Posted on 27.12.2013, by Rob Warlow

In the government’s quest to make more finance available to SMEs it has announced its intention to help alternative financiers have access to better information on SME’s credit background.

The commitment to make it easier for newer lenders to assess loan applications via improving access to SME credit data was made in the 2013 Budget. Since then the government has been working with the Bank of England, the Office of Fair Trading, the Financial Conduct Authority, the Department for Business, Innovation and Skills, and the banking industry to investigate options.

If you have read my blogs you will know that when assessing the creditworthiness of small businesses an important source of information for the lender is a business’ past financial performance. The problem is that more in-depth information (outside of that held by the Credit Reference Agencies) is often held by the bank that provides the business’ current account and is not widely shared.

The result of this is that challenger banks and alternative finance providers don’t have access to the same level of information as the bank with which the small business already has a relationship.

The solution being proposed by the government is that banks will be required to share information on their SME customers with other lenders through Credit Reference Agencies (CRA).

The government has opened a consultation period until mid February for industry players and other interested parties to comment. It will be interesting to see the banks responses to the request to share a deeper level of information they hold on their clients.

Posted on 27.12.2013, by Rob Warlow

In this clip, taken from a Kevin Green seminar run in Amsterdam recently, a look at why now is the new normal when it comes to raising finance and how you may need to brush up on your finance skills.

Posted on 23.12.2013, by Rob Warlow

In the latest Business Finance Bulletin video I look at the crowdfunding market and talk about two surveys carried out by Nesta and business crowdfunder, Funding Knight. As we close 2013 I also share 3 key priorities for you and your business to focus on in 2014.

Posted on 13.12.2013, by Rob Warlow

In the latest Business Finance Bulletin Rob Warlow looks at the highlights from the SME Finance Monitor report particularly focusing on business demand for finance.

Rob also looks at why a bank would want to convert your overdraft to a loan and the importance of tackling the issue of succession planning when approaching a bank for business finance.

Enjoy this weeks episode!

Posted on 07.12.2013, by Rob Warlow

In my latest Friday Business Finance Bulletin I take a look at the latest bank lending figures and share ideas on how to communicate with your bank. This week’s video was shot ‘on location’ in Kuala Lumpur where I have been all this week assisting on a workshop – next week back to the UK!

Posted on 04.12.2013

The latest figures from the Bank of England continue to show how banks are struggling to support SMEs when it comes to access to finance… but is that really the case?

The quarterly figures to October for bank lending to SMEs reveal that the total stock of loans to SMEs has declined by £1.4b during the three months.

As would be expected this fall in lending has been heralded as another example of how banks are not supporting SMEs. However, a closer look at the figures show that bank lending to SMEs is actually increasing when compared to the same period last year but this is being offset by repayments. In other words, small businesses are paying debt down quicker than they are borrowing it back.

New loans (excluding overdrafts) extended to SMEs between August and October totalled £10.4bn. The amount of new loans for the same period in 2012 was £8.9bn, so there has been an increase in lending of almost £1.5bn (16%). This counters the argument that banks are not lending.

This is goo d news but the increase in new lending is being masked by an acceleration in repayment of debt. In the last quarter SMEs paid back £11.8bn, hence the fall in net borrowing (new loans less repayments) of £1.4bn. In the same period last year, repayments totalled £10.1bn, so we can see that the repayment of loan debt is accelerated.

The bottom line is that either banks are not lending enough in order to keep the total stock of net loans up or small businesses don’t wish to borrow; or maybe it’s a combination of both. We looked at the lack of appetite amongst SMEs to borrow in this blog, ‘Banks Are Right Not All Businesses Wish to Borrow’.

A combination of lack of appetite on both sides is where we are at, so we do need to maintain a sense of perspective as regards to how banks are performing. There will always be cases where specific businesses feel aggrieved by a ‘no’ but we need to be mindful that businesses have their part to play when it comes to the amount of money being lent out.

Remember, there are two sides to the lending/borrowing equation – bank supply, and business demand; the blame for falling lending does not currently lie with one party.

Posted on 03.12.2013, by Rob Warlow

When dealing with clients looking to raise finance or in the seminars we run it’s surprising how many business owners are only just beginning to realise that Asset Based Finance is a growing source of alternative finance.

The sector supports growth by financing asset purchases via leasing, hire purchase and unlocking cash through invoice discounting and factoring.

The latest figures for the three months to September 2013 from the Asset Based Finance Association (ABFA) have shown that the industry and its clients are continuing to perform strongly.

At the end of September members of the ABFA had total advances out to its clients of £17.4 bn, which is 6% up on the same period in 2012 (£16.4 bn). This is only the fifth time the funding balance has been above £17 bn and this demonstrates that the demand for asset based finance is strong and growing with firms increasingly using it to fund growth and their working capital requirements.

This growth contrasts with that of the wider finance market where bank lending continues to contract at the rate of approximately 3% per annum.

ABFA has also looked at how those businesses using asset based finance have performed; total sales from those businesses broke £71 bn for the third quarter, the strongest ever quarterly performance. This is up by some 14% on the same period last year.

There is a myth that asset based finance is more for larger businesses but the industry does support smaller businesses, with almost 15,000 of the over 43,000 clients being found in the £0 – 0.5 m turnover bracket, and over 30,000 in the sub £5 m bracket.

In terms of sectors they support, asset based financiers are most active in the services (30%), manufacturing (29%), distribution (24%), transport (7%) and construction (5%) sector.

If you are planning for growth check out how asset based finance can support your plans… it’s all about diversifying your funding sources.

Check out the video below on how buying assets via an asset finance facility can work for you.

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Posted on 01.12.2013, by Rob Warlow

In the latest weekly Business Finance Bulletin Rob Warlow looks at how business owners are using personal resources to fund growth, and the increasing use by banks of the Enterprise Finance Guarantee Scheme.

In the business finance tip of the week Rob shares 5 tips on crowdfunding issued by the FSB and UK Crowdfunding Association.

Posted on 27.11.2013, by Rob Warlow

With many businesses continuing to find access to finance challenging owners are turning to a variety of personal sources to either start up or fund growth.

Findings by Experian, the global information services company, show that a quarter of small and medium sized enterprise (SME) directors have used personal finance sources of funding including mortgages, credit cards and savings accounts to support their business.

Experian surveyed a range of SMEs to better understand how they fund business ventures. Of those that had used personal finance, almost a third had used personal mortgages to fund their business while 47% said they have relied on high-interest personal credit cards for everyday business affairs.

Personal bank accounts are also frequently used by SME Directors with two thirds (65%) stating that they have drawn on funds directly from their current account and nearly half (48%) saying that they had dipped into their personal savings.

When asked what they were using the money for:

• 48% said to set up their business
• 37% to invest in new equipment or premises
• 30% to pay suppliers
• 26% to clear off debt

Whilst many will say that businesses should first be turning to external sources of finance (primarily banks) tapping into personal resources is a cheaper method of finance. The exception to this is of course accessing finance via credit cards and you do need to be aware of a potential impact on your personal credit rating if you go down this route.

As well as being a cheaper source of finance, when it comes to approaching banks for finance the fact you have put in a proportion of the project cost is a plus point.

So just remember, no bank wishes to take all the risk.

Posted on 25.11.2013, by Rob Warlow

Latest figures released by the government show that bank lending made through the Enterprise Finance Guarantee Scheme (EFG) has again increased with lending reaching its highest level since 2010.

The figures reveal that banks offered loans worth £111 million to SMEs in the third quarter of 2013 compared to £96m in the second quarter. In terms of loans actually drawn down during this quarter businesses accessed £87m, a slight increase on the £84m lent out in the second quarter.

EFG is a scheme which allows banks to lend to SMEs who would otherwise not receive credit, by providing the banks with a government guarantee for 75 per cent of the loan value. Since May 2010, over 13,400 SMEs have been offered EFG loans with a total value of nearly £1.4 billion.

EFG is offered through 42 finance providers but in the third quarter figures Barclays Bank in particular was praised by consistently offering increased EFG lending since 2012. In the last quarter, Barclays offered nearly twice as much in loans to businesses compared to the same period last year, despite the number of loans offered only increasing slightly.

The increased usage has come off the back of Business Minister Michael Fallon writing to the Chief Executives of the five main high street banks in September 2012 to challenge them to increase their EFG lending after lending continued to fall significantly from the peak in 2009. The combination of ‘naming and shaming’ and a pick up in the economy has no doubt contributed to the increase in scheme usage.

You can find out more about EFG and how it works from here: ‘Understanding the Enterprise Finance Guarantee’.