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.

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.

Of 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.

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.

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.

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.

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.

As we know access to finance amongst businesses has been tough and over the last few years the media has been filled with horror stories… but what is the reality on the ground?

Since mid 2011 an external body, the SME Finance Monitor team, has been carrying out quarterly independent research in to dealings between banks and small businesses when it comes to raising finance. Over the years the SME Finance Monitor Report has provided insight into what is really going on.

And the team has now released its latest report for quarter 1 2015.

So what are the key findings?

First the good news… 79% of those surveyed said they are now operating profitably.

This is up from 69% in the same quarter of 2013 – a significant improvement.

What about use of external sources of finance?

In quarter 1 of 2015 36% of businesses said they used external sources of finance.. that leaves a large number which are self-financing

Of those businesses using external finance 29% are using ‘core finance’ products such as overdrafts, loans and credit cards. This is down from 40% in the first quarter of 2012. This shows how businesses are moving away from the traditional sources of finance.

We often hear the statement that businesses are being starved of credit… well here’s the killer statistic which consistently comes out of this survey.

In the first quarter of 2015 48% of SMEs define themselves as ‘permanent non-borrowers’… they are not interested in borrowing and haven’t done so over the five years and don’t intend to in the future.

This was 30% in quarter 1 2012 so an increasing number of businesses are opting out of borrowing.
But what about business’ appetite to borrow over a shorter term?

The SME Finance Monitor team ask businesses about borrowing over the previous 12 months and looking ahead.

Here, 79% of businesses put themselves in this category – referred to as ‘Happy non-seekers of finance’

That’s nearly 80% of those surveyed saying they don’t want to borrow!

Added to that 72% of businesses said that their aim is to pay down their debt… and not borrow again.

So perhaps all the fuss about helping businesses to borrow is not as a big a problem as we think.

I’ll be returning to sharing more findings from the latest SME Finance Monitor Report so watch out for a future video.

The latest update from the Peer to Peer Finance Association shows that crowdfunding continues its stellar growth. Figures for the 1st Quarter of 2015 reveal that the industry lent out £459,000,000, compared to £346,000,000 in the 4th Quarter of 2014

That’s an increase of 33%… growth rates the banks can’t touch!

But let’s look closer at what else is happening.

Let’s start with the lenders… the people who are handing over their cash. At the end of Quarter 4 2014 there were 105,101 lenders. At the end of March 2015 there were 111,255

That’s an increase of 6%.

What about the borrowers?

At the end of Quarter 4 2014 there were 139,749 borrowers and at the end of March 2015 there were 159,083.
That’s an increase of 14%

It’s clear that more businesses and individuals are seeing the benefits of crowdfunding.

If you want to know how you can access finance for you business via crowdfunding you can find more information on our crowdfunding page.

According to a survey carried out by the Institute of Chartered Accountants in England Wales a large number of businesses are sitting on cash. Business Loan Services’ Rob Warlow explains…

Hilton-Baird, the debt collection and cash flow solution provider, has issued the results of its 2015 Late Payment Survey. Here is a useful videographic with the key highlights.