Corporate Governance – Business Model

The group’s main business is providing credit to businesses and consumers to enable them to spread the cost of their insurance premiums and professional fees.

In the past, the group has reported in terms of there being two core areas – insurance premium funding and funding for professionals. The board has reviewed this method of reporting and concluded that the nature of these is so similar that any segregation would not give meaningful information to users of the financial statements. Both areas are managed on a similar basis, carry similar risks and rewards and need to comply with the same regulations. For this reason, they are not separated in the year to 31 July 2018 (except to the extent that regulation requires it).

Bexhill borrows up to 75% of the amount advanced to each of its clients (up to a maximum of £15m) from its bankers, Barclays Bank plc. Orchard has in the past borrowed through Orchard Lending Club (a trading style of the group). These loans are still extant. In August 2017 the company arranged a facility of £2m with Conister Bank Limited. The balance of lending is provided by the subsidiaries from their own resources. At 31 July 2018 the group had capital and reserves in excess of £14m.

Both subsidiaries have operated within a disciplined lending environment since their inception. Barclays performs regular reviews and supplements these with an audit every six months by external independent auditors. Conister requires information on lending to be sent on a regular basis. Lending limits to our supporting partners and to the end borrowers are set by reference to financial and other qualitative information for both. Limits are set based on financial information, credit reports, regulatory requirements and other qualitative factors obtained from our partners and their clients. In addition, an annual review process, including regulatory permissions and credit checks, is conducted and each partner is monitored monthly for the company’s financial exposure to that entity.

The group’s average cost of finance was approximately 3.44% in the financial year to 31 July 2018.

In the year to 31 July 2018, an application process to obtain a bank licence was commenced. This process is at an advanced stage and the board are hopeful that the licence will be granted during the year to 31 July 2019. A bank licence will increase our liquidity and reduce reliance on third party financing as we build our customer deposit base.