Why Banks Can Be Dinosaurs
I read an article the other day about alien life. If an alien on a planet 65 million light years away looked through his telescope at Earth then he would still see dinosaurs roaming the planet. It got me thinking, realising that whatever we look at and see has already happened. No matter how hard we try we are always looking at the past.
Commerce these days moves quickly. There is a greater demand for a response, action and a result with as little delay as possible. This includes funding and commercial borrowing where companies want access to finance quickly, but more importantly they want certainty over lending at the outset. Decisions can be made when certainty exists.
The problem many high street banks face is that they are still looking through a telescope at the past, that speed of response may have worked with dinosaurs but the world is now a much quicker and more demanding place.
If aliens and dinosaurs don’t do it for you, then I found a survey from Amicus that supports my thinking.
Amicus SME Survey
The survey was conducted among SME business operators, the results showed;
- 1 in 6 small businesses say they have been turned down for loans by banks. That is an increase from 11% to 16% in the last 12 months
- A third (31%) of SME owners say the failure to secure finance terms with a mainstream lender caused them to miss out on a business deal or investment
- Twice as many small firms said that mainstream lenders were unable to make a decision quickly enough for them to act (now 15%, up from 6% last year)
The survey showed a different demand from commercial borrowers, it was less about access to finance, rather it was about speed of decision, certainty and getting the deal from start to finish in a short period of time.
Of those surveyed, 51% of SMEs said they would use alternative finance providers because of greater flexibility with 31% saying they would use alternative finance providers because of speed. That is against a backdrop of SMEs still not being fully aware of what options exist for them in the alternative finance sector.
Understanding & Speed
The message coming through from the survey was that SMEs considered alternative finance providers to have a better understanding of how businesses work, and that their speed of response was in line with that understanding.
For me, Lime Consultancy have completed several deals recently where lending has been arranged, agreed and drawn before the client’s bank have even returned their call. I am not saying mainstream banks aren’t good, I am just suggesting that (quote Bob Dylan) the times they are a changing…
If you are looking at raising commercial finance or borrowing for your business then bear in mind that there are more options out there than you first thought, if you want to know what they are then please get in touch. No cost, commitment or sell, we will show you the options and leave it with you.
Any questions please get in touch or add your comments above.
By Dave Farmer