Stop me if you’ve heard this one before: “A small business owner walks into a bank and asks for a loan.” Admittedly, it’s not a brilliant opening line, but for most small businesses, access to funding is no joke.
SMEs – The Lifeblood of the Economy?
We often hear that SMEs are the lifeblood of the economy, and for good reasons. In 2019, according to the government’s Department of Business, Innovation and Skills (BIS), of the UK’s 5.9 million private businesses, 96% employed fewer than 10 people, while SMEs accounted for 60% of all employment and 52% of revenue (you can read more here).
Despite their crucial role in the UK economy, SMEs often struggle to obtain funding. The banks always claim they’re ready, willing and able to lend, but the reality can be quite different – if you’re reading this article, then we know you know this.
For many smaller and younger businesses, access to funding can be one of the most difficult challenges to overcome. Even though SMEs provide the majority of jobs in the UK, they receive a tiny share of all bank loans.
The importance of access to finance cannot be overstated. Funding for growing businesses is essential if they are to take advantage of favourable market conditions, or make a new investment, open up a new market, or develop a new product. Funding often needs to be quick, and certain.
Unfortunately, for all kinds of reasons, it rarely is.
Coronavirus – Piling on the Pressure
As if the situation wasn’t bad enough already, the coronavirus pandemic has seen credit appetite from banks and other lenders dry up, at the very time when struggling businesses need it the most.
Yes, the government has stepped up with its excellent CBILS, bounce-back loan and furlough schemes, but these were temporary measures designed to soften the impact of the pandemic and minimise inevitable business failures and redundancies.
It’s not all doom and gloom, though. Even though the government won’t throw money at businesses forever, there are still plenty of specialist lenders who are more than happy to lend to businesses and other commercial projects. Most don’t have familiar names or high street premises. But they are out there, and they’re more than willing to lend on the right projects.
Commercial Finance – Time to Seek Professional Help?
The best way to find the specialist lenders is to talk to a commercial finance expert who can help you find the best source of funding for your business. Have an initial conversation to explain your situation and what you need the funding for. If they’re a reputable broker, they won’t charge you for this initial conversation, and they should give you an honest assessment, based on what you’ve told them. In short, they’ll give you a good sense of what is and isn’t possible.
Don’t be put off if you’ve already applied for finance and been rejected. Enthusiasm and persistence are what’s needed, not to mention the resilience required to handle rejection. Business funding is a numbers game: roll the dice enough times, and you’ll eventually get the winning number.
When choosing a commercial finance broker, look for one who is a member of industry organisations such as the National Association of Commercial Finance Brokers (NACFB) or the Financial Intermediary & Broker Association (FIBA).
Avoid the Wild West of Commercial Finance Brokers
Surprisingly, the UK commercial finance sector is largely unregulated, so it’s vital that your broker knows their stuff, and will genuinely work in the best interests of you – the client – rather than their own. Most do, but we recommend that you at least check a broker’s website to satisfy yourself that they know their onions.
Find the people involved, and then take a look at their LinkedIn profiles. This should tell you within a minute or two whether they have the experience and expertise to find you finance you need, on the best possible terms. Look for a decade or more of working in banking and finance, particularly people who have worked at large well-known banks, or other lenders.
The best brokers will work with a large panel of lenders, including banks, specialist lenders, and also the online platforms that have grown out of peer-to-peer or crowdfunding sites. They will know, based on what you tell them, which lenders to approach, and how to maximise your chances of obtaining the finance you need.
Business Finance – The Final Word
Commercial funding is out there, if you know where to look. A good broker will know which lenders to approach. And they’ll advise you every step of the way. They’ll help you prepare your loan or finance application so that the information is complete and packaged in a way that the lender wants to see it.
They will demystify things for you, give you the confidence that they will be able to help you, and will help you navigate the complex maze of commercial finance.
They’ll also be able to tell you whether you might qualify for funding that you may not have considered, such as asset-based finance, or maybe factoring or invoice discounting. Every business is different, and every commercial finance deal is different. That’s why having trust in your broker is vital.
Ultimately, a reputable commercial finance broker will become your finance partner. They will do most of the heavy lifting, leaving you to do what you’re best at – running your business.
If you’re interested in having a no-commitment chat with one of our commercial finance consultants, feel free to contact us. Call us on 01473 598132, email us email@example.com, or send us a message via our contact page.