Improving SME Take Up

Boosting specialist lenders

The wider finance market has had a very good 2018 and it has been clear from all the roadshows and seminars I attended on behalf of the Financial Intermediary and Broker Association (FIBA) last year that the sector is in rude health, with demand from businesses for financial assistance and advice remaining strong and the number of different sources for finance at an all-time high.

I presented the report and survey into small and medium-sized enterprises (SME) finance at Westminster in November to an assembled audience that represented Government, regulators, SME trade bodies and lenders to business. It is clear to me that there is now the joint will to ensure that SME access to finance in the future will have a more effective profile. One of the major findings of the report was that, although there has been a huge increase in the lending facilities available to SME firms, just under half who applied to their banks were declined and half of those who were declined then chose to look no further, believing that there were no more avenues to explore.

Asked why they had given up looking, SME owners cited accessibility, lack of understanding and confidence in lenders they had not heard of as contributory factors. Also just under a third believed fees and/or interest rates charged by non-high street lenders would be too high. On the other side of the coin, lenders also believed that trust among SME’s was a factor in small businesses not pursuing other options with lenders they had not heard of, or whom they felt might not have longevity.

Funding may indeed become less abundant in 2019, depending on what deal, if any, is conducted with the EU. However, the opportunity to provide SME’s with greater confidence when seeking new funding is still likely to be the major consideration this year.

Brands can take a long time to establish. Our main clearing banks have had at least a century or more to become household names. So, what do we do to help the newer funders who want to service SME’s? Subsidising financial institutions and their marketing is not what Government is there for.

However, creating a new kitemark standard via British Business Bank, or the equivalent of an ISO, to give specialist lenders meeting certain criteria, would go a long way to providing the extra credibility they need in the eyes of those SME’s that currently feel they have no other option than high street lenders, or to not borrow at all.

Support from Parliamentarians of all sides are keen to come together and work to see what practical measures can be taken to give SME owners confidence in the capabilities and longevity of the array of funders and lending options now available.

As featured on Business Moneyfacts