Archive for the ‘Business Finance News’ Category

Banks and Business Continue to be Cautious When it Comes to Credit

Posted on: October 12th, 2018 by blsuser1 No Comments Tags: , , , , ,
Posted in Business Finance News

The latest quarterly Credit Conditions Survey from the Bank of England for Quarter 3 2018 reveals that both bank and businesses appear to be adopting a cautious stance when to comes to lending and borrowing.

This quarterly survey of bank and building society lenders is to assist the Bank of England in understanding trends and developments in the banking sector. Lenders are asked about their experiences over the past three months and the coming three months in terms of lending to businesses of all sizes.
The Bank has reported that the overall amount of lender credit made available to businesses of all sizes was unchanged in Quarter 3. Within the total available finance, the availability of credit provided to small businesses was reported to have increased and was unchanged for medium and large businesses. So all appears well from the lender’s perspectives in the last Quarter.

However, the Bank’s monthly reporting of amount of credit taken by small businesses shows that the total amount of lending in the 12 months to August has essentially flat-lined this year. It seems that small businesses have limited appetite to borrow and not heeding the bank’s message that they have funds to lend.

Looking ahead to the next Quarter, this lack of appetite to borrow is reflected in lender’s view that the overall amount of credit they will make available in Quarter 4 is expected to decrease slightly.

Both borrowers and lenders seem to be battening down the hatches.

As well as concerns about the economy and the political situation, small businesses may also be wary of taking on additional debt due to concerns on ability to pay. The Credit Conditions Survey highlights that lenders have reported an increase in default rates, which are missed payments, on loans to businesses of all sizes in Quarter 3. Lenders though are expecting default rates to remain unchanged for businesses of all sizes in Quarter 4.

It would appear that an element of uncertainty creeping in for both lenders and businesses in terms of what lies ahead in the last Quarter of 2018.

Peer-to-Peer Lending Continues to Grow

Posted on: September 28th, 2018 by blsuser1 No Comments Tags: , , , , , , ,
Posted in Business Finance News

The alternative finance market continues to power ahead in terms of support provided to businesses and individuals. The latest figures released by the Peer-to-Peer Finance Association (P2PFA) reveals that the peer-to-peer lending industry lent £750 million which brings the total lent by its members to just under £10 billion.

The P2PFA was established in 2011 as a representative and self-regulatory body for peer-to-peer lending in the UK. There are 8 members of the Association being Crowdstacker; Folk 2 Folk; Funding Circle; Landbay; Lending Works; Marketinvoice; Thin Cats, and Zopa.
The Association has reported that new member’s lending to businesses and individuals has grown by almost £100 million quarter-on-quarter over the last year.

To demonstrate how peer-to-peer is now going mainstream, the Association has highlighted that net lending (defined as total lending minus repayments) of £191 million over the same period was greater by £60 billion than the combined net lending of the major high street banks which stood at £130 million.

On average, three quarters of the lending support UK small businesses. The disparity between the P2P lenders and the traditional High St banks is further highlighted by the latest figures from UK Finance which show that in the 12 months to August 2018, bank lending to businesses fell by 2.1%.

The P2P sector continues to fill a gap being left by the banks and no doubt has been a lifeline for many small businesses.

Late Payment on the Rise

Posted on: December 22nd, 2017 by blsuser1 No Comments Tags: , , , ,
Posted in Business Finance News

The culture of late payment to UK SMEs is a regular topic in our weekly Business Finance Bulletin and the reason for this is that delayed payment hurts many businesses by undermining their growth and the value they bring to the UK economy.

A new survey from business finance company MarketInvoice reveals that 62% of invoices issued by UK SMEs in 2017 (worth over £21b) were paid late, up from 60% in 2016.

The survey found that the average value of these invoices was £51,826. A third of invoices paid late took longer than two weeks from the agreed date to settle – some of which took almost 6 months to be paid.
Sectors

Sectors that frequently pay late included the food & beverage industry (83%), energy businesses (80%) and wholesalers (79%). Meanwhile, those who took the longest to pay included transport businesses (25 days), utilities
(23 days) and those in media sector (21 days).

Regions

In terms of regional experiences, businesses in Northern Ireland were found to be the worst late payers with 93% of invoices paid late. East Anglia (68%) and East Midlands (66%) came in second and third respectively. Scotland was the best of the worst, where half (53%) of invoices were settled late.

Countries

The Marketinvoice research also examined invoices sent to 93 countries. German companies were the worst late payers, taking an extra 28 days to settle invoices from agreed terms. French firms took a further 26 days and businesses in the USA 20 days.

While UK companies (66%) often pay invoices late, those in the USA (71%) and continental Europe (73%) are even more likely to delay payment. However, the UK still takes twice as long (18 days) to pay UK suppliers than counterparts in Europe (9 days).

To lessen the impact of late payment Marketinvoice suggests,

– making T&C’s clear from the outset
– chasing payments
– and enforcing the right to claim compensation from late payments

The Duty to Report measures, which requires large businesses to report on invoice payments twice yearly, that came in to force earlier this year will help but how effective it will be remains to be seen.

Use of Invoice Finance and Asset-Based Lending on the Increase

Posted on: December 21st, 2017 by blsuser1 No Comments Tags: , , , , , , , , , , ,
Posted in Business Finance News

business finance 2The invoice finance and asset-based lending sector is providing an increasing share of finance to UK businesses according to latest data released by UK Finance, the trade body for the finance industry.

The amount of money raised via invoice finance (a method of unlocking cash tied up in invoices) and other asset-based finance such as leasing and HP, is up 13% year-on-year. The total amount outstanding sits at just over £22 billion, which is the highest advances figure ever.

There are just over 40,000 UK business now using this form of finance, although this number has remained relatively static.

With the government focused on driving up UK exports, the exporting picture is particularly strong, with sales from clients through export invoice discounting facilities up 33% year-to-date, and export factoring up 11%.

UK Finance wants to see the government do more to encourage smaller businesses access funding via these sources. They are calling on the government to bring forward long-awaited legislation to give more smaller firms access to much-needed funding.

Many small businesses find themselves trapped by o-called ‘ban on assignment’ clauses, which are sometimes imposed by larger businesses on their smaller suppliers. This can restrict the finance options available to those supplier businesses. To address this, the UK Government is expected to bring forward revised Business Contract Terms (Assignment of Receivables) Regulations in the New Year.

Government Launches Small Business Commissioner to Help Resolve Payment Disputes

Posted on: December 20th, 2017 by blsuser1 No Comments Tags: , , , , , ,
Posted in Business Finance News

If you are one of the estimated 20% of small businesses which have run in to cash flow problems due to late payments, then help may finally be at hand.

The government has finally launched the complaint handling service of the Small Business Commissioner to ensure fair payment practices for small businesses. This follows the appointment of Paul Uppal to the role of Small Business Commissioner in October 2017.

The Commissioner’s website has also gone live, providing guidance on payment issues including how to take action if a payment is overdue.

Margot James, Small Business Minister, says that £14 billion is owed to UK small businesses and estimates that taking action on late payment could potentially deliver a £2.5 billion annual boost to the economy.

The Small Business Commissioner’s website provides guidance on how to ‘check, chase, and choose’ in respect of dealing with unfair and late payments, that is:

– check if the right information has been provided to the right people in order for an invoice to be paid
– chase effectively when a payment is overdue
– choose how to take further action, including the option of submitting a complaint to the Small Business Commissioner

You can visit the Small Business Commissioner website here.

Demand for Small Business Borrowing Slips but Success Rates Are Up

Posted on: August 25th, 2017 by blsuser1 No Comments Tags: , , , , , , , , ,
Posted in Business Finance News

The latest ‘Voice of Small Business Index’ from the FSB for Quarter 2 to June 2017, shows that only 14 per cent of small firms applied for external finance in the three months to June.

The FSB commented that the low figures are being driven by lower investment intentions and confidence levels on the back of Brexit and economic uncertainty.

The survey comes out on the back of the latest statistics from UK Finance (the finance industy’s trade body) which revealed that bank lending to businesses fell by £698m in July.

However, it’s not all doom and gloom.

Thumb UpOf the 14% of businesses which said they had applied for finance in the three months to June 2017, the share of those successfully getting a ‘yes’ stood at 74% in the quarter, up from the 71% in the same quarter a year ago.

This also compares very favourably to the 54% seen in Q2 2015. So, the more growth-focused businesses are getting what they want.

The survey also shows that the lending landscape continues to evolve with continued evidence of diversification away from traditional bank lending. Among small businesses that had applied for credit, the share applying for bank loans declined from 39% in Q2 2016 to 23% in Q2 2017.

Where are small businesses going for their finance needs?

The survey reveals that the proportion using asset-based finance, such as invoice financing, has doubled from 17% to 34%.

Our message is that if you are in growth mode, there are plenty of finance options out there.

Awareness Levels of Alternative Sources of Finance is Still Low

Posted on: July 28th, 2016 by blsuser1 No Comments Tags: , , , , , , , , , , ,
Posted in Business Finance News

In our dealings with growing businesses on the search for finance it’s always surprising how many still believe that outside the traditional High Street banks there are few alternative options to consider.

When we mention crowdfunding, short term loans, merchant cash advances and other alternative sources of finance, there is typically a vague acknowledgement that they have heard of such sources but nothing beyond that.

This lack of appreciation that there are sources of finance to tap into outside of the banks has been highlighted in a recent survey carried out by the British Chambers of Commerce and Bibby Financial Services.

The survey of more than 1,000 businesses provides an interesting insight into awareness levels of the primary sources of finance. Perhaps not surprisingly, awareness of overdraft facilities came out top at 93%, even though banks are not as keen in extending overdrafts as they once were!

Next on the familiarity chart are bank loans and commercial credit cards with awareness levels of 88% and 86% respectively. The growth seen in the usage of leasing and HP since the credit crunch is reflected in an 86% awareness levels amongst UK SMEs.

What sources of finance are languishing near the bottom of the pile though?

Trade finance facilities were known by 46% of businesses, peer-to-peer funding by 42% and angel funding by 39% of those surveyed. Propping up the sources of finance list standing at 19% awareness levels is mezzanine finance (a hybrid of debt and equity). No surprise there perhaps!

Despite what you may think there are a plethora of options available but the key problem is that you simply don’t have the time to search the market for the best options.

In fact, one of our clients this week said that they prefer to use us to source finance because we immediately know where to go thereby saving them time. That where commercial finance experts come in.

One other interesting finding from the survey was that of those firms which were successful in securing finance but ultimately rejected the offers, 54% did so because the interest rate offered was too high.

The main question though is ‘too high compared to what?’

Alternative finance is by its nature typically more costly than traditional High Street lenders due to the higher level of risk and the lower standard of security they are prepared to consider. For the alternative finance industry, the next step after raising awareness levels amongst business owners, is to resolve the pricing perception.

Our advice to clients is as long as the finance available to you allows you to achieve what you want to do, benchmark it in the market to check it’s not too wide of the mark, then look beyond the price and get on with building your business.

Funding for Lending Scheme Extension is Good News for Smaller Lenders and SMEs

Posted on: November 30th, 2015 by blsuser1 No Comments Tags: , , ,
Posted in Business Finance News

The Bank of England’s announcement that it is providing a two-year extension to the Funding for Lending Scheme (FLS) has given a boost to the growing number of challenger banks and SMEs on hunt for cheaper finance and access to funding.

The FLS was launched in 2012 at the height of the credit crunch and was designed to provide banks with a cheaper source of funding which in turn would be passed onto SMEs in the form of cheaper loans.

As we have discussed in previous blogs in the years since the scheme was launched it has drawn criticism that its effectiveness was questionable. This may be the case amongst the High Street banks where usage has been patchy (except for part Government-owned Lloyds) but the rising challenger banks have taken advantage.

The latest figures available to the end of June 2015 in respect of the second tranch of FLS funding show how much banks which have accessed the scheme have outstanding. The figures also show that smaller lenders have taken advantage.

Lloyds £24b
Nationwide £8.5b
Yorkshire Building Society £3b
Virgin Money £2.7b
Santander £2.2b
Coventry Building Society £2b
Skipton Building Society £855m
Aldermore £710m

The extension which has been announced will provide those banks participating in the scheme with additional flexibility to draw any unused drawing allowances up to 31 January 2018. The extension also introduces a gradual phasing out, with borrowing allowances reducing over time. The reasoning behind this phasing is to minimise the risks of a sudden withdrawal of funding support.

The Bank of England has also announced that there will be a separate part of the scheme to allow new banks which are not already participating to draw against new allowances over the two-year extension. This is to ensure that new banks, which may not otherwise have any borrowing allowances under this extension given the lack of a prior lending history, are not put at a disadvantage relative to other banks that have access to the scheme. This will provide newer lenders with a window of opportunity to take advantage of the scheme so widening funding options for SMEs.

Looking at the latest bank lending figures to the end of September SMEs are benefiting from increased bank lending. The figures show that gross lending (new loans and utilised overdrafts) in September amounted to £5 billion. However, set off against this is the amount of loans and overdrafts repaid in the month which came to £4.5 billion and as a result net lending to SMEs was to £500 million to the positive.

An increase in the net lending figure is coming more frequent and in the 12 months to September the growth in amounts outstanding to SMEs (loans and overdrafts) was 0.7%. Doesn’t sound a lot? Compared to historic figures of a fall in amounts outstanding of 3% to 4% this nominal increase is a major win!

There is still way to go but with the FLS extension and a growing range of finance options SMEs are in a far better place than they have been for a long time.

Shock! More Businesses Than You Think Get a Yes From Their Bank

Posted on: September 19th, 2015 by blsuser1 No Comments Tags: , , , ,
Posted in Business Finance News

During the depths of the credit crunch access to finance was consistently quoted as the number one barrier to growth. This concern led to a swath of initiatives to encourage banks to lend more, none of which can claim to be a huge success.

However, whilst the access to finance barrier remains steadfastly in place for some businesses, there is clear evidence that many SMEs have successfully overcome this hurdle and got a ‘yes’ from their bank.

Throughout the credit crunch an independent research group, the SME Finance Monitor team, have been engaging with up to 5,000 SMEs each quarter to find out about their experiences of dealing with banks.

The findings have been a fascinating insight in to what is really going on and the last report to the quarter-ended June 2015 reveals that more businesses than you may think are getting a ‘yes’ from their bank.
With an improving economy the myth that the majority of businesses are struggling to get finance is slowly being eroded.

In terms of a successful outcome to a finance request what does the latest SME Finance Report reveal?
For mature businesses which applied for a new or renewed loan and/or overdraft facility in the 18 months to June 2015 the team found that a staggering 79% ended up with a facility. Higher than you thought?

The success rate has steadily been climbing with the latest result moving up from 67% seen in the previous 18 months to quarter 4 2013.

What do the figures look like for loans or overdraft requests on a separate basis?

Of the businesses that applied for an overdraft facility 84% were successful compared to 69% for loan applications; you will be more successful if you apply for a short-term facility.

Let’s drill down further; what about businesses that applied for finance for the very first time? Perhaps not too surprisingly they struggled more than repeat borrowers in getting what they requested. The outcome for first-time applicants was that 58% were successful; more work to do here!

The one finding that always comes as a shock to some is exactly how many businesses actually want to borrow. The assumption is often that a large majority of businesses are in need of finance. Each quarter though the SME Finance Monitor team blows this view out of the water.

In the latest report, when asked whether they have borrowed in the last 5 years or plan to seek finance in the next 3 months, those SMEs who answered ‘no’ are termed as Permanent Non-Borrowers. The result was that 49% of SMEs fell into this category and this has steadily increased over time, up from 34% in 2011. That means that almost half of the SMEs questioned have no interest in borrowing!

When the question on appetite to borrow is focused on a shorter period the figure is even more surprising. On being asked if they have borrowed over the previous 12 months, those SMEs answering ‘no’ were classified as Happy Non Seekers and 80% fell into this category. I’m sure you’ll agree that this figure is higher than most people would assume.

The message here is twofold: don’t automatically assume you’re going to get a ‘no’ from your bank because the majority of your fellow business owners are getting what they need. And secondly don’t fall into the trap of thinking that all businesses want to borrow; many are perfectly happy where they are.

SME Business Finance: The Confidence Gap

Posted on: June 7th, 2015 by blsuser1 No Comments Tags: , , , , , ,
Posted in Business Finance News

We’re continuing our look at the outcomes from the recent SME Finance Monitor Report for the first quarter of 2015.
The SME Finance Monitor Report is a quarterly survey carried out by an independent body tasked with researching the relationship between small businesses and how they finance themselves.

Previously we looked at what the real demand for finance is (‘What’s The Real Demand for Business Finance?’) and now we’re looking at what the outcome is for those businesses that did apply for finance from their bank.

First of all of those businesses thinking of applying for finance what was their level of confidence in getting a yes? The survey found that amongst those planning to apply, 49% were confident that their bank would agree to their request.

Let’s look at those businesses that said they had applied for finance and what actually happened.

In the 12 months to quarter 1 2015 18% of the businesses surveyed said that they had what’s referred as a ‘borrowing event’ whether that’s a new finance request or a renewal of an existing facility.

So what was the outcome?

The SME Finance Monitor team stretched it back further by looking at the previous 18 months and the success rate for new and renewed facilities was that 76% got what they wanted.

Is that a bit higher than perhaps you thought?

And that 76% was an increase on the 66% success rate reported 12 months previously… so the success rate is on the way up.

Let’s strip out those looking just to renew existing facilities – there the success rate was 98% got their renewal agreed.

What about those applying for new money being those that have borrowed in the past. That success rate is slightly lower at 65% but it is up from 46% a year ago… so again more progress with more businesses getting what they wanted.

For those applying for money for the very first time then the success rate is slightly lower at 55% but this has improved from the 37% seen in the 18 months to quarter 4 2013.

Remember at the start I said that 49% of businesses said they expected to get a ‘yes’ from their bank but as we have seen, the actual success rate is much higher.

It’s in closing this ‘confidence gap’ where our focus should be… getting businesses to realise that their chances of success in getting finance is actually higher than they may believe.

Growth typically needs finance so don’t hold back your growth by assuming you’ll get nothing and so you don’t ask… bad move!

Prepare your Business Plan, get your financial information up to date and start applying!

If you want to chat through your finance options then just book a call with one of the Business Loan Services team.

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