Why The 91% May All Be Wrong
A recent Grant Thornton report showed that when businesses need to borrow that 91% go to one of the big 5 banks.
The same report provided feedback from the Breedon Report, this showed that in the next 5 years there will be a commercial funding gap of between £84bn and £191bn. That is an awful big demand for commercial funding that will go unmet.
The big concern is how companies will react, how they will cope if they cannot source the funding they need to meet the ambitions they harbour.
There are options out there for companies to use, they just need a little more specialism than they did 5 years ago.
The New Options
The Parliamentary Commission on banking standards stated that;
“Peer-to-Peer and Crowdfunding platforms have the potential to improve the UK retail banking market as both a source of competition to mainstream banks as well as an alternative to them…The emergence of such firms could increase competition and choice for lenders, borrowers, consumers and investors”
Think about that for a minute… The words are very important, ‘improve’, ‘competition’, ‘alternative’, words not commonly associated with the UK banking sector.
There is something going in out there, so why don’t you know more about it?
The Breedon Report – Why It Won’t Help You
There are a few pointers in this report that ring home. The underlying message is that the business lending sector in the UK needs to develop or else demand will simply not be met.
Now, I’m no Einstein but I think we all knew that things needed to change.
The report makes some seriously good suggestions, things like;
- The British Bankers Association should explore greater credit data sharing with non-bank providers, and this should be considered by the FCA
- Government should consider whether further data could be made available to support the development of new finance products and markets to benefit businesses
- An industry-led taskforce should be launched to make specific proposals on how to remove barriers on bank lending to support SME trade finance
All good, solid and needed suggestions.
The problem is that none of this will help UK small businesses. The reason is that the demand for lending is now, the demand is for solutions and tangible results, for access to lending, access to cash.
There will be a future demand for business lending of course, but what businesses want is access to finance now, not later.
Go back to the beginning of this post and you start to get the answers. There are loads of options out there for the small business to use to borrow.
BUT 91% of businesses will go to one of the big 5 banks when they want to borrow.
Roll the clock back a few years, pre Amazon, pre Ebay, pre Google. If you wanted to buy something you would go into your local store, as a buyer you would probably be pretty loyal, not necessarily out of choice but out of lack of alternatives.
These days, if I want to buy a TV, DVD, Book or pretty much anything else then I go on-line to have a look. I may make use of free postage, my Amazon Prime or simply look at the alternatives and still buy in store.
The point is that our normal daily buying habits have changed.
Why have our business lending habits not changed in the same way? The world has changed and businesses move with those changes, it is time that businesses looking to borrow changed their habits.
There are options out there, some really good options. If you want help finding them then give me a bell on 01293 541333 or contact us here.
By Dave Farmer
Dave Farmer is founder of the multi award winning Lime Consultancy, a business lending specialist based in Sussex.
Any comments about this post? Add them above or drop us a line.