roundtable: accelerating growth 53


funding to SMEs through the risk averse banks was not working effectively. “The bank’s job is not to take risks, therefore we need to find a way of providing finance that accepts the element of risk. If we want real growth in the economy at the entrepreneur end, then that’s the gap we need to fill.”


More funding, more growth?


Ed Cooper asked Roundtable members whether they would have grown quicker if they had been able to get more funding.


guarantees (APGs) and performance bonds (PBs) being increasingly required by end customers, particularly those overseas, as proof of UK banking support for the supplier.


“These are causing significant challenges at the moment, not least because they reduce the amount of working capital available in our business and this capital is of course much needed in managing our project-based business.


“If I undertake a £10m project the customer may well want a PB of 5-10%, around £1m. To meet that, I could dip into my working capital but I need that to fund my purchases from suppliers because the customer pays me slowly in milestone work-phases.


“When I go to the bank to borrow the money to cover the PB, they insist on a cash collateral securitisation, so effectively they are taking my £1m and putting it in a bank account that I can’t touch to fund the project.


It’s


self-defeating. Regardless of our reputation of 26 years, and proven business record, the banks just don’t do it. They are not risk averse, they are frightened.”


John Heynen


“Yes.” came Steer’s reply. “Early in 2010, we had the chance to buy the No.1 company, when we were No.3. It was a gold-plated deal because we were buying it from our biggest supplier. It would have made us double the size of anyone else in the marketplace. It was a no-brainer.” Despite Steer’s company having made nine acquisitions in eight years, his bank “ didn’t want to know because it genuinely didn’t have the money to lend.”


West felt banks had been between a rock and a hard place for some time – lambasted for lending too much pre-2008; criticised for not lending enough post 2008.


Fortunately, Portal had strong cash balance to support its own growth. Would he have acquired more businesses if funding had been available? “Not necessarily. I wouldn’t want to buy a small consultancy dependent upon a few people by giving them money. I’d rather give them shares and ensure they are pushing for the benefit of the business.”


Phillips said TSL had also used its own cash for two recent acquisitions, one involving an earn-out element.


Heynen agreed that increased availability of funds might not have changed his business growth strategy. “When we spotted a food trend and couldn’t find a brand or a company willing to support it or to buy, we simply developed our own brand – COOKS & Co.” His company was fortunate to be fully capitalised too.


Performance Bonds: can you guarantee your work? Phillips complained about advance payment


THE BUSINESS MAGAZINE – THAMES VALLEY – DECEMBER 12/JANUARY 13


Gibson agreed that APGs and PBs were a growing concern for


companies of all sizes. Through the LEP and the Government’s department of business, innovation and skills she was pushing for special funding to support such guarantee requirements.


Bank relationships: past, present … and future?


Grant Thornton’s Holmes stressed that not all banks, or bankers thought the same way. Some will be willing to fight your client corner harder than others, he observed. “It is the person you deal with that matters.”


Phillips agreed: “The relationship director role is very important, because they should be immersed in my business and understand its SME dynamics, know if we as management individuals are trustworthy or not. They should be our advocates inside the bank to say we are good guys, so give them some money.”


New banks are waking up to this lack of client relationships, added Holmes and approaching business banking in fresh ways. “Hopefully that will cause others to raise their game.


“There are banks now coming into the market with fresher ideas, more prepared to listen, get involved and take a calculated risk based on previous performance and potential. They just have a different outlook.”


Gibson noted: “Banks have had so much EU and UK government legislative pressure placed on them to do X, Y and Z that as a result the relationship manager’s role has completely changed. Rightly or wrongly, the banks are altering responsibilities internally on company client relationships, so you won’t necessarily get the advocate you need.”


Recruitment and retention of talent


Murray queried if lack of skills, either shopfloor or management level, were inhibiting growth.


Richard Holmes


Phillips saw two resourcing concerns within the broadcast sector:


Holmes said that at the start of the recession knowledge of clients businesses was poor in some banks. “The business may have been the bank’s client for 20 years, but if it went for a loan for the first time, the bank sometimes knew virtually nothing about them.”


Steer confirmed the lack of business and client awareness within some banks and the need for aware advocate relationship directors. “The problem is convincing the unseen credit teams in their glass towers, who don’t know you from Adam.”


• Experienced workers with 15-20 years service, but perhaps not the most up-to-date technology skills


• Young creative workers, interested in broadcast and but potentially lured to other technology spheres by salaries or lifestyle image


TSL had tackled the issue eight years ago by creating its own graduate recruiting programme, going direct to universities


Continued overleaf ... www.businessmag.co.uk


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