Why are successful SMEs still struggling to secure finance?
Despite recent reports of a growing economy, we are still hearing about the challenges facing SMEs when it comes to securing finance. We’re not talking about small businesses that are on their knees – many thousands of credit-worthy SMEs across the country are struggling to secure the credit they need to grow and prosper. The appetite is there, but the credit is not.
Successful SMEs are being turned down for finance on the high street every day, often without explanation. Businesses that we have spoken to were left confused by this rejection as they had a strong track record with the business and the means to repay the finance. These businesses were victims of a computer says yes-no lending process. Looking at a business as a whole rather than simply applying a tick box approach to lending enables Shawbrook to have a far greater understanding of the clients that we lend to.
Are banks not providing the right type of finance for businesses or are SME shying away from applying for credit? This lack of certainty around the reason for limited funding to SMEs suggests, to me, that perhaps small businesses don’t know where to begin their search for finance. We have been able to grow very rapidly since our launch in 2011 so we know that there is the appetite for finance. We have now lent over £1bn in the UK and more than 75 per cent of this has been to SMEs – this clearly shows that there are opportunities to lend.
The NACFB (National Association of Commercial Finance Brokers) is undoubtedly one of the best resources available to small businesses looking for finance. The NACFB can put businesses in touch with brokers who specialise in the type of finance they are seeking. Using a broker can give SMEs access to the best lender and products for them. There are brokers across the UK, which not only makes them convenient for SMEs but also means that banks do not need to operate a costly branch network.
Keith and Kornelia Kelly successfully applied for a loan after approaching a commercial finance broker. The broker was able to help the Kelly’s find Shawbrook and, to us, they were brilliant clients to provide finance for. Keith Kelly has been dancing all his life and he established Kelly’s Dance Studio over 30 years ago. He has been teaching at his current studio in Hampton Wick, Kingston-Upon-Thames, for nearly 25 years. It is a family business (Keith, his wife Kornelia, and his son Nick all teach dance).
Keith describes his experience as follows:
‘With Shawbrook … It wasn’t just about the money and numbers … It was about the story behind our request. It was about the history of our studio and our love for it. They took the time to get to know our story and so they made an informed and fair judgement.
‘Shawbrook is a people’s bank. They actually listen to the customer and they find a solution where all the high street banks have failed. They have a truly personal touch and for that I recommend them wholeheartedly.’
The introduction of government schemes such as Funding for Lending have yet to have the time to prove their effect in the market. We have become part of the scheme and will be able to pass the finance that FLS enables on to businesses, but there is a danger that in some banks this money is swallowed up and not correctly appropriated.
We look forward to lending even more to the UK’s hard-pressed and credit-starved SMEs in the future and will to continue our support in this sector.
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Ian Henderson is chief executive of Shawbrook bank and on Monday he’ll be speaking at:
Show me the money: how will Labour get small businesses growing?
12.45pm, Monday 23 September
Brighton Media Centre, 15-17 Middle St, Brighton BN1 1AL (just outside the secure zone)
Toby Perkins MP shadow small business minister
Mike Cherry national policy chairman, Federation of Small Businesses
Ian Henderson chief executive officer of Shawbrook Bank
Keith and Kornelia Kelly Kelly’s Dance Studio, Kingston
Chair: Victoria Groulef PPC for Reading West