without prejudice to the generality of the foregoing, the issue of this Document shall not be deemed to be any form of commitment on the part of the Company or the Group (or any other person) to proceed with any investment. The information in this Document, which does not purport to be comprehensive, has been provided by the Company and has not been independently verified. Whilst this Document has been prepared in good faith, no representation, warranty or undertaking, express or implied, is or will be made, and no responsibility or liability is or will be accepted by the Company or by any of its officers, employees, agents or advisers, in relation to the accuracy or completeness of this Document, the information contained in this Document or any other written or oral information made available to any interested party or its advisers in connection with this Document, and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation, warranty or undertaking is given as to the achievement or reasonableness of any future projections, management estimates, prospects or returns contained in this Document or in such other written or oral information. Each recipient acknowledges and agrees by accepting this Document that no person has, nor is held out as having, any authority to give any statement, warranty, representation, or undertaking on behalf of the Company. The foregoing provisions of this paragraph shall not limit the liability of any person in respect of fraud or otherwise as prohibited by applicable laws. The Company gives no undertaking to provide any recipient with access to any additional information or to update this Document or any additional information, or to correct any inaccuracies in it which may become apparent. Any recipient of this Document should note that this Document does not constitute an offer to the public to subscribe for securities in any member of the Group and has not therefore been approved by any regulatory authority anywhere in the world. Sancus (Guernsey) Limited is a non-regulated financial services business under the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 as amended by the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 (Amendment) Ordinance, 2008. This law has no effect on the conduct of business of Sancus (Guernsey) Limited except for the requirement to carry out certain measures in connection with anti-money laundering and combating the financing of terrorism measures in accordance with the guidance issued by the Guernsey Financial Services Commission from time to time. Sancus (Guernsey) Limited is also registered with the Guernsey Data Protection Commissioner under the Data Protection (Bailiwick of Guernsey) Law 2001.

This document is confidential and should only be circulated with prior approval from Sancus BMS Group.

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Important Information and Disclaimer

Legal Disclaimer

(page 2 of 2)

Sancus (Jersey) Limited is registered with the Jersey Financial Services Commission under the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 to carry out the business

• f providing lending services, including consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions (including forfeiting). As a

result of this registration Sancus (Jersey) Limited is required to comply with certain procedures to prevent and detect money laundering in accordance with the guidance issued by the Jersey Financial Services Commission from time to time. Sancus (Jersey) Limited is also registered with the Jersey Data Protection Commissioner under the Data Protection (Jersey) Law 2005. Sancus Finance Limited and Sancus BMS Group Limited are not regulated by the United Kingdom Financial Conduct Authority or by the Central Bank of Ireland. Sancus (IOM) Limited holds a money lending licence issued by the Isle of Man Office of Fair Trading under the Moneylenders Act 1991, which regulates private lending in the Isle of

• Man. Sancus (IOM) Limited is also registered with the Isle of Man Information Commissioner under the Isle of Man Data Protection Act 2002.

Sancus (Gibraltar) Limited holds a Moneylender's Licence issued by the Gibraltar Financial Services Commission under the Financial Services (Moneylending) Act 1917, which, together with the Moneylending Rules 1917 regulates private lending in Gibraltar. Sancus (Gibraltar) Limited is also registered with the Gibraltar Data Protection Commissioner under the Gibraltar Data Protection Act 2004.