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Securing SME funding – Highlights from the Midlands Business Insider Round Table

ART Business Loans was proud to sponsor Midland Business Insider’s recent round table which brought together a panel of experts to discuss the funding landscape for SMEs. Here’s our summary of the key topics discussed – you can read the full article as published by Midlands Business Insider here: MBI October SME funding round table

The variety and availably of funding for SMEs has never been greater. So why do so few businesses actually use it, and why do so many opt for ultra high interest providers on the internet?

ART Business Loans’ chief executive, Steve Walker, joined the panel to discuss this issue alongside representatives from finance providers and advisers including banks, CDFIs and investors.

How good are the funding options now available for SMEs?

Steve Walker, chief executive, ART Business Loans:

“The funding environment has changed dramatically. A few years ago, banks provided something like 80% of SME funding. Now more than half of SME lending is made by alternative funders, and growing.”

The panel discussed that, since Covid, the main banks have moved away from small businesses and don’t really concern themselves with any funding of less than £250,000. There’s a whole ecosystem of reputable funders wanting to support SMEs, but it’s a struggle to reach them. This is an exciting time to raise finance because there are so many options available, but companies should be cautious about rates.

Are some businesses choosing the wrong funding options?

Alison Bradley, director, Central Business Finance:

“It is a real concern that so many SMEs go to algorithm (online) lenders which come top in Google searches offering interest rates of 60-70 per cent. Those sort of repayments put them on a path that is sometimes impossible to get off.”

Other key issues include lack of understanding amongst business owners of their options, lack of confidence amongst diverse communities in accessing funding, lack of regulation in the market and preparing for finance.

What’s the level of awareness among SMEs about their future funding options?

Surjit Kooner, investment director, Midven:

“Something like 60 per cent of businesses turned down by the bank do not seek finance from another source. That’s mainly due to lack of awareness of possibilities. They don’t know what else is out there.”

The panel highlighted that finance is not just a matter of loans and overdrafts, there are levels of funding appropriate to the different points in their development. Businesses also need to be made aware that they need to be investment ready with good projections and a strong grasp of their figures. Most businesses fail not because of lack of profits but lack of cash because they failed to plan.

What challenges are there for businesses in getting good funding advice?

Steve Walker, chief executive, ART Business Loans:

“Over the past 20 years there has been a big change in support for smaller businesses that have passed the startup stage: frankly it has declined and most do not get the professional help they need to find appropriate finance. We need others, particularly the broker community, to help. Otherwise, we will find more businesses heading to “algorithm lenders”, such as the ‘Wonga-like’ online lenders, and their high interest rates.”

Other issues include the lack of time that SMEs have to research funding options, the importance of educating SMEs about the financial options that are available outside of mainstream banks and the low quality of business support made available to companies.

How can we improve the advice that’s being given?

Mark Selby, Debrett’s Private Finance:

“With training, many small accountancies could be an effective route for raising awareness of funds among tens of thousands of clients.”

Pam Sheemar, regional enterprise director, NatWest Bank:

“One solution must be to bring that diverse group of funders out there together to see how they can co-operate in raising awareness and cross-referring business.”

 

 

October 23, 2024 2:35 pm

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