A Perfect Storm for Businesses?
The news from the FSB this morning that businesses are finding the banks very reluctant to lend, and that the smaller the business, the more pronounced the problem, does not come as a surprise to any of us working with SME’s.
Lending to small businesses has always been an inherently risky business and the recession has amplified these risks. Couple this with all the other capital/ balance sheet challenges which the banks face and you can see that this was always going to happen. It is also worth underlining that the situation as it pertains to the banks is unlikely to change for some time, at least until they have repaired their balance sheets and digested BASEL II/ III/ LIBOR/ mis-selling etc.
In addition, and also due to the recession, central government took an axe to the RDA’s and to Business Link. The former have been replaced by local enterprise partnerships (LEP’s) but they have fractional amounts of funding and are still, in most cases, at their strategic thinking/ planning phases. This has therefore removed a hugely important resource for SME’s – many of whom gained valuable advice, guidance, and support from these bodies.
However, we live in an entrepreneurial society and these gaps have been identified as opportunities!
Right now we are in a very low interest rate environment and have been so for over 3 years – this means that returns on cash in the bank are at their lowest. Investors have started to form investment firms to increase their returns, primarily by investing in businesses. This form of lending, often called ‘peer to peer’ is becoming more and more prevalent and has cushioned the effects of the banks lack of appetite. There are more and more of these investment groups springing up, some better than others, some with declared interests only in certain sectors.
As the normal sources of support and advice have disappeared many small businesses have found life difficult, as they are often unable to afford formal non- executive directors. That said if you know where to go there is excellent advice and guidance out there. This takes the form, simplistically, of either help from a consultant directly, or help from a peer, ideally facilitated and managed by a consultant.
The first route is straightforward - the owner/ manager just needs to make sure that the consultant is the right fit and has the right pedigree. The latter is a bit more difficult to arrange but ultimately can be hugely beneficial.
If you think that you need help raising finance, or would benefit from some independent advice then Hawkmoor would really like to hear from you.
If you are particularly interested in peer-to-peer mentoring and would like to know more, why not attend our forthcoming free taster session – details and free ticket registration are on the link at the foot of this article.
This was posted in Bdaily's Members' News section by Phil Dibbs .
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