Member Article

The advantages of lenders who understand your business

Businesses looking to grow need credit providers who take the time to understand their needs and priorities. That’s why many owners are by-passing traditional routes to finance to find alternative lenders who will go the extra mile.

For an increasing number of Britain’s growing businesses, the right finance deal isn’t just about how much they can borrow and at what rate.

Owner-managers and Finance Directors today are more likely to also look at what service they will get from a credit provider. They want to know, for example, that their lender understands their business and is willing and able to share its experience and expertise to contribute to their firm’s success.

Small and medium-sized enterprises (SMEs) also want to be sure they are getting the type of finance that is best suited to their company – increasingly they are rejecting the “one-size-fits-all”.

So what has caused this change in the attitude towards business finance?

Bank lending has dried up

The credit crunch and ensuing financial crisis resulted in the major UK banks becoming much more reluctant to lend to companies and consumers alike.

Almost a decade later, the situation has barely improved: in fact, figures from the most recent BDRC Continental study of business finance showed that less than a third of SMEs managed to borrow via a bank loan, overdraft or credit card in 2014 – down from 39% in 2011.

Banks are less likely to offer advice

As well as lending less, the big banks have decimated their workforces – which means those firms which do have access to finance are less likely to get any form of personalised guidance or assistance.

To illustrate the point, Government research shows that only 8% of firms received advice from their bank last year compared with 13% in 2012.

The benefits of partnerships are better understood

A further government study has found that businesses which have some sort of mentoring partnership with a finance provider or other expert adviser are far more successful than their rivals. And figures from the Federation of Small Businesses indicate that firms with such partnerships are twice as likely to survive over five years.

Conrad Ford, Managing Director of advisory firm Funding Options, says: “Contemporary businesses should not only be looking in the direction of the familiar banking groups who might once have been seen as the only possible route to finance. It’s crucial in fact for small business operators to have an open mind and to consider the full range of funding options and loan facilities that are now available.

“While the retreat of mainstream banks from the realms of SME lending has made life rather more difficult for small companies in general terms, the good news is that emerging alternative lenders often offer more specialist services.”

The right finance company can help your firm grow, not just by providing cash but by:

• Providing you with funding which adapts in line with your business
• Working with you to ensure you can effectively manage the credit you receive
• Passing on insights gained from working with firms in your sector or at your stage of development

Figures from the Close Brothers Business Barometer survey for March 2015 show that finance is the major barrier to SME growth – a quarter of firms say they need more money to invest in staff, while a fifth are suffering from cash flow problems, for example.

This is why, today it is more important than ever to find a finance partner who understands the needs of your business and can collaborate with you to deliver healthy and sustainable growth.

Pause for thought

• Think about how your company could benefit from some sort of external business partner, and explore the options
• Consider the full range of funding options and loan facilities that are now available
• Look for finance providers who will take the time to understand your business needs and priorities

See how collaborative relationships can take your business to the next level with the guide Stronger Together: The case for working in close partnership with a funding provider. Copy and paste this link into your brower: http://bit.ly/financepartnereguide

This was posted in Bdaily's Members' News section by David Thomson .