Removing ‘high-risk’ SME stigma
Many SMEs have breathed a sigh of relief with some of the recent Budget measures introduced, many of which will save significant amounts of money for them. But will this be enough to address the impact of previous financial challenges faced by small business owners? Maybe not – just 69,300 SMEs had bank loan applications accepted last year. More needs to be done to support them.
Due to the pressures facing them, many lenders have prioritised protecting themselves since the 2008 economic crash. Unfortunately for SMEs, this means that stringent criteria is often in place and lenders may turn away prospects if they don’t meet their requirements.
Sadly, this “computer says no” attitude leads to the misconception that there are swathes of high-risk SMEs in the UK. This simply isn’t the case – just because a business doesn’t meet all the conditions in place doesn’t make them a bad business. Increased options
SME’s should turn to brokers as a key support network to enable them to understand more about the types of funding that is available from alternative lenders.
For example, brokers can evaluate business assets that can be used as security for additional short- or long-term funding. Taking this approach, anything from factory equipment to an unpaid sales ledger can be used as an asset to generate additional funds. This actively increases the security and therefore reduces the risk associated with the SME, that may have previously been rejected. This, alongside other funding options such as trade and bridging finance means that options are out there if SMEs work with the right brokers.
High risk, high reward
By viewing “high-risk” businesses as an opportunity, brokers can create long-term relationships with SMEs by constantly adding value through business consultancy while finding the funding partner that helps their business thrive. In fact, it’s likely the broker that takes them under their wing, supports them and connects them with the right lender will become the partner that SME turns to whenever it needs help in the future.
Constant rejection can sap the morale from even the most positive of working environments and by prioritising flexible funding partners with broad portfolios, brokers can offer the solution SMEs need. Doing so will inevitably help everyone involved and create a more sustainable business environment.