54 roundtable ... continued from previous page
A fundamental funding problem
Jocelyn Lomer suggested even a new Google or Vodafone would struggle to get funding in his sector. “There is a fundamental mismatch in the banks’ lending process. It is orientated around tangible assets not service innovation and IP, yet we are operating in a service-dominated Thames Valley economy.” This “systemic problem of rigidity and inflexibility” was also hampering the government’s Enterprise Finance Guarantee scheme.
Manufacturer Allister Moorcroft: “We recently had to jump through so many hoops to buy a business that had debtors, stock and property that I think it must be incredibly hard to fund anything else such as software development.”
start the economy, gets depressed with a knock on effect that cascades through the economy. The Government understands that but it can’t force the banks to lend.”
Moorcroft: “Residential property is a sector where demand outstrips supply. The logic is that we should be building now.”
Richard Blanford
Sekkat suggested some UK SMEs would benefit from adopting elements of the Mittelstand business model (SMEs in Germany that provide 70% of the nation’s workforce) with its emphasis on long- term profitability, apprenticeship training, community involvement and respect for all workers. “Owning a company does not just mean living a rich life, then asking a bank for a loan when you don’t have any assets behind it. We all have a responsibility to do the right thing, and not to point fingers when we have a crisis.”
Susan Elliott: “Everyone we talk to seems to be working towards a sale of their business, rather than the Mittelstand mindset with a long term view to build a legacy.”
Adrian Williams
Blanford: “Banks have a very traditional view of risk. They are all about loss, and not about gain.” He’d had no problem getting a loan for his offices – tangible bricks and mortar. “But when I said we’re moving into the cloud managed services field and need to invest the only funding I could get easily was on the leased data centre kit, so I ended up finding alternative funding myself.”
Maybe we should be more like the Germans?
Lomer: “How do we create an environment in which businesses can grow? There are stacks of opportunities – new technology platforms, great UK products to export, for example – but you are not going to jump the plane and export if your cashflow is in no-man’s land. There has to be a better way of doing things. It’s not just the banks, it’s about everyone pulling together to create fertile ground for businesses thrive.”
Lomer: “SMEs are meant to be leading our economic recovery, but I still don’t see any formula to help SMEs grow.”
www.businessmag.co.uk
Shouldn’t we be building our own future?
Annan said funding attitudes were mixed. “If funders are on your side then things are positive, but if they want to reduce their exposure or move out of a sector, such as in property, then what happens can be the opposite.”
Developer Christopher Lacey agreed. “If you fall into the wrong sector the answer tends to be ‘No’ before your question is even put, but there are some banks lending.
"We hope that our sector is through the worst of the recession; private investors and specialist lenders have kept the wheels turning. Had they had the same fear of property I don’t know what would have happened.
“The fundamental difficulty is that loans are being offered by the major banks, but they are not offered at commercial terms. In our case increased liquidity requirements and personal guarantees make them unviable. One or the other but not both. There are better ways of financing the business, but you have to go out and find them. Unfortunately, property development is hugely dependent on funding and if that isn’t available then the sector, one that could kick
Can I have your personal guarantee?
Blanford: “If I have been running a successful business for 20 years, why should I put my personal assets on the line just because the bank’s computer says ‘No’? I was asked to sign 40-odd legal documents and deal with someone I didn’t know from an office I’d never heard of – the whole banking ethos is wrong with no element of customer service.”
Sekkat: “I have never given a personal guarantee, and I never will because I believe that if my business case is not strong enough, my story is not understood, then perhaps that case should be rebuked. We have to understand the bank’s point of view too.”
Faced with the challenge of financing, he did the right things with his business – locking in customers through agreements, guaranteeing revenue streams. “Then you find a funding partner who is ready to support your business story because they understand the strategy, and realise it is not just a dream.”
Blanford said his bank tried to increase his quoted loan rates when he refused to give a personal guarantee.
Williams: “Much as it is my job to fight my client’s case, I can sympathise with the banks’ view. Business owners should ask themselves – ‘Why should the bank invest in this project when I am not prepared to take the risk myself?’”
Susan Elliott
Build a better case for your loan
Sekkat: “We can’t ask the bank to put up money for costly machinery, without being able to show we are profitable or have contracts with customers.
Williams said loans were too often required to offset management problems such as cashflow, holding too much stock, or poor credit control, not for growth or investment. “The first stage is to look inwardly and make sure you
Property market profile starting to change
Commercial property consultant Philip Waite: “The fundamental thing with business and property is they both involve risk. With a shortage of good quality commercial property, there is a lot of investment activity at the high end. Money is available for the best risk deals, but older secondary property is not a popular risk.”
THE BUSINESS MAGAZINE – THAMES VALLEY – SEPTEMBER 2012
manage your business well, as a well controlled working capital cycle could negate the need for additional funding.”
Sekkat: “I think it’s good that we have some conflict. Banks need to choose carefully and businesses need to put forward a good strong case, and the winners will be those partnerships that find an entente.”
Jocelyn Lomer
Elliott suggested SMEs needed professional help to submit stronger funding propositions. Banks were just one source of finance; other funding might be more appropriate for an SME, depending on its growth stage. She mentioned crowd funding, peer-to-peer lending, on- line auctioning of large invoices, and invoice discounting.
Nash agreed that SMEs could benefit from having “an experienced advocate” when pitching for funding. “We (Santander) have credit partners locally who work with prospect customers to establish exactly what the business needs.” This closer relationship also tends to bring quicker and more flexible funding decisions.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72