What challenges are SMEs currently facing in their attempts to raise finance?
I would say the main challenge is the fact that banks are pulling away from offering finance to SMEs. Banks simply don’t have the appetite for it right now, and the lending process takes such a long time with everything having to go through a centralised credit department. It can take weeks for the finance from banks to reach the business, which is just no good. SMEs need things to move quickly, especially in the early days when growth is of the utmost importance.
Another problem is the lack of awareness by SMEs of what’s out there in terms of alternative order clonazepam finance products. The banks aren’t the only option these days, and regulators could certainly help out here by making small business owners aware of their options.
Following on from this point, many SMEs don’t know what kind of finance they really need, even if they do know where they can source it. The type of finance that will benefit a business heavily depends on its own individual needs and operations, and this can often be tough to navigate.
What effect is Brexit having?
The short answer from what we’ve seen so far is: not much. We’ve seen that businesses both large and small are simply getting on with things for the time being. Now that the panic and hype following the vote has died down, it seems everyone has realised that nothing is going to happen for at least two years, so businesses are just continuing to carve their own path until the time comes for change. One caveat is that import/export businesses have seen a direct effect due to the exchange rate fluctuations. Otherwise, it’s just business as usual for now.
Could the big banks do more to help SMEs?
But, as I said before, the banks just don’t have the appetite for lending to SMEs at the moment (as shown by Virgin Money scrapping their plans to enter the SME lending space). They’re just not set up in the right way to help SMEs with what they actually need – quick and easy access to funds.
The banks are just too big and cumbersome to provide efficient lending to SMEs on a large scale. Individual branches and managers can’t sign off on credit, so everything bottlenecks with the centralised credit team who are located offsite. Banks really should be helping small businesses out, but SMEs also need to understand the limitations of the banks in this respect (in a way it’s not their fault – they’ve just grown bloated over the years).
The silver-lining is that this has given rise to the alternative finance industry, which now has the edge when it comes to SME financing. Innovation is moving at record pace in order to fill the gap left by the banks’ unwillingness to lend.
How are low interest rates affecting the ability of SMEs to raise funds?
We’re finding that there is a lot of capital out there as a result of low interest rates, as investors look to get a return on their capital from sources outside the banks. As a result, providers of finance outside of the banks are able to offer SMEs some great rates on funding their businesses for growth. This is another reason why it’s crucial that SME’s are aware of alternative finance products.
What extra options does the alternative finance industry offer SMEs?
The key benefit offered by the alternative finance industry is the sheer choice and diversity it gives to SMEs. There are a great deal of providers on the market, all of whom can offer their own, bespoke services depending on the needs of the client.
Speed and convenience is another big one. The average wait for finance to come through from banks is 72 days whereas alternative finance providers can deliver funds in a matter of hours.
Alternative finance providers also offer SMEs many more options when it comes to contracts; many are flexible and some don’t use contracts at all, freeing up SMEs to dip in and out of services as and when they need to.
In further contrast to working with banks, the alternative finance industry offers SMEs an entire range of different services, almost like a suite of finance products which they can add to their repertoire and use across many aspects of the day-to-day running of the business. In other words, SMEs can now mix and match the services they use to create a more comprehensive package.
How can of DueCourse help SMEs? Do you have any examples you can share with us?
Our service helps SMEs manage their cash flow by allowing them to unlock cash tied up in unpaid invoices. We think businesses shouldn’t be slowed down by late payments from clients, so we stepped in to bridge that gap. The beauty of DueCourse lies in its simplicity. Sign-up is completed in a few clicks and our software links up with all cloud accountancy packages, meaning it blends with a business’ day-to-day operations. Rather than waiting for weeks on end for their much-needed funds, SMEs working with us will find their money reaches their account in as little as two hours, making cash flow as smooth as possible.
And, following my point earlier on about SMEs not knowing what type of finance they need, DueCourse can also help provide advice on the best plan of action. Not only this, but we’re also more than happy to recommend other providers and products once a client outgrows us or needs something different.
Julian Foster from Fosterwood – an events company based in London – uses DueCourse to free the money in his unpaid invoices whenever he likes, to better manage his cash flow. Julian says: “It’s a simple system that fills a gap in the invoice market sector. The DueCourse team is very helpful in completing my application for funding, and it’s enabled me to have another good overdraft alternative.”
How do you see the alternative finance industry developing over the next five years? What will the companies which succeed be doing well?
I see the industry going from strength to strength over the next five years at the rate it’s growing. Innovative companies are starting to create fantastic products which are superior to the bank alternatives (overdrafts, credit cards, etc). This only serves to improve the lives of SME owners and employees as these services get better and more specialised.
The companies who are going to succeed are the ones who really embrace the technology available to them. Technology is the great enabler here, helping us to create more streamlined financial products and deliver these to SMEs more quickly and cost-effectively.