Raising finance to grow your business is not about today, it is about tomorrow. The right finance package can be a positive force within your business, one which can be used to propel your business forward.
Building a bigger, better future… that’s what we do
When you’re looking for finance to grow, a lender will want to see a well constructed Business Plan. A great Plan sets out a clear vision for the future, a future in which you soar above your competition.
Helping business owners soar… that’s what we do.
The whole process of raising finance can be a distraction and divert your attention away from what’s important. With mounting priorities it’s a case of which one has to wait. Typically raising finance is one task that can grind you down.
Making it happen… that’s what we do
No one wants to stay in the same place; it’s boring and monotonous. Growth is much more exciting but getting to the next level takes money and with it a range of financial options to consider.
Taking your business to the next level… that’s what we do
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):
| Month | New Loans | Repayment | Net Lending |
| August | 9.6 | 12.3 | -2.7 |
| Sept | 13.5 | 14.5 | -1.0 |
| Oct | 15.5 | 15.3 | 0.2 |
| Nov | 13.5 | 16.7 | -3.1 |
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.
| Month | New Loans | Repayment | Net Lending |
| August | 3 | 3.6 | -0.6 |
| Sept | 3.3 | 3.8 | -0.6 |
| Oct | 4.1 | 4.4 | -0.2 |
| Nov | 4 | 3.7 | 0.2 |
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.
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 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 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:
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’.
Posted on 20.11.2013, by Rob Warlow
The crowdfunding and peer-to-peer (P2P) loan market has been very much focused on providing short to medium term loans for traditional business needs such as additional working capital and asset/equipment purchases.
However, in a sign that the P2P market is maturing, some players are starting to venture into property funding.
Funding Circle, the most recognised marketplace for business loans, has signalled its intent to move into the property finance space, with the hire of Luke Jooste, formerly Commercial Director at Barclays Business. With an extensive experience in the property sector Luke has been brought in by Funding Circle to develop a property-focused offering.
Depending on what exactly the product is it should be a good source of property funding and will be music to the ears of businesses operating in this industry who have been badly serviced by the traditional High Street banks. I suspect the service will initially focus on secured bridging loans which is an easy toe in the water.
The P2P bridging market though does have a new confirmed entrant. Existing bridging lender Wellesley has launched a peer-to-peer lending service with the aim of funding its short-term loans.
Private investors will be able to fund bridging and development property loans of up to £1m. The shareholders of Wellesley are committing £5m so they will invest along side private investors.
The property being funded will be taken as security and sold if borrowers default. In this instance, the private lenders will be paid off first, with Wellesley’s shareholders being repaid from the remainder.
You can find out more here, Wellesley
Posted on 12.11.2013, by Rob Warlow
The banks have long countered the claim that they are not lending with the argument that many businesses don’t wish to borrow. Whilst the banks have to accept they can be too risk averse a new survey has back up their assertion that there is a lack of appetite amongst business owners to borrow.
A new YouGov study finds that almost two thirds (64%) of SMEs have not sought any extra finance over the past two years from banks or any other form of lenders.
The SME Banking 2013 report reveals that that amongst those SMEs that had not obtained additional finance in the last three years, the two main deterrents were not wanting to go into debt (34%) and fears about the economic climate (21%).
The YouGov’s research found the next five factors putting SMEs off from borrowing were,
20% didn’t like the interest rates charged
16% didn’t want to face the hassle of setting up a new facility
12% disliked the terms and conditions of the deal
11% thought they would be turned down and
10% were unhappy with the security demanded by the bank
Looking at the wider picture, the YouGov’s study shows that only 36% of SMEs have looked at alternative sources of finance but 21% have secured funding via crowdfunding and 20% took out leasing/HP agreements. Instead of searching out external finance 18% of business owners have used their own money to fund the business.
The findings of this survey confirm what we have been saying for some time in this blog… more needs to be done to highlight to business owners that there are alternative ways to fund growth other than banks. Also the government must take heed of the fact that a large number of businesses just don’t wish to borrow and so they need to be more selective in the schemes they put in place.
Rob delivered a series of 3 workshops aimed at understanding how finance houses look at finance propositions with the aim for us as a team to deliver more of a bespoke offering to our customer base. The training was delivered to a mixture of staff who work with new businesses start-ups and existing established businesses across Mid & South West Wales. Rob delivered the training with an abundance of passion and has really helped my team look at financial propositions in a different light, many thanks again Rob and I look forward to work with you in the near future.
Rob kindly agreed to attend the recent Pontypridd RFC sponsors networking evening and delivered what can only be described as an excellent talk on 5 Tactics to Boost Your Business and Your Profits. He kept the audience engaged throughout and the feedback from everyone was excellent. Rob is very knowledgeable on business and finance and on top of that is a genuine nice guy. We hope to have him back at a future event and I have no hesitation in recommending Rob’s services.
Hi Rob, it was so interesting and entertaining listening to you at the Kevin Green Wealth Coach Workshop in Reading this weekend! I didnt realise you can find Finance proposals such fun!. Brilliant tips! Thanks.
Further to your recent presentation at LEAD Wales just wanted to say it was very refreshing to see somebody talk passionately and positively about finance, very insightful!
I wanted to thank you for such an insightful, energetic, and entertaining talk at the Kevin Green Wealth event on securing funding and creating a successful plan. It was brilliantly executed and a pleasure to listen to and the ideas I’ve learned are definitely going to help me in going forward.