Posted on 04.02.2014, by Rob Warlow

New figures released reveal that peer-to-peer lending (P2P) increased by 121 per cent during 2013.

The report published by the Peer-to-Peer Finance Association (P2PFA) shows that cumulative lending at the end of quarter four in 2013 hit £843 million compared to just £381 million at the end of 2012.

The report further reveals that at the end of 2013 there were over 3,700 business borrowers, 70,000 consumer borrowers as well as more than 86,000 active lenders.

The data has been supplied by Zopa and Ratesetter who service the individual/personal market and Funding Circle, Thin Cats and LendInvest. With many other providers in the market the actual figure will be higher, although these are the major players so constitute the majority of deals.

With the P2P platforms set for regulatory oversight by the Financial Conduct Authority from 1st April the alternative lending market is going to be set for further growth this year.

Posted on 01.02.2014, by Rob Warlow

Our weekly Friday Business Finance Bulletin video is out. This week Rob Warlow looks at a new campaign being run by the banks to get businesses borrowing (yes, you did read that right!); how a UK crowdfunding finance raise for a property developer has broken all records and finally why you should never have to find an excuse to pick up the phone to chase late payers.

Posted on 27.01.2014, by Rob Warlow

In this edition of the Business Finance Bulletin Rob Warlow looks at the low level of awareness among business owners of crowdfunding and peer-to-peer lending; how the government has been taken to task for its lack of success in stimulating bank lending; and why you need to keep a close eye on cash during times of growth by balancing the use of cash with different forms of finance.

Posted on 23.01.2014, by Rob Warlow

Face with growing outcries about the continual fall in bank lending, the main High Street banks have launched a new campaign to get businesses borrowing.

The banks, together with the British Bankers Association, are keen to let businesses know they are a lot more likely to get bank finance than they think. The banks, which include Barclays, HSBC, Lloyds, Nat West, RBS and Santander, quote a recent SME Finance Monitor report which says that while only 37% of SMEs planning to apply for finance believe they will get approval from their bank, actual approval rates are a lot higher at almost 67%.

The research from the BDRC survey identified as many as 270,000 businesses that wanted to apply for finance but never actually ended up doing so. It attributes a lack of confidence in their chances of success as one of the key reasons for this.

The message of the campaign is that increasing confidence amongst businesses around lending has the potential to boost the UK economy, as if all of those businesses went ahead and applied for finance this could enable:

• 53,000 small and medium sized businesses expand in the UK
• 48,000 new orders for equipment
• 113,000 businesses to boost their spending power
• 16,000 companies to develop new products or significantly improve their offering to customers

The 12-month campaign will be aimed at businesses with a turnover of less than £25million, and working alongside the government, politicians, banks and business groups it will spread the message that SMEs are a lot more likely to get finance than they think.

The campaign, featuring online advertising and social media outreach, will provide top tips for finance success, promote schemes such as business mentoring and showcase examples of businesses that have gone on to grow and prosper after securing a loan.

Posted on 18.01.2014, by Rob Warlow

This week, in our latest Business Finance Bulletin, a look at a problem which can lead to poor cashflow; a quick review of a new peer-to-peer lender, Lending Works which launched this week; and the Tip of the Week follows a Twitter exchange we had last week on proactively using regular financial information.

Posted on 14.01.2014, by Rob Warlow

The number of new peer-to-peer lending sites continues to increase with the recent launch of Lending Works.

Lending Works, which focuses on the personal loan market, is headed by a team from the banking, accountancy and finance industries, and it aims to provide a simple, flexible and transparent way for users to lend and borrow money.

In line with the traditional P2P model Lending Works’ online platform allows people to lend their savings for a competitive return to creditworthy people requiring finance. Personal loan borrowers are prudently selected by the company’s team of highly experienced underwriters using advanced underwriting techniques and electronic credit scoring. Loan terms and lending periods are both one to five years.

To kick start the business Lending Works completed a successful pre-launch fundraising round raising £3.5 million from venture capital and angel investors.

Rates are promised to be highly competitive for both lenders and borrowers and the company is targeting a net return to lenders of approximately 5.1% AER when their money is lent for five years.

Whilst the platform is there to fund personal financial needs research shows that many business owners do resort to using personal funds as a source of business capital.

You can find out more about Lending Works here.

Posted on 13.01.2014

In this episode of the Business Finance Bulletin Rob Warlow looks at the latest bank lending figures which, when you look closer, shows that banks are beginning to lend more to small businesses.

Rob also looks at the consequences of not diversifying your client base and how this is one area of risk that banks consider when reviewing a business finance request.

Posted on 13.01.2014, by Rob Warlow

When reviewing your finance request the bank is looking to identify the various risks which could cause your business to fail or at least struggle.

There are a number of risks which banks are on the hunt for but one such risk is client concentration; is your business overly dependent on one or two clients?

A disproportionate reliance in terms of turnover on one client can prove fatal if they fail to pay what’s due or, even worse, close down altogether.

If a large portion of your sales turnover does depend on one or two clients then the bank will see this as a key risk (as should you). If you are in this position the bank will be looking for an answer to this question,

“If this key client fails, what impact will this have on repayment of our loan?”

The importance of investigating this risk, and understanding the impact it can have on a business, is highlighted in a recent company failure.

A company operated a three-star hotel just outside Cardiff Wales International Airport in South Wales.

The hotel’s primary source of income came from the company operating the airport car parking facility. The company offered the airport users a package deal comprising of car parking and hotel accommodation. An ideal win-win for both the hotel and the car parking provider

Unfortunately the car parking company closed the facility in January 2013 and very quickly the hotel started to suffer due to this dramatic loss in business. The reason for this was that the arrangement constituted a large portion of the hotel’s turnover.

The end result was the company running the hotel was placed into Administration in November 2013 with lenders and other creditors facing a significant loss.

A salutary lesson as to why you should never build a business on a thin client base; the risks are too high and if you are looking for finance the bank will be less willing to support you.

Client diversification is the key.

Posted on 06.01.2014, by Rob Warlow

The monthly business borrowing figures released by the Bank of England has once again fuelled the ‘banks aren’t lending’ debate but as I mentioned last month (Bank Lending to SMEs Is Falling But That’s Just One Side of the Story) delving deeper into the figures reveals a slightly different story.

The release of the November bank borrowing figures lead to media comments such as ‘bank lending tumbles’ and ‘slump in bank lending’. These headline grabbing quotes was on the back of Bank of England figures which showed that in the month of November alone the total amount of business lending (overdrafts and loans) fell by £4.7 billion.

However, the detail in the numbers doesn’t quite support such a doomsday situation and here’s why.

The monthly reduction figure quoted is the fall in ‘net lending’ – this is the total stock of all borrowing which is the sum of new lending drawn down in the monthly less monthly repayments.

What is happening is that businesses are repaying debt quicker than the banks are lending it back out.

Here are the figures (these numbers only include loans with overdrafts having been taken out in the stats by the Bank of England):

We can see that in August the banks lent out £9.6b and whilst this increased to £15.5b of new lending in October, the amount of £13.5b in November still compares favourably.

However, new lending is being offset by higher repayments in the month so resulting in a reduction in the total stock of loans. In November new lending of £13.5b was offset by repayments of £16.7b resulting in a net reduction of £3.1b.

These figures relate to businesses of all sizes but the Bank of England also issues figures with the larger businesses stripped out leaving just SME borrowing and these reveal a slightly different picture.

We can see that overall there has been a steady increase in new loans to small businesses. The British Bankers’ Association has quickly pointed out that the new lending to SMEs (totalling £4 billion in November) was 38% higher than the £2.9b seen in the same month in 2012.

Nearly 40% increase! I don’t see this figure being mentioned too much in the media!!

And there is further good news; for the first time in many months, November actually saw a net increase in lending to SMEs of £200m i.e. more was lent out than was paid back.

So, both from a combined position, and for SME lending on its own, the underlying problem is that businesses are paying off debt at a quicker rate than they are taking on new loans.

At a gross level, bank lending does appear to be increasing.

We can argue that banks should be making an effort to lend more in order to get to a positive position each month but should we be too concerned that businesses are paying down debt? We saw businesses gorging on easily available credit during the boom days and quite sensibly they are now focused on paying debt down.

I have talked before about the lack of appetite amongst businesses to borrow and this has been highlighted in a number of surveys. The most recent of these is the quarterly SME Finance Monitor report. In its latest review to Quarter 3 of 2013, they reported that 78% of SMEs classified themselves as ‘happy non-seekers of finance’.

Yes, nearly 80% of those small businesses surveyed said they have had no interest in borrowing over the last 12 months! No wondering that debt repayment is exceeding the total of new loans disbursed.

So, let’s not listen too much to the negative press headlines. Undoubtedly there are some businesses who feel aggrieved at their bank saying no; yes, in some cases banks could be less risk averse; but the bottom line is that there is evidence emerging that lending is on the way up… for those business who actually want to borrow that is.

Posted on 02.01.2014, by Rob Warlow

In the latest Small Business Index survey undertaken by the Federation of Small Businesses (FSB) firms are reporting that access to finance is getting easier.

The survey reveals that the number of firms refused their credit application is the joint lowest share since the start of 2012. Mirroring other surveys which looks at the demand for finance only 16% of respondents had applied for credit in the quarter, which means businesses could be paying for investment out of existing sources of capital.

Those businesses accepted for finance continue to report cheaper interest rates being charged, a direct result of Funding for Lending (FLS). With the government having recently re-allocated FLS funds to SME lending the FSB hopes this will mean the banks make finance available to more small firms.

The survey also reports that the UK’s small firms are showing increasing optimism for 2014 as businesses remain positive about the economic outlook.

This increased confidence means more small firms are planning to invest in and explore the global trade market. New data shows businesses expect to see rapid or moderate expansion in the next 12 months. Alongside this, one in 10 businesses report running above capacity while a third are running at full capacity – both the highest figures since the Small Business Index began in 2010.

Feeding into expansion plans, capital investment intentions continue to rise with almost a quarter (23.1%) expecting to invest in the next year.