Many a comment has been made about the contribution that small and medium sized business make to our country. According to figures from the British Business Bank, small businesses make up 99% of the total of UK business, worth in excess of £1 trillion annually to the economy.
But is the funding there to help these businesses develop and grow?
The short answer to this question is ‘yes’. The issue is the number of small business owners or financial directors that are not aware of the full range of options available to them.
The British Business Bank’s Small Business Survey (from earlier this year), found the majority of smaller businesses were only considering one route to finance. 27% of those who sought finance but did not get what they wanted either gave up, or cancelled their plans and only 15% said they would talk to another finance provider if they were not offered the amount they were looking for.
Which means thousands of businesses could be missing out!
Last year, lending from the traditional banking channels remained relatively flat. However, the value of funding from what is termed the ‘alternative lending’ sector, showed significant growth.
The new Small Business Commissioner (speaking to the National Association of Commercial Finance Brokers’ CEO, Graham Toy) admitted that many SMEs simply are not aware of all the options open to them.
This is what needs to change. The funding is there and there are a wealth of options to consider, including equity finance, peer to peer lending and one of the most straight-forward of all: asset finance.
What makes the alternative finance sector different?
Or, to put the question another way, what makes them more likely to say yes to funding, when the more traditional lending routes might say no?
In the case of Praetura Asset Finance, an independent asset finance lender, the answer is ‘time and understanding’; having the resources available to take the time to get to know a business and understand where they are now, where they have come from and what their plans for the future are. Then basing the underwriting decisions on the answers to those questions, rather than whether a series of boxes have been ticked on a credit-scoring form.
This increased level of understanding does not just affect the decision of when and who to lend to. By understanding the business, the deal can be adapted and structured specifically for that company. This can include seasonal payments, VAT deferrals, balloon payments and payment holidays.
Often the facilities available via the alternative finance sector can offer additional benefits to the SME too. Asset finance is a way for businesses to invest in new (or upgrade old) equipment or transport (via hire purchase or leasing), or to raise funds by unlocking capital from a company’s machinery or vehicles (with asset refinance). There can also be benefits for tax purposes, budgeting and security, to name but a few.
Put simply. the funding answers are out there to help this country’s army of small businesses develop, grow and fulfil their potential, but you need to make sure you’re asking the questions to the right people.
For more information about how asset finance could help your business, speak to your business finance adviser or local asset finance broker today.