Business Money November issue
Adam Tyler, Executive Chairman - FIBA
It is hard to ignore the way in which technology is looking to revolutionise the lending sector and many advisers might be wondering (or not) how the tech revolution can possibly help their businesses. The fear that SME’s will soon have a direct to lender offering which is a simple end to end online solution available from very lender to their funding needs is unfounded. Yes, the technology exists, and some offerings have been partially successful, but let’s not forget that traditionally business owners have been approaching their own banks for funding forever, as a logical first point of call.
The opportunities that have been presented in the last 10 years by the increase not only in the number of lenders and funders in the market, but the retraction into the market from some traditional sources has hastened the increasing need from SME’s for a new interface to advise and provide process to complete deals. Finance brokers have done very well stepping into the vacuum and creating new markets. Their ability to call on increasing numbers of potential lending solutions, thanks to the rush of new funders, and ability to tailor make funding solutions, is more often than not, eminently more suitable than a ‘one size fits all’ offering that we were all used to in the past.
Technology, when adopted by brokers to serve their own needs, is the perfect riposte to the rise of robo-advice, which believes that its major USP is that it has little or no human intervention. With the benefit of 30 plus years in the finance world, many of them as a broker myself, the vital aspect we bring is access to a human expert. Never underestimate the value that you, as a broker, bring to your 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 vital human contact is still very much in demand, these are the reasons why the specialist finance broker will still be a great source of new business for our lending community, both now and in the future.
Personally, I believe that the main challenge for advisers does not lie with threats from technology, but the need for awareness of the range of funding that is out there. If you couple this with the reluctance of SME’s to borrow, 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 SME’s used outside finance in the second quarter this year.
Of course, Brexit is an easy target to blame, but the general economic uncertainty, allied to concerns over the treatment of some SMEs in certain quarters, has helped to add to the reluctance to seek 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 legislation not being business friendly and overwhelming red tape as being supplementary reasons why SME’s have drawn in their horns.
Finance specialists like you are not only the best ambassadors to take 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.
Although it does not affect many readers directly at the moment, for those who already work in a highly regulated sector, the concerns over “regulation creep” does leave them scratching their head as full regulation is already in place. But in other sectors such as specialist property finance or unsecured business lending for example, the new wave of FCA regulation beginning with Consumer Credit way back in 2014 through to the potential changes being brought in by the expansion of the remit of the Financial Ombudsman have been much used in the coining of this phrase.
With all the challenges which face the industry and the admission that a post Brexit world is going to tax it to the utmost, it is good to see that the FCA has not lost focus on other areas, where the industry continues to need a strong lead. The timely intervention to extend the FOS remit is another example of the regulator not losing sight of the need for positive guidance.
While there might be naysayers who do not believe that the regulator should be straying ‘off piste’, no one can dispute the balancing act which the FCA has to perform in order to find a way between the competing requirements of customer protection, the practicality of enforcement and the sometimes contradictory overlay from our political masters and for a little while longer, our friends in Brussels.
Perhaps when the dust settles post Brexit, government can ensure, to everyone’s satisfaction, that it will provide a clearer set of maps which precisely identify the priorities the country needs to address and the FCA’s remit to deliver them.