In the short term this is slowing the growth rate (to 20 rather than 34 per cent), but the pay-off should start to come through in 1997. Its chairman, Hamish Grossart, says: "The group has still only achieved a fraction of what is possible in its chosen markets."
The size of the group's rivals, which are mostly owned by the major clearing banks, gives an idea of the potential. For example, Forward Trust, part of Midland Bank, is 40 to 50 times the size of EFT measured by assets. With EFT's higher margins, though, the disparity is far smaller in profits terms.
In each of its four product areas at the moment EFT has less than a 1 per cent market share, allowing great scope for growth.
As for those products, Mr Grossart cites "wheels" as a common theme. The commercial asset finance division provides a significant amount of vehicle finance; the consumer finance division, Haydock Finance, acquired last year, specialises in car finance; there is a large and very fast- growing contract hire arm that supplies heavy commercial trucks; the finance broking division arranges finance for buses and coaches.
Some statistics give the flavour of the rate at which the group is growing. The branch network has more than doubled over the last year to 14, stretching from Glasgow to Bournemouth. Staff numbers have risen from 97 at the end of 1994 to 209 at the 1995 year-end. In the technical jargon of the finance industry, "net outstanding receivables" (money owed to the group) and contract hire assets increased by 82 per cent over the year to pounds 125m while shareholders' funds grew by 44 per cent to pounds 21.7m.
There is ample headroom in the balance sheet to support further growth. By the standards of other industries, banking-type businesses operate with phenomenal levels of gearing. Forward Trust, for example, might have borrowings of 10 to 15 times shareholders' funds. By comparison, EFT's net indebtedness at the year-end was just 4.4 times. Indeed, the group has just completed a wholesale negotiation of debt facilities to give itself extra firepower for expansion. Undrawn facilities at the year-end totalled pounds 29.4m.
The quick road to ruin in banking is to make loans on thin margins to uncreditworthy customers. EFT tries not to make those mistakes. The group does not chase volume and claims to win business on the basis of flexibility and professionalism rather than price. Since it began making loans in 1987 it has had a separate credit risk assessment division. The man who deals directly with the customer does not authorise the loan. The group had some bad debts between 1988 and 1991 but nothing on the scale of the experience that left the big banks reeling.
Mr Grossart also points out that in areas such as consumer finance, which might look risky, there is usually enough value in repossessed cars to repay outstanding loans.
There are ambitious expansion plans in all four product areas. The commercial asset finance division is mainly centred in Scotland but opened its first English branch in Blackburn, in January. More branches are expected to open in England this year.
The consumer finance division increased lending by 18 per cent to pounds 34.5m and has opened three new branches over the last year. Growth will come in 1996 from further branch openings and possibly acquisitions.
The contract hire division, Alltruck, has six branches in the Midlands and Yorkshire. The fleet has grown from 141 vehicles in 1993 to 469 at the end of 1995. Further rapid growth is expected with an 1,000-vehicle fleet in sight.
Finance broking, a fee-based business, is the smallest of the divisions. Commission income rose by 20 per cent over the year and the group is targeting areas outside bus and coach finance.
Jamie Matheson, an analyst who follows the group at Glasgow stockbroker, Bell Lawrie, is looking for profits to reach pounds 5.3m this year, against pounds 4.5m before exceptional items. A further meaty advance to pounds 7m-plus is also reckoned in 1997 as expansionary moves bear fruit. On a 105p share price that last figure drops the p/e to around 11 with a dividend yield approaching 3.5 per cent, which looks good value for such a fast-growing business. Buy.