An estimated 100,000 SMEs in the UK were turned down for bank lending during 2015, business owners heard at the recent YEN event in Bradford.
Delegates to February’s Yorkshire Enterprise Network event were told that this was a major contributing factor to the high failure rate of new start businesses – with 60% failing to survive beyond the first three years.
Held at Bradford’s Midland Hotel by YEN and the Telegraph & Argus, it was the first Bradford Means Business event of 2016, attracting more than 120 delegates from across the county. In a move away from the usual format, the event featured a BBC Question Time-style panel offering advice on funding opportunities for SMEs. The expert panel was made up of David Guild, Business Development Manager of the Business Enterprise Fund (BEF); Wayne Spratt, Regional Sales Manager at Aldermore Bank PLC; Peter Beresford, Managing Director of RedSky Corporate Services and Andy Davidson, Head of Business & Private Banking (West Yorkshire) at Yorkshire Bank.
The panel outlined the various finance opportunities, with Mr Beresford focusing on crowdfunding and Mr Spratt on one of the main growth areas, Asset Financing. Mr Davidson talked about the new approaches being taken by the banking sector, saying that the banks are very much “open for business” with bank lending to SMEs greatly increased in 2015.
Mr Guild said that, according to the British Business Bank figures for February 2016, there were now approximately 350,000 new start companies launching each year with small businesses employing under 50 people accounting for 85% of new job creation. Yet new start and young businesses make up 50% of the lending rejection rate, very often because many traditional bank loan criteria are based around track record information.
The delegates heard that there were other options available, with alternative finance schemes taking an increasing share of small business lending. Among others, options include P2B (Peer to Business) lending, equity-based crowdfunding, and asset and invoice financing, where a business borrows money against its property or money yet to be paid by customers.
But, Mr Guild added, 66% of small businesses apply to only one lender for finance – usually their own bank – and do not seek alternative quotes. When rejected, 40% of them do not try anywhere else and only 19% of SMEs seek external professional advice.
Mr Guild said: “The alternative finance market is often quoted as very low, at 3.4% of the £53bn of bank lending to all SMEs in 2015. But the BBA estimates bank lending to businesses with up to 50 employees at £6.34bn, which then brings the figure to 12% with a substantial impact for small businesses. In 2015, 20,000 SMEs used alternative finance – up from 7,000 in 2014 – of which over 10,000 used online alternative funding worth £881million. But lack of awareness is still a massive barrier. While awareness about crowdfunding is now at 50%, many people are unfamiliar with the range of options available to them. The message is that first refusal doesn’t necessarily mean the end of the road.”
The panel advised delegates who wanted to pursue any of the options they’d heard about to seek professional advice from an accountant who specialises in finding finance or an NACFB broker (National Association of Commercial Finance Brokers).
Yorkshire Enterprise Network Director Sheraz Malik said: “It was the first time we’d held a panel session like this at one of our networking events and it proved to be enormously informative and useful. Hopefully the information shared will help some of the delegates to access the funding they need to grow their businesses as well assisting some potential new starts in getting their projects off the ground.”
Business Enterprise Fund (BEF) is a not-for-profit social enterprise, founded in Bradford to provide loans to SME businesses which are unable to raise finance from mainstream lenders. It still has its headquarters in Bradford, but has now extended its reach to support businesses across Yorkshire and the North East. BEF often backs high-risk projects with a good business plan and helps to sustain existing businesses.
See the details below if you would like to contact any of the panellists from February’s YEN networking event
0113 336 5210
0845 200 3919
0800 917 1917