Finance Monthly March 2019 Edition

40 www.finance-monthly.com ASK THE EXPERT - LENDING Anders la Cour, Co-founder & Chief Executive Officer of the financial utility, Banking Circle looks at the latest lending solutions for small businesses struggling to access finance through traditional banks. AQ & and even speed of response from the bank were a problem. 18.8% found that their bank didn’t offer the length of loan they wanted, demonstrating the inflexibility of traditional banking systems. Any of these issues has the potential to exclude a company from fair and affordable access to the finance required for business prosperity or expansion. A quarter (24.6%) of the SMEs said that without additional funding they would have to let employees go. 13.3% expected that the business would not survive without access to extra finance. Tackling the payment gap Of course, many firms would not need a business loan if they received faster payment for goods and serviced delivered. Payment terms allow as much as three months to pass before payment is ince the beginning of the financial crash, business lending has been a challenge. Banks have struggled to lend to any business, let alone what are often perceived as riskier start- ups and SMEs. Yet, with SMEs making up 99.9% of private businesses and employing 60% of the UK workforce 1 – 16.1 million people – this is a dangerous situation. If these businesses cannot access necessary finance, this could have a detrimental impact on their business; they may have to let employees go, they could find themselves unable to pay suppliers or worse, this could cause their business to fold. In turn, that impacts the economy, which reduces lending, which then puts even more companies out of business and people out of jobs. The economy needs SMEs. Consumers need SMEs. One of the challenges is that, as Louise Brett, Head of FinTech for Deloitte put it in 2017 2 , “… for almost a decade, banks have been given the ultimate mixed-message: ‘lend’ and ‘don’t lend’. Regulators want them to be less risky, but politicians don’t want to see small businesses starved of funding.” With the increasing use of the latest risk assessment technology and automated lending decisions, SMEs have suffered. Banks are closing branches, and as a result, many companies have lost access to the experts who understand their business and can fairly assess their risk to make an informed lending decision. Traditional banks no longer have the resources to scrutinise every application in this way. Of course, such a labour-intensive assessment process came at a cost, excluding many businesses even when lending was more readily available. A new solution is urgently required. But it cannot be the same offering, delivered in the same way it has been for generations, through the traditional legacy systems which add time and cost. Businesses today move quicker than ever before, and their finance options need to keep up. For a business lending solution to be cost- effective and meet the needs of even the smallest microbusiness, it needs to be built with those companies and their specific requirements at their heart. Identifying the challenges Last year we carried out a survey amongst those responsible for financial decisions in over 500 SMEs of all sizes. We wanted to find out about the pain points in today’s business borrowing journey. Of our respondents, 92.5% had cause to seek finance within the past five years, and just 13.5% experienced no problems with the process. More than half (52%) of the SMEs needed finance to purchase essential equipment for the business. 35% hoped to borrow so they could buy stock and 28% needed help to expand into new markets. The challenges these SMEs faced focused primarily around rates, fees and speed. 35% said their bank didn’t offer the best rate; 28% found the fees too high; and for 23.4% and 21.4%, respectively, the speed of facilitation of the finance ANDERS LA COUR Co-founder & CEO of Banking Circle GETTING CASH FLOWING FOR EVEN THE SMALLEST BUSINESSES S