Spotlight on: Propel

Specialist Finance Introducer's Jessica Bird sat down with Mark Catton, CEO of Propel to discuss the business, its partnership with Barclays, and current market trends in asset finance.

In September 2020, specialist finance provider Propel formed a strategic partnership with Barclays Business Banking, to offer equipment and vehicle finance to one million of the bank’s small to medium enterprise (SME) customers.

The bank’s UK-wide network of 1,100 relationship managers will connect directly with ‘Propeller’, Propel’s online portal, allowing businesses to make equipment purchases up to £2m, with funds often released within 48 hours.

This partnership is just one step in Propel’s story of growth, which has seen it progress from a local Welsh business to one with national coverage.

Propel now supports customers with their equipment finance needs around the UK, through equipment vendors and strategic partnerships such as the one with Barclays. It covers a wide range of equipment types, from technology and telecoms, all the way through to industrial manufacturing and commercial vehicles.

Mark Catton, CEO at Propel, says: “The demand for the ability to combine brilliant customer service with great tech is growing.

“What we do is combine great finance with great technology and an ability to offer that to SMEs in the right way. Our experience is that the demand for that across partners like Barclays as well as across equipment suppliers is growing.”

THE BUSINESS

Owned by specialist private equity house Cabot Square Capital, Propel derives the majority of its funding from the British Business Bank’s ENABLE programme.

Beyond seeing itself as simply a Fintech, Propel aims to combine customer service with technology. Its ability to be agile, innovative and bespoke, Catton says, is helped by the presence of an internal 25-strong tech team.

Catton joined the business in Q1 2018, since which time the company has invested heavily in its platform and proprietary technology, leading up to the partnership with Barclays, and future developments beyond it.

The Propeller platform is often promoted with vendor partners via joint marketing with Propel, combining product and finance to make an easy purchase for the end customer.  . Most importantly, its solution allows customers to access finance quickly, which is all the more important as demand is growing.

Catton says: “We’ve invested very heavily in the platform, the technology and the team, to give us the opportunity of scaling and building the reach across the UK, and to give us the opportunity of locking our tech and service model into some big franchise partners.”

“We started working with Barclays in 2019 to make sure we built something that was seamless for both organisations but most importantly for the SME’s we are servicing. The customer experience is at the heart of the partnership and we are obsessive about this on a daily basis,” says Catton.“Our motivation was to deploy the platform in the right way and give us access to a very different reach, while Barclays’ motivation was that it has an excellent offering for equipment finance for its larger corporate customers but wanted a proposition for its business bank SMEs who typically turnover less than £6.5million.”

“[The bank’s] motivation was to fill that gap in the customer offering and make sure the customer has as wide as possible a set of choices around asset finance.”

COVID-19 CHALLENGES

Although the asset finance industry saw a contraction in business flow volumes during April and May this year, Propel has since gained 3,000 new customers.

During the peak of the crisis, the need to ensure positive service for existing customers took priority over ambitions for growth, says Catton: “Our focus has been on making sure we’re protecting the health of our teams, families and friends, and we’ve been very sensitive to and conscious of public health more broadly.

“We’ve been busy, as the industry has, supporting customers through this to the best of our ability – mainly through payment holidays but also just being there on the end of the phone to listen and support them through often very difficult times.”

Propel has provided about 2,000 customers with payment deferrals in line with the government’s approach to assisting consumers struggling with their finances due to COVID-19. However, rather than grinding to a halt, in many ways business has continued as usual for Propel and even picked up pace on pre lockdown volumes.

Catton says: “At the same time, we’ve lent tens of millions of pounds in this period and attracted more than 3,000 new customers.

“We’ve been busy trying to do all the right things by our team and by our customers, [as well as being] very focused on making sure that we do the right things commercially.”

Propel has also not stopped in terms of its own internal growth, having hired 60 team members since lockdown began, going through the selection, hiring and induction processes entirely remotely for the first time.

MARKET TRENDS

Asset finance has been growing at a rate of between 8% and 10% per year for a number of years, says Catton; while this has been impacted to an extent by the events of 2020, the sector is already bouncing back.

While some parts of the market have taken a hit during the pandemic and resulting lockdowns, other areas have grown in importance in Propel’s experience. For example, products relating to home working have, unsurprisingly, gone from strength to strength, leading to innovative adaptations in terms of product bundling, such as the creation of ‘office in a box’ provisions for those SMEs needing to move quickly to support a new wave of remote offices.

“It differs by equipment types, so if you’re selling asset finance in technology and [telecommunications], that market hasn’t suffered particularly in the last six months,” Catton explains. “Indeed, that has grown in cert areas, whereas in commercial vehicles or heavy plant, those markets have been hit by 30% to 35% year-on-year since March. So there’s some recovery for the market to go through.”

While change and disruption may be in the air across the full gamut of British business following the effects of COVID-19, from Propel’s perspective the SME sector is likely to stay strong in the face of adversity.

“Your typical SME business is quite resilient,” says Catton. “There are 5.9 million SMEs out there of all shapes across all sectors and of all equipment types, and our job is to make sure that we’re supporting those who need help, whether through new finance or support with existing lease finance.

“We see a number of SMEs which are busy adjusting their business and product plans for a different paradigm, and we need to make sure we’re supporting those in the right way. Typically SMEs are quite resilient – the finance industry’s job is to make sure we’re supporting it in the right way.”

Catton notes that government stimulus schemes, such as the Coronavirus Business Interruption Loans Scheme (CBILS) and Bounce Back Loans Scheme (BBLS), has gone some way to keeping SMEs and UK corporates afloat, in some places proving to be a substitute for equipment finance.

“It is difficult at the moment to predict how that will play through,” he continues. “But these are relatively big markets, with tens of billions of pounds of new volume, and therefore for finance houses and banks that have good propositions, the right teams and the right tech, we think there’s significant opportunity for growth with the right positioning.”

Catton believes that permanent changes in the way the UK population lives and works will likely have knock-on effects on the asset finance market, and indeed that these trends have already started to take effect, with Propel considering how it needs to adapt alongside these shifts.

He explains: “We have a number of relationships with technology [and telecommunications] companies, and some big brands, and they are already thinking through and mobilising around different products and different product bundling.

“This is something that a number of large equipment suppliers are thinking about and going to market with. We are in conversation with a handful of big partners in how we support that.”

THE FUTURE

In September 2020, Propel’s new business levels doubled those seen pre-COVID.

The business is projecting significant growth in 2021, not least given the opportunities for scale and growth provided by the Barclays partnership, and Propel has its eye on the horizon in terms of future partnerships and collaborations.

Catton says: “There are a number of fintech platforms out there which are looking for asset finance or finance providers. Some of the more traditional equipment finance houses don’t have the inclination or the technology to link into those.

“So we’re quite heavily engaged in conversations with some of the fintech platforms as to how we can put our technology and our service model into their platform, to give customers the widest possible choice for equipment finance.”

He adds: “Our expectation is that we will see significant growth in new customers, in origination levels, and in our balance sheet through next year.

“All of the investment we’ve put into the platform in the last 18 months – and into the tech and partner development – is all starting to come through.

“With the Barclays partnership and with other partnerships close to landing, we should see some significant growth across the platform through 2021 and onwards.”

Want more deep dive features? Read the next in the Spotlight series here.