Evaluation of your business proposition

For any one who is seeking private equity finance or looking to raise debt finance then the following questions need to be considered and sef-evaluated before any investment proposition:

1. Please provide a quick summary of the product or service you offer?
2. Please describe its purpose / application?
3. Please provide a brief summary of the sector your company operates or intends to operate in.
What market do you operate or intend to operate in?
4. Who is the management, and what are their strengths / weaknesses?
5. How have you supported yourself so far?
6. What is the long term corporate plan?
7. what is the market potential (demographic, geographical etc)?
8. What are the main events happening or expected in the market?
9. What are the key characteristics of the market?
10. What are / will be the key success factors and will the success of the venture be based on?
11. Is the business profitable? When do you project profitability?
12. What are the main risks that you can identify for the business?
13. Have you considered equity finance or debt finance (depending on what is being pitched)?
14. What is the funding for?
15. What are your proposing to offer your investors?
16.What is the estimated exit timing for investors?

Changes to empty property rates for Commercial Properties

There has been a recent change in the Rates that are payable for commercial properties which I believe will have a significant impact on the commercial property market.

With effect from the 1st April this year, empty commercial property will be hit with an occupied rate liability.

The Rating (Empty properties) Act has made some amendments which include:

"Replacing the current permanent exemption for industrial properties with an exemption for the first 6 months only.

Properties that have been empty for more than three months will no longer receive 50% relief from rates. In the case of industrial property, those that have been empty for more than six months - will no longer receive 100% exemption from rates".

The Government's view is that the changes will enhance the supply of commercial property and create a downward pressure on rents making occupation of commercial property more affordable. However, it may have significant negative effect as any landlord or developer will be less likely to engage in development as they will not want to risk having a vacant property. This will also mean if there are any vacant properties where the owners have not done anything about it so far this may kick start them to sell to off load them.

credit crunch and dual pricing in the mortgage market

Everybody in the mortgage industry is suffering to some degree from the effects of the current 'credit crunch'. I am to some extent more aware than others due to having direct contact with various intermediaries and individuals in the mortgage and lending market that some businesses have been hit very hard.

Mortgage Advisers seem to be suffering more so to some extent due to the actions of a number of high profile high street lenders, who are offering preferential terms to direct branch customers. In the broker community this is being referred to as dual pricing.
These lenders have previously benefited greatly from the mortgage broker market and many have had majority of their new business introduced by intermediaries. It is estimated that overall nearly 75-80% of past mortgage business written has been via intermediaries.

It is as a result of the big volumes of business, which has traditionally been introduced by brokers that Lenders were offering exclusives and better terms for broker business rather than direct business.

It is now with the mortgage market in such a state that these lenders are causing a good deal of distress to brokers, as a result of this dual pricing.
The lenders and the FSA have shown very little sympathy to this matter. The lenders see dual pricing as a short-term expedient to control the flow of lending. With reduced liquidity available in the market and the high cost of funds, lenders are keen to control their new lending.

The FSA has commented on the subject of dual pricing. It does not believe that lenders are doing anything wrong. It states that Lenders are entirely free to determine how they price their products for each distribution channel. The FSA has made it clear that it will not intervene to remove dual pricing from the market place.
Until dual pricing finally disappears, it is vital that advisers face up to the issue rather than surrender to it. Mortgage Advisers as I see it have two choices they either let the customer know that some lenders are offering different rates to direct customers and that they, as a broker do not have access to these products and advise them as usual on what is available to them from their panel of products. If this is done then aaccording to the FSA the Adviser has acted properly and treated his customers fairly and therefore discharged his duties.

The second option is, which a number of financial service market pundits state that the brokers can if they wish direct customers to high street branches if the rates are more attractive and charge customers a finder’s fee. This to a number of brokers sounds very strange. Most of the broker community do not feel comfortable in doing this and cannot see the justification for seeking payment for this.
How long before some normality returns to the markets?

Land Banker in administration

The FSA has finally asked the High Court to wind one of the largest UK land banking operators. It has been granted an interim freezing and restraining order against UKLI Limited to protect its assets for creditors, including investors.

UK land Investments acquired mainly greenfield sites it claimed had development potential, it then divided these sites into smaller plots, then advertised and sold these plots of land to people by claiming that it could get planning permission for the land, which would increase in value and make investors a large profit once it was sold to a developer.

It is estimated that around 5000 plots have been sold to investors across the country and that around £69 million has been paid to UKLI for various sites where it is claimed that none of the land sold was ever granted planning permission.

As UKLI operated as a Collective Investment Scheme it should have been authorised by the FSA. As it was not regulated, UKLI Investors are not entitled to make a complaint to the Financial Ombudsman Service or to claim compensation from the Financial Services Compensation Scheme.

It is quite surprising that it has taken the FSA this long to take action and when some action has finally been taken it seems a little too late for the many who have lost out.

A statement by the Administrators is on the UKLI website: http://www.ukli.com/