roundtable: funding for SMEs 37


Haskins will be opening a new garden centre at Roundstone near Worthing in 2012. ”It’s a big investment that will increase our profits but the payback may well be twelve years and upwards – it’s a long-term strategy, but it’s the way for us to go forward.”


Working with several different business sectors through the Solent Synergy network, Vaughan had noticed the ”very interesting contrasts between large and small companies over their performances and funding requirements”.


Several larger businesses, particularly in the manufacturing sector, were having ”a stellar time” with increased production, but many specialist SMEs, although working with major brand-name corporates, were suffering from projects being delayed. ”Their work has not been lost, but things have slipped or been put back. The hit from those delays has meant a constant cashflow battle for many. Only those coming into such work with a healthy cash position are still smiling.”


Heathcock asked if banks were supporting SMEs with cashflow difficulties.


Vaughan pointed out that many SMEs now worked internationally, and their financial concerns might not be UK oriented. In other cases, their corporate partners might help out to keep strategic working relationships alive.


”Businesses have got to learn how they manage such situations. They often come into the business world ill-equipped to handle the complexities of cashflow issues.”


Is there enough water in the oceans?


Murray asked if SMEs were deleveraging their financial gearings, so reducing the stock of lending in the market.


Fuller: ”This is a perennial challenge. A lot of companies are focused on deleveraging and getting back to a workable solution. It’s important that we attract deposits to lend out, but we have been very public about our Merlin targets. We said we would lend out £4 billion to SMEs this year, and by June we had achieved £2.1b, so we are on track to meet that commitment. Our net lending to SMEs is up 27% year on year. On the flip side, there are companies performing well who will undoubtedly have the opportunity in this marketplace for acquisitions at cheaper purchase prices. Strategies are very interesting at the moment.”


Heathcock felt the funding/lending situation varied from bank to bank at present. He understood that one major bank was aiming to remove its reliance on the money markets by 2014 and go back to where banking was in 2000. ”So that’s bound to mean that their balance sheets are going to be shrunk and lending will suffer.


”I would think banks like Santander, who are already less reliant on the money markets, are well positioned to pick up some decent


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – OCTOBER 2011


customers who are simply in the wrong place at the wrong time with the wrong bank.”


Fuller: ”Many businesses are facing a number of challenges at present and our (Santander) strategy is all geared around taking the time to fully understand and learn about companies in our marketplace. By doing so, we are then well placed to recommend appropriate solutions to help meet their aspirations.”


Donaldson: ”Essentially Santander is self- funding, and our entry into the SME market, as the recession has kicked in, was timely. We have benefited from clients of other banks seeking a fresh approach and although there’s deleveraging by SMEs it’s a good opportunity for us.”


Murray: ”You are not carrying any baggage and people see you as a fresh start.”


McKeown: ”The upside is that Santander Corporate Banking, taking more of an active role as an alternative funder, may actually force the hand of the bigger banks to do more lending with SMEs.”


Can we research and develop relationships?


Murray asked if there were problems getting funding for R&D, which appeared to have stalled in many businesses?


McKeown: ”The rules on R&D Tax Credits have been relaxed and the scheme has been enhanced for SMEs recently. So, it has become a really valuable credit and one which the Government is supporting well, with the recruitment of good people and claims going through quicker.”


Vaughan agreed that even the HMRC was being more helpful.


McKeown: ”A lot of our work is in helping SMEs to maximise their claims. Too many people try to do it themselves to save money, but it is quite complex and they actually miss out on all the R&D reliefs that they could get.” He also pointed out that several SMEs were now partnering with larger providers because they do not have enough funding to get their product to market.


Vaughan: ”They benefit as well by getting more sector visibility and an established route to market.”


Haley noted that cash-rich pre-recession companies were maintaining their R&D investment but those trying to borrow were going down the collaboration funding route, looking for alliances and strong bonds with partners already in the marketplace. ”Instead of asking for the very few grants available, SMEs are asking for introductions to form relationships.


”It’s a much healthier situation if we encourage interaction between companies that we know, and less reliance on handouts or debt- funding. As in Dragons Den, the value is in the relationship not in the cash they are putting into the company.”


Continued overleaf ... www.businessmag.co.uk Alex Fuller


Nigel Vaughan


Ian Cole


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