There is a consensus that packages of finance from different sources is the new norm and that the banks are no longer the major trusted first point of call for businesses for finance or even for information.
Most agree that since 2008/9 there are far more choices for businesses seeking finance, with the alternative finance sector continuing to grow. Most also agree that, despite some efforts, businesses and their advisors are still all too often unaware of all the alternatives available and how to access them – so signposting still needs to be improved.
The most notable difference in opinion relates to how easy or difficult it is for businesses to access the finance they need. It seems that businesses are either reporting that they have no problem, or that they have an ongoing problem. This divide is upheld in recent surveys conducted by the FSB and the Chambers of Commerce, which highlighted opposite trends.
So what is going on? When you dig a little deeper it appears that the trends depend on what life stage the business is at and how the business proposition appears to the funder.
Established businesses, if their project is viable, are usually able to track down a bank or alternative funding source such as a peer lender or asset finance specialist. Potential high growth businesses are targeted by a range of funders for debt and equity injection including some banks and individual angel investors. However, businesses at any stage of their lives that have had a past blip of some sort do now find it difficult to access either traditional or alternative sources of finance. The main, specific, problem area is early stage businesses, which struggle to get support from the banks and many of the alternatives.
Well over 80% of the growing army of individuals starting businesses in the UK initially use their own money or the three Fs - Family, Friends and Fools. Personal finance rather than business finance is mostly used even via the Government’s start up loan programme, which provides a soft loan of up to £25k for businesses up to two years old. This can be a problem for businesses later as they will not have built up a relevant borrowing track record.
As one event contributor wistfully commented: “It still appears that many businesses cannot access finance when they need it most, because many of the funders have reduced their risk appetite and only open the umbrella when it’s not raining.”
Of course, at the meetings I was able to comment that this is exactly where financial intermediaries like ART Business Loans come in, designed to fill gaps in the marketplace left by other funders to enable all businesses with a viable proposition to access the finance they need.