October 2018
By Adam Tyler, executive chairman at FIBA
It is hard to ignore the way in which technology is looking to revolutionise the lending sector and many advisers might be feeling concerned that these advancements are a threat to their businesses. The fear that SMEs will start going direct to lenders who offer a simple end-to-end online solution to their funding needs is, in my opinion, an overreaction. Yes, the technology exists, and some offerings have been quite successful, but let’s not forget that traditionally business owners have been approaching their own banks for funding for years, as a logical first point of call.
The post-credit crunch retreat of the main banks from funding and the subsequent centralisation of decision making - reducing the role of local branch manager to merely a referral position - has hastened the SMEs’ need for a new interface to advise and process deals. Finance brokers have done very well stepping into the vacuum left by the banks. Their ability to call on an ever increasing number of possible lending solutions and to tailor these solutions, is more often than not eminently more suitable than a ‘one size fits all’ offering from their own banks.
Technology, when adopted by brokers to serve their own needs, is the perfect riposte to the rise of robo-advice which maintains that its major USP is that it utilises little to no human intervention. With the benefit of 30-plus years in the commercial finance world, many of them as a broker myself, the vital aspect we make available is access to human expertise.
Never underestimate the value that you, as a broker, bring to your commercial customers. Backed up by a wide range of lending options, the skills to efficiently ensure safe passage from enquiry to completion, and the priceless ability to provide that key personal contact which no program - no matter how sophisticated - can hope to match, are the reasons why the commercial specialist finance broker will remain a primary source of new business for lenders, both today and in the future.
I believe that the main challenge for finance brokers is not of a technological nature but is rather the growing reluctance of SMEs to borrow. We can look into the reasons why this is, but the statistics tell us that almost two thirds of UK SMEs are not willing to fund expansion through borrowing.
The BDRC SME Finance Monitor found that only 34% of SMEs used outside finance in the second quarter this year.
The elephant in the room that is Brexit is an easy target, but the general economic uncertainty, allied to concerns over the treatment of some SMEs by some lenders, has helped to add to this reticence in seeking outside funding.
Yet, there is now a clear danger that UK businesses could become woefully underfunded at a time when they should be pushing ahead, identifying and chasing down opportunities. There is clearly no lack of financing options, but the BDRC data also points to current business unfriendly legislation and overwhelming red tape as being supplementary reasons why SMEs have drawn in their horns.
Finance specialists like you are not only the best ambassadors to take forwarded the message of how financing for the future is a positive way to grow businesses, but also to demonstrate how the process of securing the right package can be fast and trouble-free thanks to your intervention.