Education has been a recurrent theme of mine on this blog – the need to let SMEs know alternative finance is here, and that our industry is keen to lend to enterprises with plans for growth. But one of the key challenges is how exactly to spread the word to business owners that capital is available if only they know where to look. Even when they realise alternative finance exists, there’s the mission of how to match the right finance provider with the right business.
Again, I’ve said many times before that commercial finance brokers are an essential piece in this puzzle. They have the expertise, the contacts, and the trust that’s so important to win over the small business community. And the launch of the findSMEfinance.co.uk website last spring was another big step in the right direction. This portal run by the National Association of Commercial Finance Brokers (NACFB) is already proving to be a vital link between alternative finance and SMEs. The site introduces business owners to brokers who, in turn, can match companies with alternative funders. All of this is facilitated by the speed, convenience, and immediacy of the internet.
More than 3,000 small and medium firms have used findSMEfinance.co.uk over the last 12 months, and the NACFB is confident double this number will be helped by the site by the end of 2015. These capital-starved companies are put in touch with an approved independent broker who can assess their needs, and then lead them to any one of about 120 alternative lenders – whichever best meets the enterprise’s individual requirements.
It’s a very simple service, but one that’s been sorely needed by our young, and rapidly growing industry. The UK’s small businesses are ravenous for funding, as shown by the rate at which they’re using this new financial matchmaker. In the past six months alone, the NACFB estimates SMEs have put in requests for £234 million through the system at an average of £1.33 million per day. That’s a staggering sum, and, as said, one that’s expected to grow enormously over the coming months. The findSMEfinance.co.uk website is part of what’s helping to put alternative finance firmly on the map, and that can’t happen quickly enough.
Too many small firms remain clueless about where to turn next when they’re unsuccessful in their bank loan applications.
- Only six per cent of SMEs know of the existence of funding away from the high street banks, according to the NACFB.
- About the same number realise they can access alternative finance via an expert broker.
It’s precisely this lack of awareness that originally prompted the NACFB to create the website, which is the first of its kind in the UK. The Government and others in the know also recognised the need for such a matching service for small companies in need of finance, with the Department for Business, Innovation and Skills, the Welsh Government, and the Federation of Small Businesses all giving their full backing to the development of the online tool. At the time of the site’s launch, Adam Tyler, the NACFB’s chief executive, put it succinctly when he said: “Many businesses are completely unaware of the breadth of lenders that are out there, and often limit themselves to high street banks. The right finance is there. It’s a matter of knowing how to access it.”
At present, the NACFB says that commercial mortgages, development finance, and leasing and asset finance are among the busiest areas on the site. That’s to be expected – these are still more familiar types of financing to many business owners. Apparently, company bosses often come to findSMEfinance.co.uk, and simply put in a generic term such as ‘cashflow finance’ only to find a broker suggests a product or type of loan they’d previously never encountered. This is the education of which I speak – SMEs being helped to realise there’s more to life than high street bank loans, plus discovering alternative finance has an exciting array of innovative, and flexible funding options available. Short-term business loans, like ours, pension-led finance, or peer-to-peer platforms often come as quite a revelation to a business owner who’s only ever dealt with their bank’s relationship manager, and their standard, vanilla offerings.
There’s hope the NACFB’s matching service will play some part in the Government’s bank referral scheme, which will put SMEs rejected for bank borrowing in touch with alternative lenders. We’ve talked a great deal on this blog about the pressing need for this programme to be put into action as soon as possible. The inclusion of findSMEfinance.co.uk in the process of referring small firms to alternative finance could be a great help to the businesses that currently fall foul of the banks’ inflexible lending criteria. It could also help our industry immeasurably. I applaud the NACFB for its creation of this valuable conduit to growth capital for small companies. And I just hope that as many SMEs as possible hear of it, and use it to get their hands – via the broking community – on the wealth of finance that’s available.