Flying into London recently from the US, I was struck by the difference in response to a crisis between our two nations. On a domestic flight from New Orleans to Florida the prior week, I had seen many passengers sporting facemasks, a reaction to the panic in America over the Ebola virus. However, on my plane to Heathrow, largely populated by Britons, there was hardly a mask in sight.
Such British stoicism may appear brave in the face of a deadly infection, but it is less helpful in other contexts. Take business financing, for example. Since we started lending money to UK firms through Boost Capital in 2012, we have noted some differences in attitude and behaviour between our British and US customers. Boost’s parent company Business Financial Services has been operating in the US for well over a decade. Businesses there have been through similar trials to those of their transatlantic cousins in recent years, most notably a contraction in bank lending in reaction to the 2008 downturn. The American memory for such suffering seems to be shorter. Businesses there have recovered from the bruises inflicted by the economic slump, and are hungry both for growth and the capital necessary to realise those ambitions. Yet, in the UK, it feels like the SME community is a little more cautious about borrowing. They are still worried about the economy and that the bad times may return. As a result, many prefer to plug away as they are, without seeking capital to help them expand.
Of course, the UK is a different market to the US. Boost Capital has a home-grown British team, and part of their job is to listen and learn from our customers. Alternative finance is more established in America. You might say we have watched the movie there, but the opening credits started later in the UK. The British market is nascent, but there is enormous growth potential for SMEs and alternative lenders here. I believe the lessons we have learned from our US operation can be helpful. We can leverage the intellectual capital that we have built up over the last 15 years and put it to use to help Britain’s SMEs grow.
We are here to tell them that borrowing growth capital is something of which they need not be afraid. We, and others like us, are a new way for small companies to get the funding they need, and we are keen to do business with them. A major challenge is educating SMEs about alternative finance and what it can do. Programmes the UK Government has put in place to alleviate the lending drought, such as Funding for Lending, have only been moderately successful. However, the referral programme announced by George Osborne this summer is very interesting – the suggestion that when banks reject business customers for loans, they will refer those firms to alternative providers. This has the potential to help more SMEs reach alternative finance providers. Awareness is key, but it is hard to educate the business community about new products. If this new approach is implemented properly it could do much to inform customers that alternatives exist.
But while the referral programme is very welcome, there is still the question of how we might be introduced to SMEs who refuse to go to the bank for fear of being rejected. If they are not asking the banks for money, then they cannot be referred to us. More businesses are finding us organically through search engines and via customer referrals. Additionally, we are working with business associations and finance brokers to get the word out. The message we relay is always the same – we, too, are a small business; we are entrepreneurial, and we understand what setting up and growing a company really involves. We have done it in the US, and it is what we are doing now with Boost Capital in the UK.
I believe that the best thing a lender can do for an SME is to provide thoughtful capital. The businesses we deal with are not financiers on the whole. They need us to be guides, as well as lenders. We are aware of that responsibility, and of the need to offer responsible lending. We want to be a solution for SMEs – never a problem.
We have plenty of capital to put into the UK SME market, and our goal is to ease the anxiety about borrowing and growth that is felt by so many small firms. The real threat for the UK’s small business community is slow strangulation through lack of finance. We can alleviate that. Britain has many SMEs that have great potential to grow if they get the right support. We know that a good business is a good business whether it is based in Birmingham in the West Midlands, or Birmingham, Massachusetts. We just need to find them to give them the help they need.