Gareth Graham of BCF: Banks won’t lend to SMEs and ‘that has provided an opportunity across the island of Ireland for us’

Gareth Graham’s experience of the fallout from the last financial crisis sowed the seeds for the former property player’s new venture, Belfast Commercial Funding (BCF), which has stepped into a gap left by banks’ caution at lending to small businesses.

In 2012, the Dublin-based National Asset Management Agency (Nama) took control of debts that his property business, Oakland Holdings Ltd, owed Bank of Ireland. The State body sold these three years later to a US fund, Cerberus, in a controversial deal dubbed Project Eagle.

Oakland refinanced the debt the following year and then raised the cash needed to develop Merchant’s Square in Belfast, from the Northern Ireland Investment Fund. That building is now accountants’ PwC’s largest UK base outside London and home to specialised staff focused on new technology.

It was during what Graham calls a “bruising experience” with Cerberus, and the effort involved in getting mezzanine finance for Merchant’s Square, that he realised the financial crisis had left a significant gap in the market. “We literally travelled the world to raise that funding,” he recalls.

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“Because of our history, we had climbed those mountains and been on those journeys, so lots of businesses that found themselves in a similar situation approached us and wanted advice,” he says.

Those organisations mostly wanted to find out how they could raise capital, get their businesses back and start reinvesting.

Oakland loaned cash to a builder, allowing the firm to clear debt to another fund and finish a housing project. From there BCF was born. At this stage it has loaned about €35 million to businesses around Ireland, tackling what Graham calls a structural failure in the finance market that has persisted since the crash 16 years ago.

“It’s incredible we’re still talking about it,” he says. “We find ourselves in a position where the banks can’t, or don’t, do lots of types of business that SMEs in particular require. And that has provided an opportunity across the island of Ireland for us.”

The problem manifests itself in different ways on either side of the Border. Northern Ireland, whose banks, Graham points out, are no longer locally owned, simply does not have a large pool of capital available to business. Although the Republic does have big alternative lenders, they mostly avoid smaller enterprises.

BCF loans up to £5 million (€5.9 million), focusing on businesses mostly needing less, anything from housebuilders to farmers looking to diversify. “We have supported car dealers, healthcare businesses, creches, literally any type of SME, hotels, pubs, clubs, hospitality venues. I can’t think of anything we’ve declined on the basis of not liking it as a business,” says Graham.

His company has financed enterprises in all 32 counties, bringing it close to his ambition to make BCF the first all-Ireland commercial lender headquartered in Belfast in at least a century. “That’s a very proud boast of ours. We have people on the road in Cork and Galway and Donegal, in every corner of this island we’re talking to people and we’re working with them.

At the moment we operate in the £250,000 to £5 million market. We want to be £50,000 to £100,000 up to £5 million

“There is demand for debt from businesses, they need to raise debt to grow. We learned the ability to do that was greatly constrained in the North, subsequently we discovered the same in the South. In almost every county in Ireland there are businesses that have problems, and we are attempting to meet some of the demand.”

All its growth materialised without the aid of marketing. Word simply spread through businesses themselves, lawyers and corporate financiers. Graham’s property background has been a big help, allowing BCF to be flexible about the type of security it takes on to allow a transaction to work.

A big difference between the group and others in the alternative lending business is that BCF uses its own capital, it is not simply a commission agent for someone else, more than likely based outside Ireland. It has two backers, German bank Varengold, which provides euro funding, and London-based Foresight, which provides sterling. Graham’s operation raises cash from these partners. That then goes on to its balance sheet as senior debt, which it combines with its own capital to make loans.

All decisions are made in-house. Anyone seeking finance will know within 48 hours if their project is something that BCF will consider. A credit committee meets “every other Tuesday” to consider applications. That body includes experts who weigh the various proposals. “Generally, you’ll know after that,” says Graham. “The people in here who write the business will be in touch with you to say: ‘yes, you’ve got approval, subject to due diligence’. Then it’s over to lawyers. It can be as fast as a couple of weeks, some of them do take longer.”

Even if the answer is no, the applicant hears quickly. This stands in contrast to the banks, which Graham says take six months, and whose processes require small enterprises to put in what for them are huge resources to simply apply for credit. “And if the answer after six months is ‘no’, that’s very very hard for businesses to digest,” he says.

Graham acknowledges that in some ways the banks’ post-crisis caution is warranted. Their loose boom-era approach crashed the economies on both sides of the Border, requiring tougher regulation. “Some of the banks haven’t been bust once, they’ve been bust several times, and the State has to keep on stepping in, so it’s not a bad thing to have handcuffs on.

“And they’re also constrained by the fact that today, if you’ve got a large deposit base, you can put that with the central bank and you get a guaranteed return, it’s the easiest business in the world. You’ve got a zero-risk return, that is the most wonderful business you could possibly be involved in. And small businesses struggle to get funded.

“I appreciate that the banks will say that’s not true, but go into the market and ask the borrower,” he argues. “If they were lending then there wouldn’t be this opportunity for us or these other people that have entered the market.”

And there are others. Graham says that the mushrooming number of alternative lenders, which in the State the Central Bank of Ireland registers and regulates, offer his firm plenty of competition.

BCF charges higher interest than banks, but Graham says this is not surprising given its own structure and how it raises some of its finances. “It’s a premium service, so you pay a little bit for it, but it’s a service that actually delivers. We have to negotiate facilities, and we get the large commercial funders who charge us for those facilities, and we add a margin on and deploy those funds along with our own funds. So, we are more expensive than a bank. If I had a large deposit book then I’d be a lot cheaper, but then I’d be a bank.”

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Graham cut his business teeth early. His father was Sean Graham, one of the best-known names in Irish bookmaking, a business his brothers now run, which combines betting shops and racecourse pitches. Family holidays were spent at racecourses, Killarney, Galway and Tralee. “We never made Listowel because school was back.”

He learned mental arithmetic that was the envy of schoolmates at St Malachy’s in Belfast. “That was an incredible education for a young lad to have,” he says. Graham remembers standing in “bucketing rain” on two boxes in one of Tralee’s betting rings at eight or nine years of age, “tic-tacking” for his dad. “That was when I had my first bet. I was trading, he was laying something in the main ring at 7/2 and I was able to back it back at 9/2.

“Mental arithmetic and margin were the two things that I learned from the betting business. When you carry that sort of margin focus through to any business, you’ll be okay.”

Despite hours of listening to his father and brothers talking form and thoroughbred bloodlines, Graham pursued his own interests, through planning and in to property, where he made his own name. He is on the verge of leaving that industry to focus solely on BCF.

Oakland sold Merchants Square to a Middle Eastern investor for €102 million in 2021, a commercial real estate record for the North. It is close to putting its aparthotel on Belfast’s Queen Street on the market. “That will be us complete,” he says. “Building BCF across the island is what we’re focused on.”

To get bigger, BCF will go smaller. Graham believes that although there are plenty of players chasing business at the top of the market, few are looking at the other end, where there is a lot of demand.

“At the moment we operate in the £250,000 to £5 million market. We want to be £50,000 to £100,000 up to £5 million. There’s a chunk of business that we don’t cover at the minute that requires more automation and investment and technology. We want to target that. If we keep £5 million or so as our cap and we reduce the bottom, then that opens a huge number of opportunities.”

He does not mind if borrowers do not fit “into a box”. One of the projects he’s most enthusiastic about is the Irish Institute of Music and Song in Balbriggan, Co Dublin, to which BCF loaned €4 million to allow director Michael T Dawson to finish out the centre, whose construction had been stalled by Covid.

The institute includes the Lark Concert Hall, accommodation, hospitality and 19 teaching studios, for which demand, including from Government departments, quickly materialised, Graham says. Dawson was 80 per cent home before the pandemic intervened. “Michael’s is a business we supported. He could not get what he needed from the banks. He opened in November 2023, a pantomime went ahead in December 2023 and he’s now advertising a pantomime for December 2024. We’re the reason he got the capital.”

Graham’s colleagues told him that it was a “little bit different” when the institute first sought funding, so he says he got his work boots on and went to see for himself. “We don’t just sit in an office looking at spreadsheets, we do want to get out, we meet all our borrowers, and we talk to them about their business plans,” he says. “We like to fund people that roll their sleeves up and get stuck into sorting things out.”

CV

Name: Gareth Graham.

Job: Chief executive, Belfast Commercial Fund (BCF).

Family: Married to Claire with four children.

Interests: The GAA, he coaches St Brigid’s Gaelic Athletic Club under 16s and exercises by running to work.

Something we might expect: He is a big Antrim GAA fan.

Something that might surprise: Despite being a son of well-known bookmaker Sean Graham, he has no interest in horse racing.

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