Lending to meet changing demands

Nucleus Commercial Finance is one of the new generation of alternative lending providers that has achieved remarkable success in the three years since its launch, being named Commercial Finance Provider of the Year (2015) and consistently featuring in the Top Five providers in the Business Money broker survey.


Launched to service the needs of some of the most difficult and challenging markets starved of cash, it started with a single product – a Construction Finance Package.

We believed that the sector was being ignored as “too difficult” by “traditional” lenders, when the reality was that there was not an off-the-shelf invoice finance product that suited how construction businesses are funded and how they get paid.

Nucleus therefore developed its own, with a team of quantity surveyors. The result is an innovative product that provides pre-payments against applications, stage payments and milestones for sub-contractors, combines a traditional factoring model but with a fixed fee to ensure transparency on cost, and advances cash at an agreed percentage of the outstanding invoice/application value, taking into account the longer contract terms typical within the construction sector.

Not surprisingly, it has proven incredibly popular. But Nucleus quickly recognised that other markets and customers were also being poorly served. This led to the launch of a dedicated Supplier Finance product that is targeted at a much broader range of businesses, with turnovers in excess of £20million. The product enables these businesses to use their balance sheet and credit rating to enable their suppliers to access funding at competitive rates.

The suppliers and/or sub-contractors benefit by receiving 100 per cent of the value of their invoice on acceptance of their goods and services – money that they can use to support their cashflow, take advantage of other supplier discounts and so on. There is no long-term contract involved, so the supplier is not tied to a relationship in which there is no flexibility to move, and the funding is guaranteed. Most importantly, however, there is a fixed (this is a theme of all of our new products!), disclosed charge for the service so that the customer knows exactly what they are paying.

The main contractor also benefits from more predictable cashflow, and the ability to build sustainable relationships with key suppliers by offering them favourable terms. Developing a strong supplier base is essential, especially when tendering.

With the upturn in the economy, demand for funding has increased, but what is clear is that not all of these SMEs are the same, and lenders need to move away from thinking that a one-size-fits-all approach will work. It is the reason that we have now expanded our product range still further.

Nucleus works with all manner of businesses in a diverse range of industries, with our sweet spot firmly in the £5million to £50million turnover bracket. We can provide Asset Based Lending (ABL) facilities of up to £10million. This includes asset finance, term loans, and property finance. Our approach is to provide the optimum solution for the business by fully leveraging the balance sheet.

By creating bespoke products, we are continuing to meet a growing demand. How? By truly understanding how those businesses work, by recognising a coherent business plan when we see one, and creating lending products that meet a genuine need.

Chirag Shah is chief executive of Nucleus Commercial Finance