Propel – Championing the SME

Summary

Propel Finance has enjoyed soaring growth of 92% over the last year. What is driving this growth as the economy faces headwinds that could challenge the asset finance industry once more?

As an independent asset finance specialist lender, Propel has seen a rapid rise in delivering asset finance to SMEs; reflecting both the investment in its staff, its technology and its desire to work with its partners – whether financial or manufacturer – to provide SMEs with vital access to finance.

Propel’s most recent partnership with Samsung Capital highlights Propel’s capabilities as an SME specialist. Samsung, like Barclays, introduce their SME customers to Propel in an accretive ecosystem business model, based on their confidence in Propel’s technology platform and customer service

In a recent interview with Jon Maycock, Commercial Director of Propel, Asset Finance Connect discussed the main drivers of growth with Jon – robust funding, distribution partnerships and efficient customer centric systems.

Samsung Capital

In their strategic partnership with Propel, Samsung Capital are introducing their business customers to a specialist which is a mutually beneficial way of helping SMEs. Propel are particularly effective in performing this specialist role. The appetite for partners such as banks, brokers and technology providers to use this niche service seems clear, with the new collaboration with Samsung reinforcing its success. Customers are evidently appreciating this new way of connecting their business needs with a niche provider based on Propel’s customer satisfaction scores.

This accretive ecosystem business model works particularly well because Propel have invested in excess of £4m in its proprietary platform, Propeller, to deliver a seamless end-to-end process for the customer journey. Propel have deployed their technology to their chosen distribution partners to enable Barclays, their broker partners and Samsung’s channel to connect via API or directly to obtain access to an asset finance service that is simple, smooth and seamless.

As part of their partner model, based on the proprietary nature of their platform, Propel can tailor the application process and the specifics of the decision engine according to the needs of the partner and their customer flows.

The Propel ecosystem

Propel have been growing their business ecosystem by collaborating and partnering with several financial businesses to drive investment and support SME growth. Using the accretive ecosystem business model, Propel can help enable businesses to maximize their growth, driving productivity and performance.

The accretive ecosystem model is generally an arrangement between two, or just a few entities, where all parties have a portion of an overall customer value proposition that combined is worth substantially more than the sum of its parts. In the accretive model, the members generally don’t compete. The most common example of an accretive ecosystem is where a company has developed some sort of distinct and valuable IP and/or substantial aggregation of valuable data because of their primary business activities.

There is a realization that those assets present a monetization opportunity, but there is no appetite to invest internally to form a new business unit to create the platform and the channels to market. By selecting the right partner(s), these assets can quickly become revenue-generating without the deployment of significant capital.

Partnerships

Propel began to grow their ecosystem in 2020, when they partnered with Barclays Business Bank, to help SME business customers access best-in-class asset finance services to purchase equipment and vehicles.

Barclays, who do not offer direct asset finance services to their Business Banking customer base, introduce them to Propel as they are specialists in SME asset finance with slick capabilities – including their own scorecards for specific types of customers and their own tech automation and processes.

In 2021, they formed partnerships with UK accounting, tax and business advisory firm Azets and global payments service provider emerchantpay. The strategic partnership between Propel and Azets allows the latter’s business clients to access best-in-class asset finance solutions to obtain vital equipment and vehicles.

Recently in October 2022, Propel announced a landmark strategic partnership with Samsung Capital, the finance division behind Samsung Electronics (UK) Limited, to provide asset finance solutions to UK SMEs through Samsung’s extensive distribution channels.

While Samsung Capital will continue to serve the financial requirements of its larger business customers directly, they recognize that they can deliver better experience for the high volume, lower value transactions by partnering with Propel. It is these smaller value transactions where Propel will work with Samsung’s distribution partners and channel resellers to provide finance to Samsung’s channel partners’ business customers in the UK to acquire a wide range of equipment – including the latest phones, tablets and leading-edge audio-visual equipment.

These and future partnerships point to Propel’s innovative business model whereby they can partner with a financial institution like Barclays – but can equally be used by manufacturers like Samsung who have cash reserves and can finance their own large-ticket deals but need the systems that Propel have to provide finance to SMEs with more small-ticket deals.

The third distribution channel for Propel is to partner with a limited number of the largest UK brokers. The Propeller system brings efficiencies to the broker community, avoiding multiple input into disparate systems for the broker.

Funding

In August 2022, Propel announced its first private securitization, as part of a new £500 million financing round. As part of this competitive source of funding, Citi structured a £275 million private securitization facility, while Quilam Capital provided an additional £35 million mezzanine and working capital facility. This enabled the partial refinance of Propel’s existing British Business Bank ENABLE funding facility and support further growth. The British Business Bank will continue to be an important funding partner for Propel, with an ENABLE Funding facility that will allow Propel to provide c. £165 million of finance to SMEs across the UK.

The financing supports Propel’s emergence as a leading force in UK asset finance; and supports the business generated by its strategic partnerships with Barclays Business Bank, accountancy firm Azets and global technology leader Samsung Capital. This allows Propel to provide more than one million SMEs with access to fast and flexible finance to acquire equipment and vehicles.

Re-platforming Propel

During the pandemic, from 2019 to 2021, Propel decided to look at their business ecosystem and began to make changes to effectively revitalise and grow the business. In 2019 they completely re-platformed the back-office accounting system and, in 2020 to 2022, invested around £4 million in developing its in-house proprietary technology platform – Propeller. The origination software is a proprietary end-to-end system providing a seamless and swift experience for distribution partners and customers, from proposal through credit scoring to document generation and e-sig. In 2021, this was coupled with a brand-new Microsoft Dynamics CRM which sits on top of the platform.

Following this, in 2021, Propel streamlined its business origination model into three channels:

1. Partnership model – with financial partners, Barclays and Azets, who look at their customers and identify any potential needs for asset finance. They send information through their CRM system via APIs to Propeller. Typically, Propel are processing 1,500 deals a month with same-day decision. Through 500 referrals a month from Barclays, Propel are receiving fantastic end customer feedback with a 9.7 out of 10 customer satisfaction score.

2. Broker model – positioned Propeller into carefully chosen partnerships with UK asset finance brokers, where Propel can drive a similar partner approach and offer the same process. This is a growing channel for Propel, where they can embed tech through APIs into the broker front-end system.

3. Vendor model – this is the historic core of the Propel business; and is where the tech focus has emanated from. Technology vendor distributors (i.e. phones, tablets, telephony, laptops, audio-visual with an average ticket size of £7,500) have access to Propeller – embedded tech by APIs into their models. Propel are looking at repositioning traditional vendor models and embedding the tech into the customer journey. The Samsung partnership is borne out of this technology vendor channel.

Propel clients are all from business sectors and range from large corporates to micro-SMEs. Propel can offer regulated and unregulated agreements according to the profile of the customer.

Propel believes that SMEs still need to be educated about the benefits of asset finance; and provided with an awareness of being able to deploy asset finance lending against non-traditional assets. Asset finance is not just available for cars and yellow goods – but for production systems, technology assets and a whole range of fixed assets.

When asked about the credit profile of his customers Jon highlighted that all through the COVID pandemic, the cost of risk at Propel stayed consistently low and below industry average and continues to perform. The product range remains simple – either hire purchase or finance lease. Typically, HP is used for larger assets with a future value and finance leases are used for smaller deals for tech assets.

Jon believes that the business is a success due to the “combination of technology and people”. Propel are still passionate about the face-to-face client experience, but we also understand how Propeller has changed the customer journey providing an end-to end and efficient experience.