This month we’re focusing on helping UK businesses get access to the wide variety of alternative forms of finance available. For most businesses the first port of call is their bank – but what if they turn you down or can’t give you the amount of funding that you need?
Don’t worry – our latest ebook outlines the funding options available to you at each stage of the business lifecycle and one things for sure, it certainly isn’t over just because ‘the bank says NO’.
Overwhelmingly, the message of the past few years has been that banks and small businesses are less than partners and more like adversaries.
As the economy continues on its hesitant growth path, there are signs that bank lending is picking up. Over the course of 2014, £29 billion in loans to SMEs were approved, an increase of nine per cent on 2013, according to figures from the British Business Bank.
And while that increase must be a good thing, some would say this improved picture is only happening because of gradually strengthening balance sheets at the banks and because of the policy focus on this area over the past few years.
The British Business Bank, after all, arguably only exists because this part of banking lost its way and became dysfunctional.
Lending to entrepreneurial and growth businesses – the engine room of the economy – stalled after the credit crisis and, in spite of that recent uptick, has yet to recover to pre-crisis levels. And the problem seems to be a low level of confidence in what the banks have to offer.
An SME Banking Market Study carried out by the Competition and Markets Authority last year found low rates of switching between banks. The majority of SMEs, 71%, approached only one provider on the last occasion they sought finance, even though the level of satisfaction with that service was found to be low.
Meanwhile, alternative finance providers are growing at a fearsome pace – innovating around products, customer service and offering speedy decisions. According to KPMG, the major retail banks could lose up to ten per cent of their lending market share to alternative providers over the next five years.
Banks have continued to answer their critics with the line that it is demand that has dropped.
But if demand drops is that the fault of the market? The low satisfaction levels among SMEs reported by the CMA suggest these problems are entrenched. Business people in this sector do little in the way of comparison shopping when it comes to bank loans and other services because they believe there is not much to differentiate products and services from one bank to another. They also find both business current account and loan pricing to be overly complex.
A recent report from the Federation of Small Business found that over half of SMEs surveyed said the credit available from banks was unaffordable.
The solution: access to quick positive decisions on lending to SMEs that want to borrow to grow. A thriving SME sector, after all, will bring about a more sustainable recovery.
What to do if the bank says ‘NO’: