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Archive for the ‘Raising Finance’ Category

Alternative finance available via ‘Asset Based Lending’ leaps to £4.3 billion

Monday, December 12th, 2016

asset based finance in the UK
Amount of available lending against machinery and property in the UK

The amount of alternative finance available under ‘asset based lending’ to UK businesses reached a record high of £4.3 billion, up 22% in the last year.
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Banks' lending to SMEs continues to hinder growth strategies

Wednesday, October 22nd, 2014

The economy might be improving but it is still apparent that SMEs are not seeing the full benefits of this, particularly those wishing to pursue faster, more aggressive growth strategies.

According to the Bank of England’s latest Trends in Lending report, the amount of money handed from major banks to small and medium sized businesses has fallen by £400 million in the last quarter. What’s more, the government’s Funding for Lending scheme (FLS) is also failing to benefit larger enterprises, with lending to these firms down £3.9 billion in the three months to the end of September 2014.

The government initiative was designed to help banks offer cheap loans to fuel growth among British businesses amid claims that lenders were reluctant to provide the funds many SMEs were after. The findings of this report suggest that the plan is failing.

The national chairman of the Federation of Small Businesses, John Allan, calls the figures, released on 20 October, "disappointing". He said: "Despite the economy strengthening and the price of credit easing over the past 12 months, these disappointing figures suggest the demand for finance from small businesses is not being met by supply from the banks.”

It is worrying sign that there is a lack of finance available to SMEs through established avenues. Instead these companies are increasingly have to turn to alternative lending options, such as crowdsourcing.

With the economy improving and confidence returning to the vast majority of sectors, businesses are increasingly looking to capitalise on market conditions by pushing for growth. Naturally, a popular approach is to grow inorganically – that is to say, to grow by acquiring other businesses. To do so, a company needs access to capital, which can be difficult to amass even if the business is performing well.

If banks remain unwilling to lends to SMEs – as the Bank of England’s report indicates they are – then they are placing a glass ceiling over the heads of these businesses looking to pursue more aggressive growth strategies.

British Business Bank given green light by European Commission

Wednesday, October 15th, 2014

The UK’s new business lender British Business Bank, created to support and encourage lending to SMEs, has been given the green light by the European Commission.

The Commission confirmed that the bank, set to open before the end of October, doesn’t break any state aid rules.

Created by the coalition last year, the bank will support lending to small and medium-sized businesses that have been hit by stymied bank funding in the wake of the recession.

The intention is to facilitate lending, rather than to compete with existing lenders, by bringing Government schemes together and injecting £1 billion into lending to help more traditional finance providers get moving again. It will also lessen the burden of losses on a portfolio of new loans to companies.

Vince Cable said the new bank is aiming for its first deal with a lender to guarantee some of its loans before the end of October.

The guarantee will be particularly useful for “challenger” banks, the business secretary said, in lending to small companies needing finance and will “expand their scale quite significantly”.

Andrew Van der Lem, one of the bank’s managing directors, said: “We’ll announce the first transaction and then open it to a wider range of participants.”

Struggling businesses failing to find time to create growth strategies

Wednesday, September 3rd, 2014

Two in five small business owners say they have found running a business more difficult than expected.

According to a YouGov survey, 62 per cent of small business owners say their work is a ‘constant challenge’. Furthermore, 44 per cent of owners revealed they have missed a personal occasion because they are too busy running the company, with more than one in 10 even failing to attend their own birthday celebration.

No doubt the turbulent economic climate is contributing to the stresses and strains on SMEs in the UK, with many companies stating that the push of recession might in fact make it harder for them to keep pace with the rate of growth. Another contributing factor is the lack of lending options available for these invariably more cash-strapped businesses; last week it was revealed that lending to SMEs via the Government's Funding for Lending Scheme (FLS) fell again in the second quarter of the year.

To return to the YouGov findings, the main challenges small business owners have faced include managing staff (32 per cent) and accounting or tracking finances (25 per cent). In fact, 22 per cent of decision-makers claim that their small business spends more than 10 hours per day on average on ‘behind the scenes’ admin tasks such as these.

With administrative tasks accounting for so much time, it is unsurprising that 73 per cent of the owners revealed they did not have time to think of ways to expand the business.

Needless to say, having a clear growth strategy is integral for any business, small or large. With funding woes exacerbating the general strains on SMEs, there are many businesses struggling to explore avenues for expansion.

Naturally for those in stronger positions, the opportunity is there for inorganic growth, taking on the struggling businesses to enhance their own offerings.

Alternate funding options on the up

Wednesday, August 13th, 2014

There is an increasing amount of money being supplied to SMEs in the UK by alternative lenders, new figures have suggested.

Money provided to smaller firms by alternative online funders rose from £318 million by last September to £852.5 million by June, according to finance firm Fleximize. The company suggests that the amount of money coming from alternative online sources is increasing by an average of 11.7 per cent every month, with the £1 billion mark expected to be broken by the end of the month.

Max Chmyshuk, founder and managing partner at Fleximize, commented: “Reaching the billion pound lending benchmark is a huge milestone for alternative lenders in the small firms sector. As the industry works more closely with government and banks, alternative finance will become better recognised, allowing us to reach £2 billion and beyond quickly.”

The promising news comes in the light of ongoing controversy surrounding the lending habits of high street banks to SMEs in the UK. Specifically, many of the banks have been criticised for their reluctance to lend money to smaller firms, which are deemed a higher risk.

In times of improving economic conditions, it is vital that smaller businesses have access to the funds they need to grow – particularly those that are exploring options for inorganic growth through business acquisitions. The latest findings from Fleximize indicate the rise to prominence of the alternative sources away from the big name banks, such as online banks, crowdfunding or the First Enterprise Business Agency (FEBA) – a regional lending option supported by the European Regional Development Fund to help those who struggle to secure funding from high-street banks.

For those looking to get their hands on the necessary money for a business acquisition, it is clear that straying from the traditional lenders is an increasingly worthwhile practice.

New Government website rates banks for SMEs

Wednesday, June 11th, 2014

It seems that not a week goes by in which the Government isn’t doing something new to help the UK’s small businesses.

Having come under heavy scrutiny for seemingly ignoring SMEs in the past, the Government is now doing everything in its power to bolster this unquestionably important contributor to Britain’s economic recovery. The latest change: a new website launched to help SMEs compare business bank accounts.

The Business Banking Insight (BBI), which was launched recently, will present smaller companies with five star ratings for 74 different banks based on the opinions of 5,000 businesses. More SMEs will also be surveyed over the coming months to garner more accurate and far-reaching results.

With the banking industry criticised for its reluctance to lend to the supposedly riskier small or microbusinesses, the BBI website will put pressure on them to improve the way they treat and serve this market. It follows news about the alternative lending scheme, in which banks will have to refer companies who apply for finances to a competitor if they choose not to provide the money.

At the Business Sale Report we recognise that legislative change or less official initiatives such as the BBI are important steps in ensuring small businesses get the financial support they need. Furthermore, as the economic outlook brightens month-on-month, and the fortunes of individual companies continue to improve, the confidence to pursue business acquisitions is likely to grow, making lending habits even more important.

Needless to say funding is a critical part to the acquisition process and thus the banks must look to actively support businesses as best they can in this venture.

As Chancellor George Osborne commented: “A key part of our long-term economic plan is increasing competition and choice in banking, and ensuring Britain’s SMEs get the best possible service from their bank. This new survey will be a powerful tool for these businesses, providing them with the means to see who’s up for the challenge and who isn’t.”

Banks' lending habits to SMEs scrutinised again

Wednesday, March 12th, 2014

The UK’s major high street banks are facing another inquiry into their lending habits towards SMEs, amid further criticism from an industry watchdog.

The news comes after MPs launched their own inquiry into the same matter at the end of February. Now the Office of Fair Trading (OFT) has published an update on its own inquiry into business banking, which revealed that the banking industry needed to do more to support, educate and provide for SMEs, lest further action be taken against them.

Small businesses – which might be wishing to gain funds to expand into new markets, geographies, or simply bolster what they are already doing – are unaware of potential sources of finance, according to the OFT report. Specifically, high street banks have been accused of not being forthcoming with information about peer-to-peer lending initiatives and new financial technology lending platforms.

OFT chief executive Vivienne Dews said: “SMEs are a vital driver of growth in the UK. They need access to banking services and loans that meet their needs. Our work suggests there may be competition concerns in this sector.

“We will continue our work over the coming weeks and hand this on to the CMA to conclude the analysis, and decide on the next steps.”

On 25 February, MPs announced that an investigation was to be carried out into the same issue. This inquiry was being conducted by a committee comprising of 13 politicians from across the leading parties, which will look at three main areas: access to finance for SMEs, competition in the sector and the treatment of SMEs by banks.

With dual inquiries, heavy criticism and bad publicity all round, it has not been a pleasant fortnight for high street banks in the press. However, with the Budget fast approaching, it is certainly an area that is going to come under further scrutiny. As SMEs are hailed as an integral part to the UK’s continuing march out of recession, if banks are found to be hindering their progress then it is likely that they can expect an assault on multiple fronts.

Documented proposals 'key to securing funding'

Thursday, January 23rd, 2014

As the M&A market starts to pick up, industry reports suggest that a new class of buyers are coming to the table.

In fact, many of these buyers are people who have only just started to look at buying a company as a feasible option. A slight but prolonged upturn in the economy has made more people consider their options and prompted them to explore a deep-rooted desire to be their own boss and drive up their earning potential.

Roger Mundy, managing director of a business transfer specialist based in Exeter, Beardsley Theobalds, told The Western Morning News that funding is one of the biggest issues for new buyers.

“Besides good credentials, the key to a prospective business owner securing funding is a good understanding of the lender's borrowing criteria and a well thought out and fully documented proposal including a business plan and financial projections,” he told the paper.

While new buyers are likely to find that there are more businesses on the market than there were this time last year, Mundy warned that they will also be facing higher levels of competition. This is due largely to an increase in risk appetite; the economy is on the up and many sectors are taking the opportunity to expand while the future looks bright.

As ever, the key to succeeding in this kind of market is preparation. Buyers need to make sure that their funding is in order before making an approach, and be prepared to show proof of funds as soon as its required if they expect to be taken seriously by sellers.

SMEs 'still not seeking finance'

Wednesday, September 18th, 2013

Research has found that access to finance is still an issue for small and medium-sized enterprises (SMEs), reigniting concern about the strength of the economic recovery.

Although unemployment figures are falling and many industries are showing signs of improvement, without access to finance, SMEs are still on pretty shaky ground despite being the main drivers behind the recovery. Worryingly, research from the Bank of Cyprus UK has found that this appears to be very much the case.

The bank's Owner Managed Business (OMB) Barometer found that companies are very hesitant about seeking investment. Fifty-eight per cent confirmed that they had "no requirement for additional finance in the last quarter", but of those that did, taking on extra debts was not seen as a favourable option.

Around a third (34 per cent) said that they opted to inject personal funds instead of looking for external funding, while just 12 per cent said that they had plans to apply for increased facilities from their bank in the next 12 months, with 11 per cent stating that access to funding is still a "significant barrier to growth."

Tony Leahy from the bank commented on the results: "Given the prolonged difficult climate that OMBs have had to manage through, any signs of optimism should be welcomed and supported.

"Whilst businesses are right to keep a tight grip on their credit management and cash flow until recovery is more evident, it is disappointing that many respondents lack confidence that their bank would support them with additional facilities if needed."

He added that OMBs and banks need to engage in dialogue in order to avoid any current issues but also to "remove any doubt or uncertainty that may inhibit confidence in planning for the future".

Nationwide to delay small business lending

Friday, August 30th, 2013

The government had hoped that business lending would start to increase and help to improve broader economic conditions but things are taking longer than planned and access to finance remains difficult.

Now Nationwide has announced it is to delay its launch into business finance lending until 2016, dealing a further blow to this entrepreneurs and others looking for funding.

Reports from the Financial Times confirmed that the UK's biggest building society put its plans to lend to SMEs on hold, with rumoured connections to tighter regulations as UK regulators are forcing lenders to hold more capital as a buffer, which could well be behind the decision to delay.

Nationwide only announced its plans to enter the SME loans market earlier this year but the decision to delay will no doubt come as a blow to the government's plans to speed up economic recovery.

A spokesman for the building society said: "We have previously said that it is our strategic intention to enter the SME banking market and that we will do this at the right time for the society and our members. That remains our intention."

Policy makers and lenders remain divided on how best to boost economic recovery, but access to finance remains a key issue in the debate. One of the latest points came form the business secretary, Vince Cable, who last month dubbed the Bank of England "capital Taliban" for their tight restrictions on lending which he claims "actually make it more difficult for companies to operate and expand … at this delicate stage of recovery".