CCR2 Credit Risk Information
Turning ‘high risk’ into an opportunity
Taking a positive approach to risk assessment can allow you to work with customers who might otherwise be out of reach
Richard Waldman Group sales director, Ultimate Finance rwaldman @
ultimatefinance.co.uk
It has been a very tough decade for Britain’s small businesses. From the financial crash of 2008, through to current Brexit uncertainty, there have been obstacles at every turn. This is why it is so worrying that around
20% of SME bank loans are rejected and the government’s Bank Referral Scheme has only resulted in £15m of support since its launch in November 2016. That is the equivalent of £2.60 for every business in the UK – clearly more needs to be done.
‘Computer says no’ Since the economic crash, many banks and other lenders have focused on protecting themselves. Unfortunately, this means many SMEs continue facing rejection due to being viewed as a high-risk business. Some banks and alternative lenders have
stringent criteria that SMEs must meet before they are considered for financial
support. Miss just one of those criteria and it is almost certain lenders, with this old- school mentality, will turn SMEs away. With the ‘computer says no’ attitude still
rife, it is no surprise rejection remains high. This attitude leads to the misconception
that there are a large number of ‘high risk’ SMEs throughout the UK, but this is not strictly true. The figures actually highlight that it is lenders who have tightened up their acceptance criteria. Failing to be accepted for a loan should
not be seen as the end of the world though – the requirement for additional funding or falling on hard times does not instantly make an SME a bad business. However, one too many rejections may
cause many business leaders to become disheartened and end up closing their doors, rather than finding the good funding partner they need.
Stop the rejection cycle So what can happen to businesses that keep getting rejected? For budding entrepreneurs, it could put them off starting-up their firm or make it impossible regardless of their hunger. For SMEs struggling to scale-up, it may
be the difference between them taking the next step and plateauing. When you consider Britain’s 5.7 million SMEs are the growth engine of the UK economy, not giving them the support needed to thrive can have a huge impact. This is where brokers who have strong links to a wide spectrum of lenders have become vitally important. Although there will always be businesses
that do not qualify for finance due to serious red flags, the vast majority of SMEs should be able to access the financial support they need to thrive. One way for business to source this funding is to contact financial brokers who can assess their needs and
However, one too many rejections may cause many business leaders to become disheartened and end up closing their doors, rather than finding the good funding partner they need
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www.CCRMagazine.com
October 2018
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